Education campaign due on substance’ rules
An education campaign will be rolled out to help local companies understand their responsibilities under new “economic substance” laws.
Curtis Dickinson, the Minister of Finance, admitted work was needed to make sure people know what they must do to abide by the legislation, which will come into effect next year.
MPs passed a revised version of the Economic Substance Act 2018 during a special sitting of the House of Assembly yesterday.
Bermuda was among more than 40 jurisdictions required to approve legislation by the end of this year to address the European Code of Conduct Group’s concerns about tax avoidance by multinational companies.
Members heard that not only will residents be affected by the tougher controls on global businesses, but that local companies will also be subject to the new rules.
Mr Dickinson said: “This Bill will impact Bermuda’s business community and by extension Mr and Mrs Bermuda in several ways, by imposing an obligation on an entity, domestic or international, involved in relevant activities as defined in the Bill to maintain economic substance in Bermuda and in that regard comply with economic substance requirements set forth in the Bill.
“Although the substance obligations will apply as well to local or domestic entities, the obligations will apply only to the extent that a local entity is one that engages in a relevant activity.”
Economic substance includes physical presence, employees and revenue-generating activities.
The legislation also contains provisions to monitor firms and enforcement for those who fail to comply, from fines to being struck off the register of the companies.
Businesses deemed to be engaged in “relevant activity” include those operating in banking, insurance, shipping or as a distribution and service centre.
Leah Scott, the deputy Opposition leader, asked yesterday: “I know that local companies are now in scope in terms of economic substance and so ... I would like to know whether or not there are intentions to educate Mr and Mrs Smith about their shop and what they need to do and how they need to comply with this legislation.”
Mr Dickinson explained: “Local companies are only covered by this legislation inasmuch as they are engaged in a relevant activity.
“We will, inasmuch as folks need help understanding how this is applicable to them, be able to provide advice through the ministry.
“We have some work to do around educating people on the impact to them individually and so we will have to publish some guidance notes of some sort, whatever’s appropriate to help people navigate their way through this.”
Patricia Gordon-Pamplin, the One Bermuda Alliance spokeswoman for finance in the House, asked about the “communication process” for companies not registered by organisations like the Association of Bermuda Insurers and Reinsurers.
She said: “We can’t assume knowledge if they don’t have direct communication.”
Mr Dickinson replied: “We accept that there needs to be an education component to the implementation of this legislation.
“We commit to doing what we need to do to advise people accordingly.”