Economic Substance Requirements to Apply to ALL Bermuda Partnerships - JD Supra

The Economic Substance Amendment Act 2021 was enacted on 30 June 2021, bringing within scope of the Economic Substance Act 2018 all Bermuda partnerships and overseas partnerships that are engaged in a relevant activity[1], including those partnerships without separate legal personality.

Prior to this amendment, all Bermuda companies, permit companies and Limited Liability Companies were in scope of the economic substance regime, but only those partnerships that elected to have separate legal personality, were required to comply with the economic substance requirements if they were carrying on a relevant activity[2]. However, with the enactment of these amendments, all partnerships to which the Partnership Act 1902 applies, limited partnerships, exempted partnerships, exempted limited partnerships and overseas partnerships that are carrying on a relevant activity are now required to satisfy the economic substance requirements, irrespective of whether such partnerships have elected to have separate legal personality.

All partnerships formed and/or registered in Bermuda on or after 1 July 2021 carrying on or expecting to carry on a relevant activity are immediately subject to the economic substance requirements. However, partnerships that were not previously in scope of the Economic Substance Act 2018, but which were in existence or registered in Bermuda on or prior to 30 June 2021, and are carrying on a relevant activity, will be subject to the economic substance requirements from 1 January 2022. Their first economic substance declaration therefore must be filed in respect of relevant periods ending on or after 31 December 2022.

Any local partnership (being a partnership that is not registered as an exempted partnership) carrying on a relevant activity is not part of an MNE Group (as such term is defined in the Economic Substance Act) and which carries on business only in Bermuda will, along with other local entities, be subject to reduced economic substance requirements. Such local partnerships are required only to comply with governance requirements set forth in the relevant Partnerships Act (as applicable), but will not be required to complete and file an Economic Substance Declaration fForm (the “Declaration Form”).

These changes are consistent with economic substance legislative changes made in [other jurisdictions (including the Cayman Islands, the British Virgin Islands and the Channel Islands) and are compliant with current international economic substance requirements.

How can we help?

Conyers has been closely involved with the implementation of Bermuda’s economic substance legislation as well as the Registrar’s Economic Substance Declaration Portal.

[1] “relevant activity” means carrying on as a business any one or more of the following: banking; insurance; fund management; financing and leasing; headquarters; shipping; distribution and service centre; intellectual property; and holding entity.

[2] Economic substance requirements do not apply to such entities that can provide evidence of their residence for tax purposes in a jurisdiction outside Bermuda that is not listed in Annex 1 to the European Union’s list of non-cooperative jurisdictions for tax purposes.

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