The Bermuda Government has passed legislation, with effect from 31 December 2018, requiring relevant entities based in Bermuda to comply with certain obligations in regard to economic substance in the jurisdiction. We set out below a summary of the entities affected by this new legislation and the information that such entities will need to provide in order to evidence their compliance.
The Economic Substance Act 2018 and the Economic Substance Regulations 2018 were enacted in response to a scoping paper issued by the European Union’s Code of Conduct Group (Business Taxation) in June 2018. The paper set out requirements that certain jurisdictions1 outside the EU must adopt with regard to the economic substance of entities based in those jurisdictions, in order to avoid being black-listed by the EU. Broadly equivalent legislation has been passed in all of the major offshore jurisdictions in addition to Bermuda, including the Cayman Islands, BVI and the Channel Islands. It is anticipated that the EU’s economic substance requirements will soon become a global OECD standard.
Those registered entities which carry on as a business any one or more of the following relevant activities will be in scope and must comply with economic substance requirements:
These terms are defined in the legislation and a summary of them is included in Appendix 2 to this bulletin. It is anticipated that guidance notes will be issued by the Bermuda Government in due course to provide further practical detail.
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Bermuda’s Economic Substance Legislation
1 Anguilla, Bahamas, Bahrain, Bermuda, British Virgin Islands, Cayman Islands, Guernsey, Isle of Man, Jersey, Marshall Islands, Turks and Caicos Islands, United Arab Emirates, Vanuatu