The PRI had left the new president with the particularly significant task of unravelling the intricacies of a tax system in need of reform. One of those taxes was the 40% withholding tax on Preferential Tax Regimes (PTR) (jurisdictions with a tax of 75% or less than the median tax of an ‘onshore’ country). Under OECD’s guidance, if any withholding tax may be applicable (to a PTR, for instance), the onshore country has to provide in writing its legal definition of a PTR, in order for offshore jurisdictions to counter and/ or satisfy onshore requirements to omit withholding tax and/or other local discriminatory regulations.
Bermuda followed proper protocol from inception, starting with President Fox’s government, and, along with key members of the International Treaty Team of Bermuda’s Ministry of Finance and key legal and financial/economic advisors from Bermuda’s private sector, negotiated a Tax Information Exchange Agreement (TIEA) with Mexico’s secretary of the treasury’s team of tax and legal advisors. The result was the first signed TIEA between offshore and Latin jurisdictions. Mexico/Bermuda’s TIEA has been, and still is, the standard by which all other offshore/LatAm and LatEuropean TIEAs are negotiated and governed.
As a direct outcome of Mexico’s TIEA with Bermuda, Bermuda’s transparency and impeccable reputation became known by all of LatAm and LatEurope, which resulted in all main economies in those countries entering into negotiations and eventually producing signed and in-effect TIEAs with Bermuda.
From the Americas, Mexico, Colombia and Argentina have signed and put in-effect TIEAs. Brazil has signed a TIEA and is only awaiting congress’ assent to put it into effect, and negotiations with Chile and Peru have been finalised, now properly proceeding to the next step towards gaining congress’ assent. Elsewhere, the European countries of Portugal, France and Italy have in-effect TlEAs with Bermuda and negotiations with Spain were successfully finalised, only awaiting signing and the government’s final approval.
With the implicit green-light of their governments, private and public sectors of all countries mentioned above, have significantly increased international business with Bermuda.
Bermuda is now home to at least 700 companies/clients of known LatAm or LatEuropean origin, as well as to hundreds of others where non-Latin interests are invested in those countries through Bermuda-based entities. Bermuda, already the leader in worldwide captive insurance company formations since the creation of the concept in the 1960s, is also the leader, by a much wider margin, in Latin captives, some of them representing not only the largest companies in the region but among the largest entities in the world.
When people enquire about Bermuda’s secret to success in all the Latin countries, we point out the trust and confidence those countries and international financial and economic guides and agencies (for example the OECD, IFM, World Bank, Standard & Poor and AM Best) have in Bermuda. The jurisdiction’s well-established record of compliance on international standards has helped to shape its blue-chip reputation not only with Latin countries, but the rest of the world. This will continue to bring business to Bermuda.