Tax_and_substance_in_Bermuda

Bermuda Economic Substance Requirements

To establish if the Bermuda economic substance requirements will apply to any specific entity in respect of each financial year of the entity ("relevant financial period"), please answer the questions in the panel below.

This tool has been developed in response to the Economic Substance Act 2018 (as amended, the "Act") and the Economic Substance Regulations 2018 (the "Regulations"). It is therefore subject to any changes, guidance, the form of annual declaration and any supporting legislation being published. In particular, it should be noted that the guidance published by the Bermuda government on the application of the Act and the Regulations is still in draft form and is subject to change.

This tool is only intended to be used as a quick reference guide and not as a substitute for professional advice. For advice on any specific circumstances, please contact a member of our economic substance team.

Is the entity any of the following?

  • a company?
  • a limited liability company?
  • an exempted partnership with separate legal personality?
  • an exempted limited partnership with separate legal personality?
  • an overseas partnership with separate legal personality?

Is the entity resident for tax purposes in a jurisdiction outside Bermuda that is not in Annex 1 to the EU list of non-cooperative jurisdictions for tax purposes?

As of 21 June 2019, the EU list is composed of:

  • American Samoa
  • Belize
  • Fiji
  • Guam
  • Marshall Islands
  • Oman
  • Samoa
  • Trinidad and Tobago
  • United Arab Emirates
  • US Virgin Islands
  • Vanuatu

Is the entity engaged in a relevant activity?

"Relevant activity" means carrying on as a business any one or more of the following:

Click the boxes below for a summary definition of each relevant activity.

  • BANKING

    An entity engages in "banking" if it engages in deposit taking business for which a licence is required in accordance with the Banks and Deposit Companies Act 1999.

  • INSURANCE

    An entity engages in "insurance" if it engages in business for which registration is required in accordance with the Insurance Act 1978.

  • FUND MANAGEMENT

    An entity engages in "fund management" if it manages investments for funds and in respect of which a licence is required in accordance with the Investment Business Act 2003 or for which a licence would be required if such activity were taking place in Bermuda.

  • FINANCING

    An entity engages in "financing" if it provides funds, other than by way of subscription for shares or other equity contributions, for the business activities of one or more other entities (whether or not affiliated).

  • LEASING

    An entity engages in "leasing" if it provides leasing arrangements in respect of which it is the lessor of one or more assets leased to one or more affiliates or third parties.

  • HEADQUARTERS

    An entity engages in business as a "headquarters" if the entity engages in the general management and administration of its affiliates within or outside Bermuda.

  • SHIPPING

    An entity engages in "shipping" if it engages in ownership, leasing, operation or management of a ship that is used to transport goods.

  • DISTRIBUTION AND SERVICE CENTRE

    An entity engages in business as a "distribution centre" if it engages in resale of goods purchased from a foreign affiliate.

  • INTELLECTUAL PROPERTY

    An entity engages in "intellectual property business" if the entity engages in the exploitation of intellectual property assets (including non-trade intangible assets).

  • HOLDING ENTITY

    An entity engages in business as a "holding entity" if it engages in activities including holding or managing any assets or equity participations.

Is the entity a local entity?

A "local entity" is any company incorporated in Bermuda other than an exempted company or a limited liability company formed under the Bermuda Limited Liability Act 2016 other than an exempted LLC.

Is the entity a pure equity holding entity?

A holding entity is a "pure equity holding entity" where it only holds or manages equity participations, and earns passive income from dividends, distributions, capital gains and other incidental income only.

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