Key insights for businesses in Bermuda

The Bermuda Government has recently implemented a number of regulations aimed at bringing its regulatory environment into alignment with global trends including increased protection for personal information and the introduction of a corporate income tax in line with the OECD’s GloBE (Global Anti-Base Erosion) Rules. 

We discuss each of these further below.

Personal Information Protection Act (PIPA)

What is it?

PIPA represents the data privacy legislation of Bermuda and was introduced to regulate and protect the use of personal information by individuals, companies, public authorities and other organisations (each an Organisation) in and from within Bermuda. In a “Guide to PIPA” published by the Office of the Privacy Commissioner for Bermuda (Privacy Commissioner), the Privacy Commissioner states that PIPA applies to every Organisation that uses personal information in Bermuda, where such personal information is used wholly or partly by automated means and/or forms, or is intended to form, part of a structured filing system and defines personal information to mean any information that relates to an identified or identifiable individual, examples of which include names, dates of birth, photographs, video footage, email addresses, and telephone numbers. “Use” of personal information is a defined term under PIPA that means “carrying out any operation on personal information, including collecting, obtaining, recording, holding, storing, organising, adapting, altering, retrieving, transferring, consulting, disclosing, disseminating or otherwise making available, combining, blocking, erasing or destroying it”.

The Privacy Commissioner’s Guide to PIPA can be accessed at: The Office of the Privacy Commissioner for Bermuda | PrivCom

Timing

PIPA came into force on January 1, 2025 and all Bermuda entities to whom it applies are required to be in compliance. 

How to comply?

The below has been summarised from information available on the Privacy Commissioner’s website at the time of writing:

1. Every organisation shall adopt suitable measures and policies to give effect to its obligations and to the rights of individuals set out in PIPA.
2. The measures and policies in (1) above shall be designed to take into account the nature, scope, context, and purposes of the use of personal information and the risk to individuals by the use of the personal information.
3. Where an organisation engages (by contract or otherwise) the services of a third party in connection with the use of personal information, the organisation remains responsible for compliance with PIPA at all times.
4. An organisation shall designate a representative (“privacy officer”) for the purposes of compliance with PIPA who will have primary responsibility for communicating with the Commissioner.
5. A group of organisations under common ownership or control may appoint a single privacy officer provided that a privacy officer is accessible from each organisation.
6. A privacy officer designated under (4) above may delegate his duties to one or more individuals.
7. In meeting its responsibilities under PIPA, an organisation shall act in a reasonable manner.

Global minimum tax

What is it?

Bermuda introduced the Corporate Income Tax Act 2023 which established a 15% Corporate Income Tax (CIT) for the first time in Bermuda’s history. The introduction of CIT was guided by a minimum tax rate agreed internationally by 137 countries which is applicable to Bermuda entities that are part of multinational enterprise (MNE) groups with annual revenue exceeding €750M.

Timing

The legislation was passed in December 2023, and the CIT is effective for fiscal years beginning on or after January 1, 2025 for all Bermuda constituent entities of MNE’s that fall in scope.

How to comply?

Various administrative aspects of the CIT regime are still being developed. The Corporate Income Tax Agency was established by the Corporate Income Tax Agency Act 2024 and is expected to be fully operational in 2025, in advance of any filings become due in 2026. 

To help facilitate the administration of CIT, the Annual Declaration form, which is ordinarily filed with the Registrar of Companies before 31 January each year, has been modified and amended for 2025 to collect information relevant to the CIT.

There are various provisions of the CIT regime that can have a different impact depending on the circumstances of the entity. For example, entities may be able to take advantage of exclusions and exemptions, including, but not limited to:

• Five-year deferral for MNE’s with a limited international footprint in six or fewer jurisdictions.
• Excluded entities (e.g. non-profit organisations, investment funds)
• Bermuda entities that are <80% owned by ultimate parent of MNE Group
• De minimis exemption (subject to election and certain other rules)

As such, entities should consult appropriate tax and legal advisors to determine the full effect of CIT on their business.   

While not so fresh off the press, it is imperative that entities continue to review their compliance with the Economic Substance Act and related Economic Substance Regulation on an annual basis.

Economic substance

What is it?

The Economic Substance Act (Act) and related Economic Substance Regulations (Regulations) were passed in response to an investigation and recommendations made by the EU’s Code of Conduct Group and have been operative since December 31, 2018. . Under the Act and Regulations, Bermuda-registered entities engaging in one or more of the 9 relevant activities identified in the Act are required to comply with certain economic substance requirements in Bermuda and file an economic substance declaration (ESD) annually. An entity that can provide supporting evidence that it is resident for tax purposes in a recognised jurisdiction outside of Bermuda, may be exempted from certain provisions of the Act, however, an ESD filing is still required. 

Timing

Entities engaged in relevant activities are required to submit an ESD to the Registrar of Companies within six months of their financial year-end.

How to comply?

To comply with the Act, in-scope entities must meet the following five criteria for each of its relevant activities:

1. Managed and directed in Bermuda: The entity’s key decision-making functions and strategic oversight must be carried out within Bermuda.
2. Core income-generating activities (CIGA) undertaken in Bermuda: The entity’s primary profit generating activities related to the relevant activities should be conducted within Bermuda.
3. Adequate physical presence: The entity must maintain a suitable physical presence in Bermuda, reflecting the nature and scale of its operations.
4. Qualified full-time employees: The entity should have a sufficient number of full-time employees with appropriate qualifications to support its operations in Bermuda.
5. Adequate operating expenditure: The entity must incur operating expenses in Bermuda that are commensurate with the level of its relevant activity

As an independent, market leading provider of fund, fiduciary and legal services in Bermuda, our team of experts from Ocorian Law can help you respond to the unique requirements across a wide range of Bermuda legal services. For guidance and questions, please reach out to our team.