There is an exemption from the economic substance requirements for entities that are resident for tax purposes in a jurisdiction outside of Bermuda that is acceptable to the Registrar of Companies (Registrar) provided that (i) all of its income from relevant activities is liable to tax in that jurisdiction; and (ii) that the jurisdiction in which the entity claims to be resident for tax purposes is not on the EU's list of non-cooperative jurisdictions for tax purposes (Exemption). Any entity that wishes to rely on the Exemption is required to make a submission to the Registrar on an annual basis. The Exemption claim must set out the jurisdiction in which the entity claims to be resident for tax purposes and must provide sufficient evidence to support that claim.
The Economic Substance Guidance Notes were revised on 30 January 2023 and provide that the Registrar will no longer accept an Exemption claim from an entity that is resident for tax purposes in a jurisdiction that does not have a corporate tax regime and/or residency for tax purposes in such jurisdiction does not result in the entity being subject to the equivalent economic substance requirements in that jurisdiction. Some of the jurisdictions which may be rejected by the Registrar in connection with an Exemption application include Anguilla, Bahamas, Bahrain, Barbados, the United Arab Emirates (the Restricted Jurisdictions).
Any Bermuda entity that currently claims an Exemption from a Restricted Jurisdiction should carefully consider its activities and whether it can continue to adhere to the economic substance regime.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
