The Bermuda Registrar of Companies (the "Registrar") has implemented a number of changes in relation to the Economic Substance Act 2018, the Economic Substance Regulations 2018 (each as amended) (the "Economic Substance Laws") and the related Guidance Notes issued by the Minister of Finance on 18 September 2020, which entities should take into consideration in advance of filing their economic substance declaration for the 2019-2020 relevant financial period. These changes have been implemented by the Registrar in response to reviews completed by the EU Code of Conduct Group on Business Taxation and are consistent with Bermuda's ongoing commitment to comply with international standards.

Summary of Reporting Requirements

As noted in our previous client advisories, which can be found at the following links: Economic Substance Overview, Economic Substance Update, COVID-19 Economic Substance Update, any entity conducting a 'relevant activity' and any entity claiming 'non-resident entity' status under the Economic Substance Laws in a relevant financial period, must file an economic substance declaration form (the "Declaration") no later than six months after the last day of their financial year end. The Declaration must be filed on the Registrar's e-portal and the entity must provide the requested information in relation to each 'relevant activity' or (if applicable) provide supporting evidence for its claim as a 'non-resident entity', together with supporting documents.

Key Legislative Updates

Previously an entity that was conducting a 'relevant activity' but that did not earn any gross revenue in a relevant financial period was not considered to be carrying on a 'relevant activity' as a business. Consequently, such entities were not required to file a Declaration in respect of the applicable relevant financial period. However, the Registrar has updated the e-portal and has issued an industry notice confirming that any entity conducting a 'relevant activity' that does not earn gross revenue in a relevant financial period must now file a Declaration on the portal, but still does not have to meet the applicable economic substance requirements under the Economic Substance Laws in respect of that relevant activity for the relevant financial period.

Entities should be prepared to provide additional information on the Declaration for the 2020 relevant financial period. These questions largely relate to data fields under the headings 'Managed & Directed' and 'Financial Information & Employees'. Entities which are filing a Declaration are now required to provide information on: (i) the number of meetings held in Bermuda where strategic decisions are made; (ii) the total expenses directly incurred in Bermuda; (iii) salary and related employment expenses incurred in Bermuda and in all locations where the entity operate; (iv) total outsourcing expenditure; and (v) the units of qualified full time equivalents in Bermuda. It will therefore be important for entities to keep records to enable such reporting to be made, and those records must be accessible from Bermuda, whether in hard copy form or electronically. 

For those entities that are required to comply with the applicable economic substance requirements, but that self-report on the Declaration that they have not met such requirements for the relevant financial period, such entities will now be required to indicate which of the requirements the entity has failed to comply with. The Registrar has not given any indication as to whether any potential penalties for non-compliance will be treated more favourably where an entity self-reports their non-compliance. Entities are however reminded that it is an offence to provide false information.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.