Bermuda and UK agreement on income reporting
Bermuda and Britain have signed a Country by Country Competent Authority Agreement that will enable the automatic reporting of corporate income for UK-related transfer pricing enforcement purposes.
Transfer pricing refers to the setting of the price for goods and services traded internally between divisions or subsidiaries of a larger parent company. Such transactions can take place across multiple countries.
In the past, a number of jurisdictions, including Bermuda, have faced criticism because of the practice of multinational companies transferring billions of dollars of revenue to offshore holding companies. Some of those corporations have been accused of using such mechanisms to minimise their tax liabilities elsewhere.
In a statement, the Bermuda Government said the agreement will complete the Organisation for Economic Co-operation and Development Base Erosion and Profit Shifting tax transparency package between Bermuda and the UK.
Similar to individuals under the Common Reporting Standard, corporations must also automatically report financial information to Bermuda authorities. Any reported UK-related income will be shared automatically with UK tax authorities.
The OECD describes BEPS as tax-planning strategies that exploit gaps and mismatches in tax rules that can allow multinational enterprises to artificially shift profits to low or no-tax locations where they have little or no economic activity, resulting in little or no overall corporate tax being paid.
And the OECD sees its BEPS project as providing governments with solutions for closing the gaps in existing international rules, that currently allow corporate profits to “disappear” or be artificially shifted in such a manner.
Bermuda is the first UK Overseas Territory to complete a CbC Competent Authority Agreement with Britain.
David Burt signed the agreement today, during his overseas trip to London which also included yesterday meeting Theresa May, the British Prime Minister.
The Premier said: “I am pleased to sign this important agreement with the United Kingdom on behalf of the people of Bermuda.
“We are the first Overseas Territory to sign the agreement which further solidifies Bermuda's position as a global leader in international tax transparency. Bermuda remains a jurisdiction with an excellent reputation for quality.
“We continue to demonstrate leadership in global tax transparency and we encourage other countries to meet the ‘Bermuda Standard'.”
In June, the Government created a new online portal to meet Bermuda's obligations under the OECD common reporting standards and CbC automatic exchange of information regimes.