Bermuda and international transparency
In the second of a two-part series, Stephanie Paiva Sanderson, Corporate Attorney and Chair of the Industry/Government Joint Committee on Fatca and CRS analyses recent developments in the global effort to increase transparency and how Bermuda is participating in the various international schemes.
Base Erosion and Profit Shifting (BEPS) Project
The OECD has been working at record speed to get the Base Erosion and Profit Shifting Project off the ground over the past couple of years and global implementation is quickly advancing. There are 15 action points that all together constitute well over 1,500 pages of proposals and plans to deter tax planning strategies that shift profits or take advantage of loopholes in tax regulations. The BEPS Project will indeed be shaking up international business and takes aim at an array of technical issues such as double non-taxation, hybrid mismatches, treaty shopping, and transfer pricing — just to name a few.
Importantly, the BEPS Project includes a reporting regime dubbed ‘country-by-country reporting' (CbC reporting) for multinational enterprises that earn over 750 million euros per annum. CbC reporting requires information to be provided to tax authorities for scrutiny. Information required under the regime will include details of global business operations, revenue, profits and tax as well as information on management and organisational matters. It is largely aimed at transfer pricing which in a nutshell concerns the pricing of goods/services traded within the same multinational group.
Bermuda recently became the 33rd signatory of the agreement for CbC reporting (the Multilateral Competent Authority Agreement for the automatic exchange of Country-by-Country reports). All multinational groups based in Bermuda that fall under the criteria for providing a CbC report will need to start collecting the information for fiscal years starting on or after January 1, 2016.
CbC reporting is currently not intended by the international community to be public. Although there is some support in the EU for making CbC reporting information public, global competitiveness is a major consideration and some, including Business Europe, have indicated potential loss of competitive edge if a decision to make companies' financial information public goes ahead in the EU.
In the wake of the Panama Papers, the G5 Finance Ministers (UK, Germany, France, Italy, Spain) issued a letter to encourage the development of a standard for the exchange of beneficial ownership information and a number of countries have initially responded to the call. As I wrote in a piece published in this newspaper back in December 2014, Bermuda is ahead in this regard being one of the few jurisdictions to already have in place a continuously updated centralised register of beneficial owners.
Bermuda's authorities share information requested by international authorities within 24 hours and Premier Dunkley recently announced developments to allow faster exchange of beneficial ownership information with the UK. This further demonstrates Bermuda's willingness to fully co-operate and work with its overseas counterparts on regulatory matters.
Bermuda's Anti-Money Laundering and Anti-Terrorist Financing laws are robust. Owners of Bermuda companies up the chain to ultimate beneficial owners are screened and scrubbed. The Bermuda Monetary Authority, Bermuda's financial services regulator, has recently stated that it will begin to publicly disclose enforcement actions and the identity of persons and entities that have breached regulations. Bermuda will undergo an assessment by the Financial Action Task Force in 2018.
Another recent change concerns disclosure of company directors. Director and officer registers as well as shareholder registers are accessible to the public at a company's registered office under Bermuda company law. However, new amendments to Bermuda's company legislation will now require Bermuda companies to also file current director information with the Registrar of Companies to be held in a database that will be publicly searchable. Under the new provisions, changes to a company's list of directors will need to be filed with the Registrar within 30 days of any changes.
Bermuda continues to meet international transparency standards and in doing so Bermuda maintains its reputation as a forward-thinking blue chip jurisdiction, which is vital for its survival. Bermuda's achievement of Solvency II equivalence with the EU earlier this year should be interpreted by all as a beacon of its unparalleled standing as a leading reputable offshore jurisdiction.
I have no doubt that we will continue to see this wave of international pressure for jurisdictions to be more transparent in how they operate and allow business to operate on their shores. Further, the impact of the Panama Papers should not be underestimated and we will see the documents being used by governments for various tax enforcement activities.
Participating in the conversation on global transparency has become essential for international business and there has never been a time of more rapid development in this regard. One key to the success of the global efforts is that they must be supported and carried out unanimously among the jurisdictions; all countries will need to co-operate and implement the regimes to the same standards in order to ensure equal footing. There are many questions over whether that will be the case or not, but Bermuda is staying abreast of developments. It will be years yet until we see the fruits of these labours. In the meantime, it will be very interesting to watch this space.
Stephanie Paiva Sanderson is a Corporate Attorney at BeesMont Law Limited (www.beesmont.bm).