Bermuda economic substance requirements in 2024

In December 2018, Bermuda introduced its Economic Substance Act 2018 to enable local companies to comply with European Union tax governance principles.

The economic substance requirements (ESRs) do not apply to multi-national Clients who use their Bermuda LLC as i) a trading company ii) a professional consulting services company or iii) a corporate advisory services firm.

• ESR rules

  • All local entities in Bermuda must meet ESRs if they are engaged in i) insurance ii) banking iii) fund management iv) financing and leasing v) headquarters vi) shipping vii) intellectual property viii) distribution and service centres business and ix) holding entity activities.
  • Entities bound by ESRs must demonstrate any of the following: i) it is managed and directed in Bermuda ii) its core-income generating activities are undertaken in Bermuda iii) it has an adequate number of suitably qualified full time employees in Bermuda iv) it has adequate operating expenditure in Bermuda and v) it has an adequate physical presence in Bermuda.
  • Our Client’s business must demonstrate that it has satisfied the ESRs in respect to any relevant financial period and is required to file a declaration form on the Economic Substance Declarations (ESDs) portal. In addition, each non-resident entity is required to file evidence of its tax residency (no later than six months after the last day of each relevant financial period).

• Problems and solutions of Bermuda ESRs

  New legal requirement	Simple, practical low-cost solution
  Bermudan companies engaged in relevant activities must i) conduct income-generating activities in Bermuda ii) rent physical office space in Bermuda iii) hire staff in Bermuda and iv) have active directors in Bermuda.	Healy Consultants Group will assist you to: Locate a small shared physical office space for a one-time fee of US$950. Rental fees are then paid by our Clients directly to the landlord. Recruit a local, low-salary admin employee for a one-time fee of US$4,950. Secure your local visa for a one-time fee of US$4,950.
  Effective December 2018, all Bermuda companies must complete an annual economic substance declaration confirming whether the company is conducting relevant activities within six months of the end of the fiscal year. The notification must be a Declaration Form on the Economic Substance Declarations (ESDs) portal. The declaration includes i) tax residence ii) business activities iii) amount and type of gross income iv) premises v) number of employees, including number of full-time employees and vi) information on core income-generating activities.	For a fee of US$1,500, Healy Consultants Group will prepare and file this report for an active company. For a dormant company, the fee is US$650. The contents of this report will be agreed with our multinational Clients, to ensure their business goals continue to be met.
  Failure to timely comply with the above may result in i) a fine of approximately US$10,000 and/or ii) suspension or revocation of license iii) dissolution of the company.	Together with our multinational Client, Healy Consultants Group will timely, accurately and completely discharge your Bermuda annual legal and accounting and tax obligations. If required, Healy Consultants Group will assist you to prepare accurate and complete financial statements for your Bermuda business, for these accounting and tax fees. While the preparation of annual financial statements is not legally required, Healy Consultants Group recommends our Clients prepare them, in case the government of Bermuda or of their country of domicile requires to sight them.
  Our multinational Client does not want to submit an annual ESR report to the Bermuda government.	We help our Client re-domicile the Bermuda entity to alternative reputable zero tax jurisdictions, including Singapore or Delaware.

Conclusion

As a short-term solution, engage Healy Consultants Group to register your Bermuda company for economic substance requirements and complete its international tax filing obligations.

As a long term solution, engage Healy Consultants Group to re-domicile your Bermuda business or register a new business in a reputable zero tax country.