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Bermuda: Economic substance legislation; removal from EU “blacklist”

Bermuda: Economic substance legislation

Bermuda has been removed from the European Union (EU) list of non-cooperative tax jurisdictions—the “blacklist”—at a May 2019 meeting of the Economic and Financial Affairs Council (ECOFIN).

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The EU confirmed that Bermuda’s March 2019 amendments to the economic substance regulations resolved the EU’s last area of concern (i.e., language relating to core income-generating activities for intellectual property assets). These amendments were made after the original agreed cut-off date at the end of February 2019, resulting in Bermuda’s temporary inclusion on the list of non-cooperative tax jurisdictions.

Bermuda has now joined the so-called “grey list” jurisdictions (along with the Cayman Islands, British Virgin Islands, and Bahamas) that have committed to addressing concerns raised by the EU related to economic substance in the area of collective investment funds. In its formal comments, the EU indicated that these jurisdictions have engaged in a positive dialogue and remained cooperative, and following the release of further technical guidance, will be expected to further adapt their legislation by the end of 2019.

Bermuda economic substance legislation

The Economic Substance Act came into effect in Bermuda on 1 January 2019 with a six-month transition period for entities in existence prior to 2019. Registered entities conducting one or more relevant activities (banking, insurance, intellectual property, distribution and service centres, shipping, leasing, financing, fund management, holding company, headquarters) are required to meet the domestic economic substance requirements—including the requirement that prescribed core income-generating activities be conducted in Bermuda.

Read a 2019 report [PDF 88 KB] prepared by the KPMG member firm in Bermuda

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