EU confirms Bermuda’s status as a cooperative jurisdiction in international tax transparency
The European Union confirmed on Friday 17 May 2019 that Bermuda has been removed from its list of non-cooperative tax jurisdictions. Bermuda is now listed as a cooperative tax jurisdiction and accordingly does not appear on the EU’s “blacklist” of 12 non-cooperative jurisdictions.
In common with other cooperative jurisdictions, including Australia and Switzerland, Bermuda has now been placed on a list of jurisdictions which, in the words of the EU, “have taken many positive steps to comply with the requirements under the EU listing process, but should complete this work by the end of 2019, to avoid being blacklisted next year”. This list is referred to by the EU as a “greylist”.
What does the greylisting mean?
Inclusion on the greylist means that Bermuda is considered to be cooperative and is not subject to any sanctions.
What was the rationale for the greylisting?
The EU has stated that Bermuda, along with the Cayman Islands and BVI, requires “further technical guidance” in relation to addressing economic substance concerns in the area of collective investment funds. It is understood that the EU is currently in dialogue with Bermuda so as to clarify those requirements in order for them to be addressed (if necessary, by amending legislation) by the end of 2019.
Next steps?
The Economic Substance Act and the Economic Substance Regulations became operative on 31 December 2018 and the compliance deadline for existing entities remains 1 July 2019. Clients with Bermuda entities need to assess their structures and identify any potential compliance challenges.
All Bermuda companies, LLCs and partnerships (which have elected to have separate legal personality) are potentially within scope of this legislation if they are conducting a “relevant activity”. The relevant activities are banking; insurance; fund management; financing; leasing; headquarters; shipping; distribution and service centers; holding entity; and intellectual property.
An in-scope entity will be required to satisfy economic substance requirements by demonstrating that (i) it is managed and directed in Bermuda; (ii) the core income generating activities are undertaken in Bermuda with respect to the relevant activity; (iii) it maintains adequate physical premises in Bermuda; (iv) there are adequate full time employees in Bermuda with suitable qualifications; and (v) there is adequate operating expenditure incurred in Bermuda in relation to the relevant activity.
Appleby has the specialized knowledge and in-depth understanding needed to navigate the economic substance regime. If you would like more information on ways in which we can assist you, please contact Sally Penrose or Tim Faries.
