Bermuda Companies Act Amendments and Regulatory Updates

Recent amendments to the Companies Act and regulatory framework that may impact your business operations in Bermuda

Bermuda has undergone significant enhancements in its commercial (re)insurance supervision and regulatory regime, driven by industry consultations and market testing led by the Bermuda Monetary Authority (BMA). These enhancements particularly impact commercial (re)insurers in the long-term space, resulting in rule amendments, guidance releases, and adjustments to annual fees, all aimed at ensuring Bermuda’s continued resilience in the important industry. We summarise the most significant changes below.

Bermuda Corporate Income Tax

In alignment with international tax standards and the Organisation for Economic Co-Operation and Development’s base erosion and profit-shifting (BEPS) reforms, Bermuda’s Parliament passed the Corporate Income Tax Act 2023 (the Act) recently. This Act introduces a 15% corporate income tax regime effective from 1 January 2025, applicable only to Bermuda businesses that are part of multinational enterprise groups with annual revenues of EUR750 million or more in at least two of the four preceding fiscal years.

Local Bermuda businesses and those not part of multinational enterprise groups (MNE) are exempt. There are further exclusions if the jurisdictional footprint and tangible asset value requirements are met, to meet the requirements:

• the MNE Group must be located in five or fewer jurisdictions outside the reference jurisdiction (ie where the MNE Group has the highest total tangible assets)
• the sum of the net book value of the tangible assets of all constituent entities located in all jurisdictions other than the reference jurisdiction must not exceed EUR50 million
• These exclusions are valid for five years beginning on or after 1 January 2025.

These exclusions are valid for five years beginning on or after 1 January 2025.

Corporate income tax calculations begin with financial accounting net income or loss, subject to various adjustments to determine taxable income. Provisions for tax credits and over 24 elections are also included in the act, these elections include annual, five-year, and other categories. Annual elections, the most flexible, apply for the election year and subsequent fiscal years, with options such as branch exemptions, unclaimed accrual and de minimus. Five-year elections have limited revocability and include entity ownership treatment. Additionally, there is a form of “other” election which applies to a specific point in time, a specific transaction or once to a specific year.  

Companies Act Amendments

The Companies Act 1981 recently underwent major amendments. Key changes include:

• reduction of share capital – Section 46 of the Companies Act no longer mandates advertisement for a reduction of share capital. This allows the reduction of share capital to be a more expedited process via corporate approvals and filing with the Registrar of Companies without the need for public advertisement.
• digital asset businesses – Section 129A (and section 24 of the Limited Liability Company Act 2016) now includes digital asset businesses, simplifying the regulatory framework for entities engaging in digital asset activities. The amendments also highlighted that companies carrying on a BMA licensed digital asset business in Bermuda do not require a licence under the Companies Act to carry on such business or activity in Bermuda.

BMA Guidance on Exchange Control Enforcement

The BMA and the Ministry of Finance recently issued guidance on enforcing exchange control regulations, emphasising compliance with the Exchange Control Act 1972. This guidance applies to various circumstances, including the issue and transfer of shares of Bermuda companies.

Oversight of Beneficial Ownership Register

The Central Beneficial Ownership Register has been managed by the BMA for over 70 years, cooperating with regulators for transparency on AML and criminal matters.

The Registrar of Companies has recently announced plans to transfer the Central Beneficial Ownership Register from the BMA to the Registrar of Companies, as well as to streamline and strengthen the beneficial ownership legislative framework, with Bermuda aiming to implement these within 12 months following the review of the EU’s fifth Anti-Money Laundering Directive. The Registrar of Companies will issue a consultation paper that will provide further details, including the Registrar of Companies’ potential public access to the Beneficial Ownership Register.

The potential public access will not impact companies or partnerships and the shares of which are listed on a recognised stock exchange, as these entities are not required to maintain a beneficial ownership register or file same with the Bermuda authorities.

Government Fees Changes – New Regulatory Fee

Legislation introduced a new annual fee to cover the increasing regulatory functions of the Registrar of Companies (ie in respect of economic substance, AML/ATF, tax treaties, etc). Notable changes include a USD500 annual fee for non-local partnerships and corporations. The implementation of this fee, initially set for 9 February 2024, has been postponed to a later date.

Conclusion and Next Steps

The recent amendments to the Companies Act and regulatory framework in Bermuda present important changes that necessitate careful consideration.

The introduction of Bermuda’s corporate income tax signifies a fundamental shift from its traditional “offshore” moorings to a “mid shore” jurisdiction. Although this tax will only apply to a limited category of Bermuda entities, this is a seismic shift for Bermuda. A corporate taxing infrastructure will need to be developed and new rules will need to be interpreted.

We anticipate forthcoming guidelines from the relevant regulatory authorities, which will offer detailed insights into the practical implementation of the various amendments.

As the guidelines become available, Marbury will provide direct communication with affected clients to outline any specific actions that need to be taken by our Bermuda entities. As always, we remind Bermuda entities to uphold their obligation to promptly notify the registered agent of any changes in the addresses of directors or members on an ongoing basis. Inaccurate or out-of-date information held on the registers may incur penalties. For any related queries, please contact your usual Marbury relationship manager or info@marburys.com.

Author: Michelle Kwong

Disclaimer The information included in this communication is accurate as of the date of publication and is subject to potential updates or modifications from the relevant regulatory authorities. It is advisable to consult with legal and compliance professionals familiar with Bermuda’s regulations for specific advice and guidance.