Economic Substance Requirements

Impact on Bermuda entities

The Economic Substance Act 2018 was passed by the Bermuda Government in response to concerns raised by the European Union’s Code of Conduct Group (Business Taxation). The Act is effective from 1 January 2019 and addresses the issue of economic substance for relevant businesses by defining ‘relevant activity’ and ‘core income generating activities’.  

Who is subject to economic substance requirements?

Every entity that is engaged in a “relevant activity”. A "relevant activity" is one where an entity is operating in one or more of the following categories: Banking, Insurance, Fund management,  Financing and leasing, Headquarters, Shipping, Distribution and service centre, Intellectual property, Holding companies.

What are the economic substance requirements?

An in-scope entity must meet the following economic requirements:

  • Managed and directed in Bermuda
  • ‘Core income generating activities’ are undertaken in Bermuda with respect to the ‘relevant activity’ 
  • Maintains adequate physical presence in Bermuda 
  • Has adequate full-time employees in Bermuda with suitable qualifications
  • Incurs adequate operating expenditure in Bermuda in relation to the ‘relevant activity’

What are the economic substance reporting requirements?

Affected companies are required to file an annual Economic Substance Declaration (an “ESD”) with the Bermuda Registrar of Companies (the “ROC”).

What to do if I am concerned about meeting economic substance requirements

Some companies may struggle to meet the economic substance requirements. Speak to us before submitting your filing and we can walk through your options.

Economic Substance updates

Declarations - Online Portal Now Live

The Registrar of Companies (“ROC”) has launched its Economic Substance Declaration (“ESD”) portal and it is now live for individuals and organisations to register and ESD submissions under the Economic Substance Act 2018 are now being accepted. As a reminder, the filing deadline for entities with a year end of 31 December 2019, is 30 June 2020.

The portal is located at www.registrarofcompanies.gov.bm and the ROC has provided a list of FAQs.

In addition, the ROC has issued draft sector specific guidance notes which we have attached below and should be read alongside the General Principles Guidance Notes which were issued on 24 December 2019. Please note that as these guidance notes are still in draft, and are subject to change.

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Economic Substance Declarations: How we can help

We can assist you with the preparation and filing of relevant material, including tax evidence and the ESD annual returns for your entities, by undertaking the following approach and related responsibilities:

  • Analyze, challenge and comment on documents prepared by you which will include a consideration of the completeness of the documentation, where applicable.
  • Preparing the ESD annual return by entering the information provided by your Management into the Portal.
  • Conduct a pre-submission review to highlight any omissions or additional information requirements.
  • Provide summary conclusions to your Board.
  • Assist in the facilitation of Management’s review and approval of filings including Management approval prior to the filing being made.*
  • Upon final approval by Management, we can file the relevant documentation on your behalf.*

(*Only relevant for non-SEC restricted entities).

You may learn more here in our PwC Economic Substance Declarations - Are you prepared? guide. Please reach out to us should you have any questions on economic substance requirements or would like to discuss further.

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James Ferris

Advisory, Director

Tel: +1 441 299 7153

ferris.james@bm.pwc.com