Economic Substance Update – Non-resident Entities
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Brian Holdipp is Counsel in the firm’s corporate practice group. His practice encompasses many areas of general corporate and commercial law, with specialist expertise in securities, joint ventures, corporate restructurings and cross-border financings. Mr. Holdipp also advises on partnerships.
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The Registrar of Companies has issued notice that with effect from 30 January 2023, the Economic Substance Guidance Notes (the “Guidance Notes”) have been revised to implement guidance issued by the OECD Forum on Harmful Tax Practices in relation to entities making a claim to be a “Non-resident entity” for the purposes of the Economic Substance Act 2018.
Formerly, the Guidance Notes stated that an entity will be a Non-resident entity, and therefore out of scope of the economic substance requirements as set forth in the Economic Substance Act 2018 and the Economic Substance Regulations 2018, if it is resident for tax purposes in a jurisdiction outside of Bermuda provided that the jurisdiction in which the entity claims to be resident for tax purposes is not in Annex 1 to the EU list of non- cooperative jurisdictions for tax purposes.
The Guidance Notes have been amended to clarify that an entity will not be deemed by the Registrar to be resident for tax purposes in a jurisdiction if that jurisdiction 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. Such jurisdictions may include Anguilla, Bahamas, Bahrain, Barbados, British Virgin Islands, Cayman Islands, Turks and Caicos Islands and the United Arab Emirates.
These changes reflect the evolving nature of the economic substance regime which should serve as a reminder of the importance of staying abreast of changes to the legislation and regulations in effect so that any action necessary to comply can be taken in a timely manner. Should you require assistance in analysing Bermuda’s economic substance regime as it stands, please feel free to reach out to our Brian Holdipp or any other member of our Corporate team.