Bermuda

Bermuda

*Updated March 2024*

Editorial Board

  • Randall Krebs TEP (lead editor), Harbour International Trust Company, Bermuda

 

Important new developments

  • Beneficial ownership registers: It seems unlikely that Bermuda will introduce public registers, in light of art.8 of the European Convention on Human Rights, the Sovim judgment from the European Court of Justice, recent decisions of the European Court of Human Rights and the lack of consensus on legitimate interest.
  • Corporate income tax for multinational enterprises with annual revenue of EUR750 million. Trusts and traditional investment holding companies are not subject to this tax since they are not required to prepare consolidated financial statements. The companies that will be subject to the new tax will be largely indifferent since they would otherwise be subject to similar tax under Pillar 2 top-up tax, regardless of tax residence.
  • AML/ATF/sanctions: In 2023, updates were made to the main guidance notes and the sector specific guidance notes for trust business, the securities sector, corporate service providers and money service business.
  • Investment funds: Amendments were made to the Investment Funds Act 2006 and rules. Amendments are not expected to materially change the day-to-day operations of most Bermuda funds.
  • The Personal Information Protection Act 2016 will become effective on 1 January 2025.
  • The Trade Marks Act 2023 and Trade Mark Regulations 2023 were enacted but are not yet operative. The new Act closely mirrors the UK Trade Marks Act 1994 (as amended) and will have the effect of modernising trademarks legislation in Bermuda, in accordance with global trends.

Quick links

Bermuda’s legal system has its roots in English common law. Domestic legislation has kept Bermuda’s laws progressive and innovative, while UK case law remains of persuasive authority.

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Inheritance and succession

Succession

Bermuda legislation does not have forced heirship provisions. Further, it has specific provisions that are designed to prevent application of foreign forced heirship laws for Bermuda trusts: see the Trusts (Special Provisions) Act 1989.

If the deceased had property or was resident in Bermuda, the estate may not be dealt with until the Bermuda Court grants probate, letters of administration or reseals a foreign grant. The willingness of the Bermuda Court to take jurisdiction over probate proceedings on the basis of property within the jurisdiction (even though the deceased was not resident or domiciled in Bermuda) and the absence of estate or gift taxes/duties can be of assistance for international estate planning. See Administration of Estates Act 1974.

Family law and defined inheritance rules

Bermuda supports testamentary freedom. However, in special cases, and only where the deceased was domiciled in Bermuda, the Bermuda court can set aside a transfer of property where the disposition by the deceased's will or intestacy law does not make reasonable financial provision for a ‘qualified’ applicant under the Succession Act 1974.

Probate process

The granting of probate and administration and the resealing of foreign grants is governed by the Administration of Estates Act 1974. Probate is granted where the deceased had a valid will and provided for an executor. Letters of administration are granted where the deceased died intestate. In either case, the Court will require proof that the person applying for the grant is so entitled.

The estate administration and probate process is efficient. Bermuda has no estate or gift taxes/duties. Stamp duty is levied only on Bermuda-denominated property.

Mental capacity

The Succession Act 1974, as amended, provides that where the surviving spouse is incapable, by reason of mental disorder within the meaning of the Mental Health Act 1968, of managing or administering their property or affairs, a requirement or consent under the First Schedule may be made or given on their behalf by their parents or parent; testamentary or other guardian or receiver, if any; otherwise by the court.

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Estate planning

Use of trusts in estate planning

Bermuda has a long history of using trusts for local and international estate planning.

For international families, trusts are used for all the reasons that trusts are employed elsewhere, including:

  • to make provisions for loved ones or charities, including broad classes of beneficiaries, such as unborn grandchildren;
  • to allow for the continuity, succession and retention of family businesses and properties;
  • to shelter property from potential creditors, and foreign forced-heirship laws;
  • to provide protection for families or individuals seeking risk management through the transfer of a portion of their assets to another jurisdiction;
  • to protect the family fortune from dissipation by less responsible family members;
  • to enhance protection against exchange controls or the seizure of assets due to political instability, nationalisation or similar measures, thereby mitigating sovereign risk;
  • to provide international estate planning opportunities;
  • to consolidate family interests in one estate planning vehicle;
  • to establish family offices through the use of a private trust company;
  • to hold foreign investments, patents and copyrights, or insurance policies;
  • for commercial trust arrangements using special purpose and specially designed trusts;
  • for employee benefit and share option schemes; and
  • as philanthropic vehicles.

Use of foundations in estate planning

NOT APPLICABLE

Types of entities

As Bermuda is a common-law jurisdiction, the entities available are similar to those in Canada, UK and the US. Bermuda statutes governing these entities are often based on the equivalent UK statute. However, the Bermuda has adapted these entities to suit Bermuda’s offshore industry. The entities currently available are:

  • companies limited by shares, companies limited by guarantee, or unlimited liability companies;
  • limited liability companies (LLCs);
  • local/exempted companies;
  • segregated accounts and incorporated segregated accounts companies; and
  • general/limited/exempted partnerships.

Bermuda law distinguishes between those companies that are owned predominantly by Bermudians (local companies) and those which are owned predominantly by non-Bermudians (exempt companies). Exempt companies may be resident in Bermuda and carry on business from Bermuda in connection with transactions and activities outside Bermuda. The activities of most international companies are likely to satisfy this requirement. Only local companies and exempted companies holding a licence under s.129A of the Companies Act 1981 are permitted to carry on and compete for business in Bermuda.

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Taxation

Income tax system

NOT APPLICABLE

Personal income tax rates

NOT APPLICABLE

Corporate income tax rates

15 per cent for multinational enterprises with annual revenue of EUR750 million. They are also required to prepare consolidated financial statements.

Capital gains tax

NOT APPLICABLE

Non-residents

NOT APPLICABLE

Withholding tax rate (non-treaty)

NOT APPLICABLE

Withholding tax rate (treaty)

NOT APPLICABLE

Taxation at death

NOT APPLICABLE

Other taxes

NOT APPLICABLE

Tax treaties

Bermuda has signed four double taxation conventions (DTCs), with Bahrain, Qatar, the Seychelles and the US.

Tax information exchange agreements (TIEAs)

Bermuda is part of the Common Reporting Standard (CRS) and is a signatory of the Multilateral Competent Authority Agreement on the exchange of Country-by-Country Reports. It has entered into a Model-2 IGA for FATCA. Bermuda has exchange of information relationships with 44 jurisdictions through its DTCs, 41 TIEAs and the Convention on Mutual Administrative Assistance in Tax Matters.

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Residence and domicile

Special rules on becoming resident

Bermuda now offers a One Year Residential Certificate to individuals who wish to work or pursue higher education remotely from Bermuda.

Bermuda offers the Economic Investment Residential Certificate (EIRC) to persons making a qualifying investment of at least BMD2.5 million in Bermuda. Qualifying investments include charitable donations, the purchase of Bermuda property and investment in a Bermuda-based business. The EIRC allows the holder and their spouse to reside and seek employment in Bermuda, with automatic employment approval at any business in which the holder has invested. Dependent children up to the age of 18, or 25 if enrolled in higher education, may also reside in Bermuda. EIRCs are issued for five years. After five years the holder may apply for a Residential Certificate (RC), which grants the holder and their spouse indefinite rights of residence and seeking employment, again with automatic approval to work at any business in which the holder has invested. Under the RC, dependent children may reside in Bermuda indefinitely.

A person may enter Bermuda as a tourist and remain for 180 days.  Extensions can be granted, on a case-by-case basis through application to the Department of Immigration. Permission to reside on an annual basis may be applied for. This form of residence is renewable annuall

Persons wishing to reside in Bermuda for an extended period with full residential status may apply for a residential certificate. A residential certificate grants the right to the holder to live in Bermuda and to enter and exit freely for so long as the certificate is in existence. The Incentives for Job Makers Act 2013 has created a simpler and more affordable procedure for senior non-Bermudian executives to be granted a permanent residency certificate. In other cases, persons wishing to apply for a residential certificate must be retired (worldwide) and in possession of substantial financial means and be one of the following:

  • A person who has, immediately prior to the application, been employed in Bermuda for at least five years.
  • The owner of residential property in Bermuda.
  • The spouse of one of the above.

Residential certificates are issued without time limit and are subject to revocation by the Minister of Home Affairs subject to the rules of natural justice.

Special rules on ceasing residence

Where a person is granted a Permanent Resident Certificate (PRC) and plans on leaving the island for a period of two years or more, he/she must notify the minister of such intention and the reasons why, so that the PRC status is not revoked.

Domicile concept for gifts and inheritance

NOT APPLICABLE

Taxation of holdings by non-residents on death and of gifts

  • Gifts: NOT APPLICABLE
  • Death: stamp duty may apply in respect of Bermuda land or investments in Bermuda currency.

Reporting/auditing requirements

There are no uniquely Bermudian reporting or audit requirements in respect of trusts.

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Other relevant information

Asset protection laws

Bermuda does not have short time periods for the commencement of legal proceedings or condoning fraudulent transfers to trusts. A properly established asset preservation trust (whose specific purpose is not designed to defeat, hinder or delay existing or reasonably foreseeable creditors) is permitted. Bermuda maintains a reasonable balance between the interests of the well-intentioned individual and those of that individual’s legitimate creditors. As a result, a trust created in Bermuda is not immediately viewed as having been created for the sole purpose of hindering creditors.

A gift or transfer of property at below market value, including a disposition to a trust, made in order to put property beyond the reach of a person (or class of persons) with a possible claim against the transferor, is voidable at the insistence of certain ‘eligible creditors’. This rule applies in or outside liquidation or bankruptcy. Insolvency is not a prerequisite.

An eligible creditor will have a period of six years to initiate proceedings.

Foreign currency restrictions

NOT APPLICABLE.

Foreign ownership restrictions

Bermuda local companies are subject to a 60/40 ownership rule. These rules are expected to be amended in 2024. Provisions and legislation regarding ownership of Bermuda land by non-Bermudians is covered by, inter alia, the Bermuda Immigration and Protection Act 1956, and is beyond the scope of this summary.

Foreign trust reporting obligations

NOT APPLICABLE

AML/due diligence and other requirements and regulatory procedures for advisors

Bermuda’s anti-money laundering (AML), anti-terrorist financing (ATF) and anti-bribery regimes are set out in:

  • The Proceeds of Crime Act 1997 (the 1997 Act);
  • The Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing) Regulations 2008 (the Regulations);
  • The Anti-Terrorism (Financial and Other Measures) Act 2004;
  • The Financial Intelligence Agency Act 2007;
  • The Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing Supervision and Enforcement) Act 2008 (the SEA Act); and
  • The Bribery Act 2016.

All employees of a regulated institution must comply with the Regulations and the Bermuda Monetary Authority’s AML/ATF Sector Specific Guidance Notes for Trust Business on the Prevention and Detection of Money Laundering and the Financing of Terrorism (the Guidance Notes). If they know or have reason to suspect any money-laundering activity is proposed or is being carried out, they must report their concerns or suspicions to the regulated institution’s reporting officer. By making such a report, an employee has a defence to liability under the 1997 Act or the Regulations as regards any money-laundering offence.

The Bribery Act 2016 creates a corporate offence of failing to prevent bribery by an associated party, in addition to bribing, being bribed and bribing a foreign public official.

The Personal Information Protection Act 2016 requires the use of personal information that is not already publicly available to be justified by conditions defined under the legislation.

Requirements to:

  • Establish a trust: the Trust Code of Practice prepared by the Bermuda Monetary Authority sets out that licensed undertakings must have procedures in place to ensure that proper due diligence is carried out before acting for any new customer. As a minimum, licensed undertakings need to be able to comply with the Guidance Notes, and any relevant legislation. Licensed undertakings should have adequate policies and procedures to ensure that they know the identity of each settlor, protector and custodian on an ongoing basis and to the fullest extent possible the identity of the beneficiaries. They must also verify the source of all assets introduced, to satisfy themselves that they are not of illicit origin.
  • Open a bank account: The Regulations specify the required customer due diligence measures, and the consequences of failure to perform these. They include: identifying the customer, and verifying their identity; identifying the beneficial owner, where relevant, and verifying his identity; and obtaining information on the purpose and intended nature of the business relationship.
  • Incorporate a company: the approval of the Bermuda Monetary Authority must be obtained in connection with the incorporation of any Bermuda exempted company. A personal declaration signed by each of the ultimate beneficial owners (holding 10 per cent or more) of the proposed company is required for submission to the Bermuda Monetary Authority. By the declaration, each beneficial owner attests to their good standing.
  • An application for permission to issue shares of a company (together with the supporting information on the ultimate beneficial owners) is submitted to the Bermuda Monetary Authority. For a company proposing to carry on certain types of restricted business activity, consent of the Ministry of Finance is required. On receipt of such permission (and consent, if needed) the memorandum of association is registered with the Registrar of Companies who issues a certificate of incorporation.
  • The Personal Information Protection Act 2016 requires the broadly defined 'use' of personal information that is not already publicly available to be justified by conditions defined under the legislation.

Other points of interest

Bermuda is the UK’s oldest overseas territory, claimed in 1609. It is also the longest self-governing territory, having had its own local parliament since 1622.

Key resources for further information

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