Bermuda was added to the EU’s list of non-cooperative jurisdictions for tax purposes on 12 March 2019. The Premier of Bermuda released a statement confirming that whilst Bermuda’s legislative framework is compliant today with the EU requirements a technical omission, now corrected, resulted in the breach of a mandatory deadline thus leading to the present inclusion in the non-cooperative list. The Premier reported that the UK government has stated “that Bermuda has legislated to address the issue identified. In light of this we expect Bermuda, and other compliant jurisdictions, to be removed from the list at the next available opportunity.” The next meeting of the EU’s Economic and Financial Affairs Council is scheduled for May 2019.

Whilst we await this EU reassessment, the economic substance legislation is in force and the compliance deadline 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 and 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 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.

As a trusted advisor to our clients, we have the specialized knowledge and in-depth understanding of the regime needed to navigate economic substance. We can provide you with an initial assessment memorandum on the scope and applicability of the substance requirements based on your specific structure. If you would like more information on initial assessment advice please contact Sally Penrose or Tim Faries.

Type

Insight

Sectors

Economic Substance

Locations

Bermuda

Share
Twitter LinkedIn Email Save as PDF
More Publications
11 Oct 2019 |

Purpose-built ISAC a boon for Bermuda

The long-awaited Incorporated Segregated Accounts Companies Act 2019 was tabled in the House of Asse...

3 Oct 2019 |

Maternity/Paternity Leave – Anticipated Amendments to the Employment Act

The Employment (Maternity Leave Extension and Paternity Leave) Amendment Act 2019 (Bill) (2019 Amend...

26 Sep 2019 |

Introduction of the new Collateralised Insurer class

Members of the ILS Bermuda Market Intelligence workstream hosted a roundtable to discuss the Bermuda...

26 Sep 2019 |

Fund bye-laws and payments-in-kind

Typically, a Bermuda fund is incorporated as an exempted mutual fund, formed as an exempted limited ...

18 Sep 2019 |

Offshore listing Vehicles to benefit from the Shanghai - London stock connect

Offshore listing Vehicles to benefit from the Shanghai - London stock connect

Contributors: Huiyan Liew
18 Sep 2019 |

Economic substance requirements in Bermuda, the British Virgin Islands and the Cayman Islands

Economic substance requirements in Bermuda, the British Virgin Islands and the Cayman Islands

Contributors: Shana Simmonds
12 Sep 2019 |

Magistrates’ Court: a summary of procedure

Commencing a claim in a court of summary jurisdiction, also known as the Magistrates’ Court, is a ...

10 Sep 2019 |

Bermuda: weathering all storms in an improving market

The market is moving in the right direction on rates but the landscape is becoming increasingly comp...

5 Sep 2019 |

Cat bond market “here to stay” despite 2019 lull

There has been a distinct slowdown in cat bond issuance throughout 2019 after the heavy loss experie...

4 Sep 2019 |

Cyber insurance to drive innovation, take industry by storm

The structures and products developed to tackle cyber risk over the next five years will take the gl...