EU Announces Bermuda is listed as a non-cooperative jurisdiction
In an announcement by the European Union on 12 March 2019, Bermuda has been added to its list of non-cooperative jurisdictions for tax purposes, despite Bermuda’s enactment of the Economic Substance Act 2018 (the “ESA”) and the Economic Substance Regulations 2018and subsequent amendments (the “ESA Regulations”). This is an unexpected and unfortunate decision. The Bermuda Government has confirmed that the implementation of the Economic Substance legislation in its current form satisfies the EU’s requirements with regard to the introduction of an economic substance regime.
The Bermuda Government is assuring stakeholders, industry leaders and the general public that the blacklisting of Bermuda is temporary. The UK Government, through HM Treasury, has expressly asserted, “Bermuda has legislated to address the issue giving rise to the blacklisting and expects that Bermuda will be removed from the list at the next available opportunity”. The EU’s Economic and Financial Affairs Council (ECOFIN), which is responsible for drawing up the blacklist, next meets in May 2019.
In response to the announcement by the European Union, the Minister of Finance of Bermuda, Curtis Dickinson, reiterated in a press conference on 12 March 2019 that “Bermuda is a co-operative jurisdiction.” He further stated, “although the EU decision is regrettable, it does appear to be based only on a technical failure, rather than a substantive complaint by the EU.”
Industry leaders, citing Bermuda’s top-tier reputation for cooperation and transparency, have come out in support of Bermuda’s regulatory regime and committed to work alongside Government to ensure that Bermuda is recognised as being fully compliant at the earliest opportunity.
The consequences of Bermuda’s blacklisting are unknown at this time. Currently, no specified sanctions have been specified for non-cooperative jurisdictions by the EU and the Bermuda Government has confirmed that it “does not anticipate any sanctions” against Bermuda.
The situation is being monitored closely and we will advise of any further developments.
As Bermuda awaits the EU reassessment, it is important to note that the ESA and the ESA Regulations remain in effect and affected entities will need to be aware of the economic substance requirements to ensure that they are in compliance within the specified period.
The corporate team at CHW is available to advise on any queries relating to Economic Substance requirements.