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.

Type

Insight

Sectors

Economic Substance

Locations

Bermuda

Share
Twitter LinkedIn Email Save as PDF
More Publications
28 Jun 2022

Bermuda: a restructuring destination

Bermuda has an outsized, first-class insurance and financial sector, attracting complex, multination...

Contributors: James Batten
27 Jun 2022

Insurtech ILS and the New Normal

As Bermuda and the global markets with which the Island transacts move towards the so-called  ‘ne...

Contributors: Josephine Noddings
23 Jun 2022

Digital Assets in a Crypto Winter

In 2013, IT engineer James Howells was cleaning out his house. He had two identical hard drives: one...

Contributors: James Batten
22 Jun 2022

Bloomberg Tax Country Guide: Bermuda

Bloomberg Tax Country Guides provide overviews of the tax regimes of more than 200 jurisdictions. Th...

Contributors: Ashley Bento
9 Jun 2022

Bermuda’s long-term re/insurance landscape

Bermuda’s long-term re/insurance market has grown considerably in recent years. The island now has...

2 Jun 2022

Provisional Liquidation In Bermuda

Provisional liquidation in Bermuda is a distinctive, flexible regime that operates to support compan...

Contributors: James Batten
23 May 2022

The good life: Bermuda’s new economic pillar

The life sector has moved swiftly from being a new ‘nice-to-have’ in the Bermuda marketplace, to...

5 May 2022

Restructuring of (Re) Insurers during Covid-19

Restructuring involves changing the financial, operational, legal or other structures of a business ...

28 Apr 2022

Assignment, novation or sub-participation of loans             

Transfers of loan portfolios between lending institutions have always been commonplace in the financ...

21 Apr 2022

Defining digital assets in insolvency proceedings

It has been more than a decade since the creation of the first cryptocurrency, bitcoin, yet digital ...

Contributors: James Batten