Senators see compliance rules as opportunity
Opportunities existed for Bermuda despite tough new rules designed to crack down on international business, senators said yesterday.
Kathy Lynn Simmons, the Attorney-General and Minister of Legal Affairs, said that although Bermuda was at the “top end” of co-operation and compliance, it was “often placed in the same bucket as others that are not”.
She was speaking as the Upper House passed the Economic Substance Act 2018 in response to a European Union warning that low or no-income tax jurisdictions would be blacklisted if they did not introduce laws to combat companies with only a nominal base offshore.
Economic substance means that companies must show a physical presence, employees and revenue-generating activities.
Bermuda was one of 40 jurisdictions that promised to pass legislation by the end of this year.
Ms Simmons told senators opportunity could arise from the new regime.
She said: “It will force those jurisdictions at or near the bottom in terms of compliance with international standard to raise their game up to international standards.
“We also anticipate some overseas countries may view Bermuda as a domicile of choice if companies find themselves in a position of having no choice in establishing a physical presence, economic substance, in the jurisdiction where they are registered and thus may seek Bermuda as a domicile of registration.”
Marcus Jones, a One Bermuda Alliance senator, said: “Bermuda has proven to be a country that can persevere even through the hardest times.
“As much as we may be looking at this as strong headwinds that are trying to hold us back from progress, we can look at this as an opportunity to pivot and be creative in the way that we do business.”
He added: “We can also look at it as a potential spark to really focus on our immigration reform.”
James Jardine, an independent senator, said Bermuda had to maintain “a strong working relationship with the EU” in the future, particularly given the uncertainty over Britain's decision to leave the bloc.
He added that some details such as the definition of “core income-generating activities” were expected to become apparent with the publication of regulations.
Mr Jardine added: “It's very important that the regulations are issued as soon as possible so that companies that are here can see what it is they have to do.
“And also, more importantly, those companies that may be considering coming here can see what the requirements are.”
Ms Simmons later told him the regulations were “almost complete”.
Nick Kempe, the shadow finance minister and OBA Senate leader, said companies with a presence in Bermuda as well as another jurisdiction, such as the Cayman Islands, might consider a merger of their business in a single country.
He said: “We need to make sure that if they're going to, say, consolidate their operation in one of the two to ensure that they have the minds and matter ... that they choose Bermuda.”
Mr Kempe added: “We need to ensure that there's a plan to capture the silver lining in this situation. It needs to be communicated to the country.”
Anthony Richardson, a government member of the Upper House, said there were good aspects to the new rules.
He explained that overseas companies that wanted to relocate to Bermuda and some already registered here would need to “build their substance, that is have some employees”.
He said qualified Bermudians must be given employment opportunities first and it was important to make sure the right education and experience were provided to help them fill the available roles.
The Senate also passed legislation to change the functions and role of the chief medical officer, as well as the Allied Health Professions Act 2018, which introduced regulations for five more healthcare professions.
Other Bills given the green light yesterday were the Investment Funds Amendment Act 2018, the Bermuda Monetary Authority Amendment (No 3) Act 2018, and the Insurance Amendment (No 3) Act 2018.
Senators also approved a 1.4 per cent increase to Contributory Pension benefits.