Economic Substance: An Overview For Bermuda Shipping Companies

Bermuda's Economic Substance Act 2018 and Economic Substance Regulations 2018 (and subsequent amendments) set out the requirements that Bermuda-based entities must adopt with regard to economic substance in the jurisdiction. Bermuda, along with all of the major offshore jurisdictions, passed this legislation in order to remain on the European Union's 'white list' of cooperative jurisdictions for tax purposes. This article provides a general overview of economic substance as it applies to shipping entities in Bermuda.

Which shipping entities are in scope?

Entities within the scope of the legislation ('registered entities') include exempted and local companies, permit companies, exempted and local LLCs, and partnerships that have elected to have separate legal personality, where those entities are carrying on a 'relevant activity' as a business in or from within Bermuda. Non-resident entities are out of scope; for this purpose a non-resident entity is an entity which