Latest Developments in Bermuda’s Economic Substance Regime
The Economic Substance Amendment Act 2019 became operative on 28 June 2019. Bermuda Managing Partner Tim Faries and Partner Sally Penrose outline the latest developments in Bermuda’s Economic Substance regime.
Economic Substance Amendment Act 2019
The Economic Substance Amendment Act 2019 (Amendment Act) became operative on 28 June 2019. The Amendment Act creates an exemption for entities that are resident for tax purposes in a jurisdiction outside of Bermuda (provided such jurisdiction is not on the EU’s list of non-cooperative jurisdictions for tax purposes). This important development will place Bermuda on a level playing field with other jurisdictions that are subject to the EU’s economic substance requirements.
Information received by the Registrar of Companies (RoC) from an entity to support its non-resident status will be provided to the foreign competent authority of the jurisdiction where the holding entity, the ultimate parent entity, the owner or the beneficial owner of the non-resident entity is incorporated, formed and registered or resident.
Draft Guidance Notes
The RoC released Draft Economic Substance Requirements – General Principles (Draft Guidance Notes) on 26 June 2019 for industry consultation. The Draft Guidance Notes will assist entities in determining whether they are within scope of the economic substance requirements and, where entities are in scope, provide guidance on how to satisfy these requirements. Additional sector-specific guidance notes will be released by the RoC in due course. The Draft Guidance Notes state that the RoC is in the process of building an e-registration system to accept and manage the economic substance declarations and it is anticipated that the e-registration system will launch in the second quarter of 2020.
Next Steps?
The Draft Guidance Notes reiterate that entities incorporated, formed and/or registered on or after 1 January 2019 are immediately subject to the Economic Substance Act 2018 while entities incorporated, formed and/or registered prior to 1 January 2019 will be subject to the ES Act from 1 July 2019.
Appleby has a regulatory team with a specialised knowledge and in-depth understanding of the economic substance regime. For further information please contact Tim Faries, Sally Penrose or your usual Appleby contact.
