Bermuda publishes new economic substance laws

On 24 December 2019, the Bermuda Minister of Finance released changes to Bermuda’s economic substance laws and related guidance, including the Economic Substance Amendment (No. 2) Act 2019 (“ESA”), the Economic Substance Amendment (No. 3) Regulations 2019 (“Regulations”), and the final version of the General Principles Guidance Notes (“Guidance Notes”).

The Amended ESA and Amended Regulations outline revisions to a number of definitions, including the following: Holding entity; Pure equity holding entity; Local company; Local LLC; Financing and leasing; and Shipping. They also include amendments to the Companies Laws, which enshrines the mandatory submission of information on the implementation of relevant activities to the Registrar of Companies.

The Guidance Notes contains explanations of what it means to engage in relevant activities “as a business”, the mode of work with non-resident organizations and the corresponding deadlines for reporting, namely:

1. Carrying on a business: The register of companies will consider that the corresponding activity is carried out as a business when the company receives any gross income from such activities during the corresponding financial period;

2. Nonresident entities are not a subject to the requirements of the new laws. Any legal entity that claims to be a non-resident because it is a resident outside of Bermuda must file a claim with the Registrar of Companies indicating the jurisdiction in which it is a resident;

3. The Notes clarify that the relevant financial period will be the financial year of the entity, as determined in accordance with its constitutional documents. Declarations will need to be submitted no later than six months after the last day of each relevant financial period. Electronic registration system is scheduled to launch in the second quarter of 2020.

Source: http://www.bermudalaws.bm/laws/Annual%20Laws/2019/Acts/Economic%20Substance%20Amendment%20(No.%202)%20Act%202019.pdf