Exempted company (Company limited by shares)
Bermuda is a British Overseas territory and an international financial hub that does not apply taxes on profits, income or dividends, capital gains nor personal income. Non-resident investors may buy or sell shares and units of investment funds without being subject to taxation.
Exempted companies are exempt from the ownership restrictions that apply to local companies.
Furthermore, a Bermuda exempted company is not subject to exchange control restrictions or stamp duty on instruments executed by or on its behalf.
Bermuda’s exempted companies require a local resident acting as director or secretary or representative and its incorporation and maintenance costs are higher than other offshore jurisdictions.
The Bermuda Government passed legislation related to Economic Substance – the Economic Substance Act 2018 and the Economic Substance Regulations 2018 – in order to avoid being blacklisted by the EU.
Exempted and local companies, permit companies, exempted and local LLCs and partnerships that carry out ‘relevant activities’ as defined by the Economic Substance Act, 2018, will be required to meet certain substance tests – such as control and management from within Bermuda, adequate physical presence, employees and operating expenditures, among others.
Relevant business activities include banking, insurance, fund management, finance and leasing, headquarters, intellectual property, distribution and service centers, and holding companies. High-risk IP businesses will be subject to enhanced substance tests, whereas pure equity holdings will be subject to minimum substance requirements.
Companies conducting relevant activities will need to file an Annual Economic Substance Declaration. Existing companies will have until June 30, 2019, to meet substance requirements, whereas newly incorporated entities in 2019 will be required to comply with substance legislation immediately.
Companies that are not compliant with substance requirements may face civil penalties up to BMD 250,000. Making false economic substance declarations may carry out penalties up to BMD10,000 or imprisonment for two years, or both.
Bermudian companies that do not carry out relevant activities are not required to meet economic substance requirements.
Many Fortune 500 companies have set up a Bermuda exempted company for purposes such as holding company, holding assets, trading, manufacturing, inter-group financing, shipping, aircraft leasing and holding of intellectual property rights, among others.
Legal
Country code – BM
Legal Basis – Common law
Legal framework – Companies Act 1981 (as amended 2006)
Company form – Exempted company (Company limited by shares)
Liability - The liability of a shareholder to the company is limited to any amount unpaid on a share held by the shareholder.
Economic Substance –
Under the Economic Substance Act 2018 and the Economic Substance Regulations 2018, Exempted and local companies, permit companies, exempted and local LLCs and partnerships that carry out ‘relevant activities’ are required to meet certain substance tests – such as control and management from within Bermuda, adequate physical presence, employees and operating expenditures in Bermuda, and conduct their core income-generating activities in Bermuda.
'Relevant activities' include:
- banking i.e. banking business
- insurance i.e. insurer
- finance and leasing i.e. business of providing financing or leasing of assets
- fund management i.e. management of collective investment schemes
- distribution and service center business i.e. reselling goods to affiliated companies or providing services to affiliated companies. Affiliated company is defined as a company which is part of the same group (e.g. parent-subsidiary, sister entity with common parent company, etc).
- headquartering i.e. providing management services to affiliated companies
- intellectual-property business i.e. holding and exploiting IP assets, generating identifiable revenue from such assets. Please note that the provision of services for developing IP assets or holding or using IP assets for ordinary commercial or service business is not considered an intellectual property business. IP businesses are those that generate separate and identifiable revenue from IP assets (e.g. patent licensing).
- shipping i.e. transportation by sea of persons, animals, goods or mail, the renting or chartering of ships for such transportation, management of ship crew, sale of travel tickets, the use, maintenance or rental of containers, including trailers and other vehicles or equipment for the transport of containers, used for the transport of anything by sea
- and pure equity holding company, companies that only own equity interests in other companies, and only earn dividends and capital gains (subject to a limited economic substance test, where the company does not need to be directed and managed from within Bermuda, or conduct its core income-generating activities in Bermuda)
Companies conducting relevant activities need to file an Annual Economic Substance Declaration.
Companies that are not compliant with substance requirements may face civil penalties up to BMD 250,000. Making false economic substance declarations may carry out penalties up to BMD10,000 or imprisonment for two years, or both.
Bermudian companies that do not carry out relevant activities are not required to meet economic substance requirements.
Share capital – Bermuda exempted companies are no required to maintain a minimum share capital other than issuing at least one share of any par value. Government fees payable annually to the Registrar are calculated according to the assessable capital of the company.
Shareholders – The company may be formed by 1 or more shareholders, who can be either individuals or corporations and may be non-resident. The Register of Members may be accessed by any person visiting the registered office. Nominee shareholders are permitted.
Directors – At least one director is required, who may be a natural or a legal person, and may be non-resident. Details of the directors are disclosed on a public file. The Register of Directors may be accessed by any person visiting the registered office.
Secretary – The appointment of secretary is mandatory who may be a natural person or a company, and may or may not be resident in Bermuda. However, the Companies Act requires that each exempted company must have one representative of the company who is ordinarily resident in Bermuda. This requirement may be satisfied by the company having either of the following:
- a director who is ordinarily resident in Bermuda; or
- a secretary who is ordinarily resident in Bermuda; or
- a resident representative who is ordinarily resident in Bermuda; or
- in the case of a company the shares of which are listed on an appointed stock exchange, a resident representative.
Registered Address – Exempted Companies must have a registered office in Bermuda provided by a regulated corporate service provider.
General Meeting – Annual general meetings are not mandatory and can be held anywhere. Meetings can be held by telephone or other electronic means; alternatively, directors, as well as shareholders, may vote by proxy.
Electronic Signature – Permitted.
Re-domiciliation – A foreign and local entity may continue as a Bermuda Exempted company, and vice versa.
Compliance – Bermuda exempted companies are required to prepare and maintain accounting records, to reflect the financial position of the company. Accounting records should be kept for 5 years from the date of its preparation and may be kept anywhere. An annual financial summary must be kept in the registered office but it does not need to be filed with the Registrar.
An annual return and an annual fee must be filed and paid to the Registrar every January. Annual government fees are calculated according to the assessable capital of the company.
An exempted company must prepare financial statements annually and shall have such financial statements audited. However, members and manager may agree to waive the audit requirement by resolution, with the exception of companies carrying out a regulated activity and holding a license issued by the Bermuda Monetary Authority (e.g. financial service businesses).
Exempted Companies that are subject to economic substance requirements are required to submit an annual economic substance declaration together with financial statements.
- Shareholders not disclosed
- Directors not disclosed
- Corporate shareholders permitted
- Corporate directors permitted
- Local director required
- Secretary required
- Local secretary required
- Annual general meetings required
- Redomiciliation permitted
- Electronic signature
- Annual return
- Audited accounts
- Audited accounts exemption
- Exchange controls
- Common law Legal basis
- 1 Minimum shareholders
- 1 Minimum directors
- - Minimum issued capital
- - Minimum paid up capital
- USDAny Capital currency
- Anywhere Location of annual general meeting
- 2017 AEOI
Taxes
Corporate income tax – Bermuda does not levy corporate income tax. All trading income, investment income, capital gains, compensations, rents, and royalties, as well as sales of goods or supplies of services, are exempted from taxation.
No withholding tax is levied on dividend, interest and royalty payments to non-residents.
Other taxes - Bermuda does not levy personal income taxes, including capital gains and investment income, which are exempt from taxation.
An annual tax is levied on the annual rental value of land and stamp duties may apply on estates transferred upon death at progressive rates from 5% up to 20% on estates with a value exceeding BMD 2,000,000.
- Offshore Income Tax Exemption
- Offshore capital gains tax exemption
- Offshore dividends tax exemption
- CFC Rules
- Thin Capitalisation Rules
- Patent Box
- Tax Incentives & Credits
- Property Tax
- Wealth tax
- Estate inheritance tax
- Transfer tax
- Capital duties
- 0% Offshore Income Tax Rate
- 0% Corporate Tax Rate
- 0% Capital Gains Tax Rate
- 0% Dividends Received
- 0% Dividends Withholding Tax Rate
- 0% Interests Withholding Tax Rate
- 0% Royalties Withholding Tax Rate
- 0% Personal Income Tax Rate
- 0% VAT Rate
- 0 Tax Treaties
Country details
The Bermuda Islands are a British overseas territory located in the North Atlantic Ocean off the east coast of the United States. The closest American continent point is the Cape Hatteras in North Carolina, located 1,030 km to the northwest, while the city of Miami is 1 770 km to the southwest. It has just over 67,000 inhabitants and its capital is Hamilton.
Bermuda forms the northern peak of the legendary Bermuda Triangle, a large maritime area in which it is said that they have been disappeared numerous ships and aircraft in unexplained circumstances. The archipelago is in an adverse climate area prone to be hit by hurricanes.
Its official currency is the Bermudian Dollar (BMD), pegged to the US$ at a 1:1 ratio.
The executive power in Bermuda resides in the monarch and is exercised in his name by the Governor. The governor is appointed by the King on the proposal of the British Government. The head of government is the prime minister.
The cabinet is proposed by the prime minister and officially appointed by the governor. The Legislative Branch consists of a bicameral parliament inspired by the Westminster system. The Senate is the Upper House, composed of eleven members appointed by the governor on the proposal of the prime minister and the leader of the opposition.
The House of Assembly, or lower house, has thirty-six members elected by the population with the right to vote by secret ballot.
The country has one of the highest per capita income worldwide. Its economy is based on insurance and reinsurance, banking and financial services, as well as tourism, which accounts for approximately 28% of GDP. Bermuda has a robust international business and financial sector, which accounts for 60% of its GDP.
The industrial sector is small, and agriculture is severely limited by the lack of adequate land.