Bermuda Regulatory Update – Economic Substance Amendment Act 2026
On 31 March 2026, the Economic Substance Amendment Act 2026 and the Economic Substance Amendment Regulations 2026 (together, the “2026 Amendments”) came into force, enacting changes to the Economic Substance Act 2018 (“ES Act”) and Economic Substance Regulations 2018.
Regulatory Oversight Transitions to Corporate Income Tax Agency
The 2026 Amendments transferred responsibility for the administration, monitoring and enforcement of Bermuda’s economic substance regime from the Bermuda Registrar of Companies (“ROC”) to the Corporate Income Tax Agency (the “CIT Agency”), with effect from 31 March 2026. The transfer of economic substance regulatory oversight to the CIT Agency is part of a broader set of recent changes to consolidate Bermuda’s international tax compliance functions under a single dedicated tax regulator. Other recent changes include transition of responsibility for the automatic exchange of information to the CIT Agency by designating the CIT Agency as the Competent Authority under the International Cooperation (Tax Information Exchange Agreements) Act 2005 and the U.S.A.–Bermuda Tax Convention Act 1986 for common reporting standards and country-by-country reporting. Given that economic substance is fundamentally a tax‑driven international standard, the transition of economic substance regulation to the CIT Agency’s remit is a logical regulatory realignment.
Filing Processes and Deadlines Unchanged
There are no immediate changes to the content of economic substance declarations or the processes for the filing of such economic substance declarations. Companies that are in-scope of the economic substance regime will continue to submit their economic substance declarations via the ROC portal until further notice. Filing obligations and deadlines also remain unchanged following the introduction of the 2026 Amendments.
Clarified Oversight and Penalties
In addition to the change in regulator, the 2026 Amendments also set out the oversight capabilities of the CIT Agency with respect to inspection, oversight and enforcement. Whilst the civil penalties and criminal offences which may be imposed under the ES Act remain unchanged, they have now been clarified by being expressly set out within the body of the ES Act. A particular penalty to be aware of is the daily penalty (ranging from $100 – $500 per day) which may be levied for failure “without reasonable excuse”: (1) to file by the prescribed date information (including annual declarations), (2) to respond to notices, or (3) to permit access to premises.
Key Takeaway
While compliance obligations remain largely unchanged following the 2026 Amendments, economic substance oversight now sits with the CIT Agency. Entities should be aware of the revised regulatory landscape and monitor for further guidance as the CIT Agency settles into its expanded role.
If you are a Bermuda company with questions about your economic substance compliance obligations, Appleby’s regulatory experts would be pleased to assist you.
