Bermuda’s first attempt at legislation to address “economic substance” concerns was given the thumbs-down by European Union officials, The Royal Gazette understands.

Three sources have claimed that the European Code of Conduct Group said last week it was not satisfied with the Economic Substance Act 2018 tabled in the House of Assembly on December 7.

One source, who declined to be named, told The Royal Gazette: “The Code of Conduct Group met on December 11 and they flat out rejected Bermuda’s proposals.”

Efforts to confirm the source’s claim were unsuccessful.

The group is made up of tax officials from EU countries and meets behind closed doors.

Bermuda was one of more than 40 jurisdictions who promised to pass legislation by the end of this year to address the group’s concerns about tax avoidance by multinational companies.

The Royal Gazette asked the Ministry of Finance if it had any comment on the EU’s believed dissatisfaction with the legislation after an initial anonymous tip on Thursday.

A Ministry of Finance spokesman said at the time: “This process is ongoing. It is not appropriate to comment at this time.”

The Bill was drawn up after consultation with industry and the EU to target entities with a lack of economic substance.

Economic substance includes physical presence, employees and revenue-generating activities.

The Bill also included provisions to monitor firms and enforcement for those who failed to comply, from fines and to being struck off the register of the companies.

The legislation is due to be debated in a special session of the House of Assembly today.

Failure to pass the Bill this year would risk Bermuda being put on the EU’s list of noncooperative jurisdictions, something that David Burt, the Premier, has worked to avoid.

Mr Burt said on Friday: “We are determined to meet our obligations and ensure the success of a thriving international business sector in Bermuda.

“We are on course to meet the end-of-year deadline for this legislation and I am confident that any affected companies will effectively manage the implementation of this new regime.”

Curtis Dickinson, the Minister of Finance, added: “We have been in constant contact with officials in Brussels and within the UK Treasury in our endeavours to ensure that our Bill meets the criteria necessary to keep Bermuda off any list of noncooperative tax jurisdictions.

“Technical officers within the Ministry of Finance and the Attorney-General’s Chambers have quite literally been working around the clock to finalise a high-quality Bill which incorporates a broad consultative exercise with industry partners and the Bermuda Monetary Authority.”

It was not clear whether the version of the Economic Substance Act due to be debated today will be different from that tabled on December 7, or if the island will be given a deadline extension into next year to make any amendments needed to satisfy EU demands.

Bermuda’s legislation, which drew heavily from EU guidance in a scoping paper published by the Code of Conduct Group in June, is similar to that tabled by other territories that have made the same commitment, such as Jersey and the Cayman Islands.