Bermuda

*Updated July 2020*

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• Legal system
• Inheritance and succession
• Estate planning
• Taxation
• Residence and domicile
• Other relevant information

Legal system

While Bermuda has had its own parliament since 1622, Bermuda’s legal system has its roots in English common law, having adopted the doctrines of equity and English statute law in force in 1612. Although the domestic legislation has kept Bermuda’s trust laws progressive and innovative, UK case law remains of persuasive authority today.

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Inheritance and succession

Succession

Bermuda legislation does not have forced heirship provisions. Further, it has specific provisions that are designed to prevent application of foreign forced-heirship laws for trusts governed by the laws of Bermuda, see Trusts (Special Provisions) Act 1989.

If at the time of death the deceased has property in Bermuda or was ordinarily resident in Bermuda, the property of the deceased may not be dealt with until the Supreme Court of Bermuda grants probate or letters of administration or reseals a foreign grant. The willingness of the Supreme Court to take jurisdiction over probate proceedings on the basis of property within the jurisdiction (even though the deceased was not resident or domiciled in Bermuda) and the absence of estate or gift taxes/duties can be of assistance for international estate planning. See the Administration of Estates Act 1974 (the Administration Act).

Bermuda supports the principles of testamentary freedom, subject to provisions noted below.

Family law and defined inheritance rules

Bermuda does not have forced-heirship provisions. However in special cases, and only where the deceased was domiciled in Bermuda, the Supreme Court of Bermuda does have powers under the Succession Act 1974 (the Succession Act) to set aside a transfer of property where it is satisfied that the disposition of a deceased’s estate effected by their will or the law relating to intestacy is not such as to make reasonable financial provision for a qualified applicant under the Succession Act.

Probate process

The granting of probate and administration and the resealing of foreign grants is governed by the Administration Act. Probate is granted where the deceased had a valid will and provided for an executor, and letters of administration are granted where the deceased died intestate. In either case, the Supreme Court undertakes a process whereby it seeks proof that the person applying for the grant is so entitled.

The estate administration and probate process is efficient. There are no Bermuda estate or gift taxes/duties, and stamp duty is levied only in respect of Bermuda-denominated property. Under Bermuda succession law, no person is entitled to a compulsory share in an estate. The treatment of movable assets in a Bermuda trust is in accordance with the terms of the trust deed and the settlor/grantor’s wishes rather than the succession laws of the settlor/grantor’s country. This has made Bermuda an option for some clients who wish to have their estate administered in Bermuda.

Mental capacity

The Succession Act, as amended, provides that where the surviving spouse is incapable, by reason of mental disorder within the meaning of the Mental Health Act 1968, of managing or administering their property or affairs, a requirement or consent under the First Schedule may be made or given on their behalf by their parents or parent; testamentary or other guardian or receiver, if any; or, where there are no parents or parent, testamentary or other guardian or receiver, by the court.

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Estate planning

Use of trusts in estate planning

Bermuda has a long history of using trusts for local and international estate planning. In addition to all of the traditional reasons for the use of trusts for estate planning, locally there has been a particular demand for trusts as a mechanism to minimise stamp duty for Bermuda land upon death.

For international families, trusts are used for all the reasons that trusts are employed elsewhere, including:

• To make provisions for spouse, family, friends or charities, including broad classes of beneficiaries, such as unborn grandchildren.
• To allow for the continuity and retention of family businesses and properties.
• To shelter property from potential creditors (asset preservation) and the forced heirship laws of certain jurisdictions.
• To provide protection for families or individuals seeking jurisdictional risk diversification through the transfer of a portion of their assets to another jurisdiction.
• To protect the family fortune from dissipation by less responsible family members.
• To enhance protection against the possible implementation of exchange controls or the seizure of assets due to political instability, nationalisation or similar measures, thereby mitigating sovereign risk.
• To provide international estate planning opportunities.
• To consolidate family interests in one estate planning vehicle.
• To establish family offices through the use of a private trust company.
• To hold foreign investments, patents, and copyrights, or insurance policies.
• Commercial trust arrangements using special purpose and specially designed trusts.
• Employee benefit and share option schemes 
for employees.
• Unit trusts.
• Charitable/philanthropic trusts.
• Trusts created for commercial purposes, such as reinsurance trusts or trusts in asset finance structures.
• Voting trust for control and succession planning.

Use of foundations in estate planning

NOT APPLICABLE

Types of entities

As Bermuda is a common-law US jurisdiction, the entities available are similar to those in other common-law jurisdictions, such as Canada, the UK, and the US. Many of the Bermuda statutes governing these entities are based on the equivalent UK statute. However, the Bermuda legislature has, over time, adapted these entities to suit Bermuda’s offshore industry. The entities currently available are:

• Companies limited by share capital, limited by guarantee, or unlimited liability companies;
• Limited liability companies (LLCs);
• Local companies;
• Exempted companies;
• Segregated accounts companies and incorporated segregated accounts companies;
• General partnerships;
• Limited partnerships; and
• Exempted partnerships.

Bermuda law distinguishes between those companies that are owned predominantly by Bermudians (local companies) and those which are owned predominantly by non-Bermudians (exempt companies). Exempt companies may be resident in Bermuda and carry on business from Bermuda in connection with transactions and activities that are external to Bermuda. In practice, the activities of most international companies are likely to satisfy this requirement. Only local companies and exempted companies holding a licence under s.129A of the Companies Act 1981 (as amended from time to time) are permitted to carry on and compete for business that is in Bermuda.

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Taxation

Income tax system

NOT APPLICABLE

Personal income tax rates

NOT APPLICABLE

Corporate income tax rates

NOT APPLICABLE

Capital gains tax

NOT APPLICABLE

Non-residents

NOT APPLICABLE

Withholding tax rate (non-treaty)

NOT APPLICABLE

Withholding tax rate (treaty)

NOT APPLICABLE

Taxation at death

NOT APPLICABLE

Other taxes

NOT APPLICABLE

Tax treaties

Bermuda has signed four double taxation conventions, with Bahrain, Qatar, the Seychelles and the US.

Tax information exchange agreements (TIEAs)

Bermuda is an early adopter of the Common Reporting Standard (CRS) and is a signatory of the Multilateral Competent Authority Agreement on the exchange of Country-by-Country Reports (CbC MCAA). It has entered into a Model-2 IGA for the Foreign Account and Tax Compliance Act (FATCA). Bermuda has exchange of information relationships with 44 jurisdictions through four double taxation conventions, 41 TIEAs and one multilateral mechanism; the Convention on Mutual Administrative Assistance in Tax Matters. To see a list of these agreements, visit www.eoi-tax.org/jurisdictions/BM#agreements

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Residence and domicile

Special rules on becoming resident

A person may enter Bermuda as a tourist and remain for three months. A longer stay will require an application to the Department of Immigration, citing reasons for such requirement and necessary documentation. Permission to reside on an annual basis may be applied for and such application involves completion of an immigration application form, specific personal documentation, proof of adequate funding to support oneself for one year and valid medical insurance. This form of residence is renewable annually.

For persons wishing to reside in Bermuda for an extended period and who wish to gain full residential status, it is advisable to apply for a residential certificate. A residential certificate grants the right to the holder to live in Bermuda and to enter and exit freely for so long as the certificate is in existence. The Incentives for Job Makers Act 2013 has created a simpler and more affordable procedure for senior non-Bermudian executives to be granted a permanent residency certificate. In other cases, persons wishing to apply for a residential certificate must be retired (worldwide) and in possession of substantial financial means and be one of the following:

• A person who has, immediately prior to the application, been employed in Bermuda for at least five years.
• The owner of residential property in Bermuda.
• The spouse of one of the above.

Residential certificates are issued without time limit and are subject to revocation by the Minister of Home Affairs subject to the rules of natural justice.

Special rules on ceasing residence

NOT APPLICABLE.

Domicile concept for gifts and inheritance

NOT APPLICABLE

Taxation of holdings by non-residents on death and of gifts

• Gifts: NOT APPLICABLE
• Death: stamp duty may apply in respect of Bermuda land or investments in Bermuda currency. 

Reporting/auditing requirements

There are no uniquely Bermudian reporting or audit requirements in respect of trusts.

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Other relevant information

Asset protection laws

Bermuda does not have short time periods for the commencement of legal proceedings or condoning fraudulent transfers to trusts. A legitimate asset-protection trust (which is not designed to defeat, hinder or delay existing or reasonably foreseeable creditors) is permitted, common and sensible. Bermuda maintains a reasonable balance between the interests of the well-intentioned individual and those of that individual’s legitimate creditors. As a result, a trust created in Bermuda is not immediately viewed as having been created for the sole purpose of defeating, hindering or delaying creditors, as might be the case when the trust is created in one of the more aggressive jurisdictions.

A gift or transfer of property at below market value, including a disposition to a trust, made with the dominant intention of putting property beyond the reach of a person (or class of persons) who has a claim or may at some time have a claim against the transferor, is voidable at the insistence of certain eligible creditors. This rule applies in or outside liquidation or bankruptcy. Insolvency is not a prerequisite. A creditor will be an eligible creditor if they fall into one of the following categories:

• A person to whom, on or within two years after the date of the transfer, the transferor owed an obligation which remains unsatisfied on the date of the action or proceeding.
• A person to whom, on the date of transfer, the transferor owed a contingent liability and since that date the contingency has fallen in, with the liability remaining unsatisfied.
• A person to whom the transferor owed an obligation in consequence of a claim that they made against the transferor, where the cause of action giving rise to the claim occurred prior to, or within two years of, the transfer.

An eligible creditor will have a period of six years to initiate proceedings. This creates a time period within which a transfer to a trust can be attacked of between six and eight years following the date of the transfer. Bermuda’s Trust Law Reform Committee is in the process of proposing new legislation that will further refine the legislation.

Foreign currency restrictions

NOT APPLICABLE.

Foreign ownership restrictions

Yes. ‘Local’ companies are subject to a 60/40 ownership rule. There are detailed provisions regarding foreign ownership of Bermuda land that are beyond the scope of this summary.

AML/due diligence and other requirements and regulatory procedures for advisors

Bermuda’s anti-money laundering (AML), anti-terrorist financing (ATF) and anti-bribery regimes are set out in:

• The Proceeds of Crime Act 1997 (the 1997 Act);
• The Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing) Regulations 2008 (the Regulations);
• The Anti-Terrorism (Financial and Other Measures) Act 2004;
• The Financial Intelligence Agency Act 2007;
• The Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing Supervision and Enforcement) Act 2008 (the SEA Act); and
• The Bribery Act 2016.

Amendments to the Regulations in 2010 and 2013 expanded and strengthened customer due-diligence requirements. The SEA Act implemented a full range of supervisory and enforcement procedures to support the Regulations. In February 2015, the Bermuda Monetary Authority issued comprehensive AML/ATF sector-specific guidance notes for trust businesses on the prevention and detection of money laundering and the financing of terrorism. Under the SEA Act, professional bodies have taken on the responsibility for supervising lawyers and accountants for compliance with AML/ATF regulations.

All employees of a regulated institution are under a legal responsibility to be vigilant in complying with the Regulations and the Bermuda Monetary Authority’s AML/ATF Sector Specific Guidance Notes for Trust Business on the Prevention and Detection of Money Laundering and the Financing of Terrorism (the Guidance Notes). If they know or have reason to suspect any money-laundering activity is proposed or is being carried out, they must report their concerns or suspicions to the regulated institution’s reporting officer (internal procedures of a regulated institution may provide for reports to be made to a ‘line manager’ as a first point of contact). By making such a report, an employee has a defence to liability under the 1997 Act or the Regulations as regards any money-laundering offence.

The Bribery Act 2016 creates a corporate offence of failing to prevent bribery by an associated party, in addition to bribing, being bribed and bribing a foreign public official.

• To establish a trust: the Trust Code of Practice prepared by the Bermuda Monetary Authority sets out that licensed undertakings must have procedures in place to ensure that proper due diligence is carried out before a decision is made to act for any new customer. As a minimum, licensed undertakings need to be able to comply with the above referenced legislation, the Guidance Notes, and any other relevant legislation that may come into operation from time to time. To ensure compliance with these requirements licensed undertakings should have adequate policies and procedures in place to ensure that they know the identity of each settlor, protector and custodian on an ongoing basis and to the fullest extent possible the identity of the beneficiaries. They must also verify the source of all assets introduced, to satisfy themselves that they are not of illicit origin.
• To open a bank account: as with all international financial centres, Bermuda has introduced comprehensive legislation and guidance. The Regulations specify customer due diligence measures that are required to be carried out, and the timing, as well as actions required if customer due diligence measures are not carried out. The Regulations then describe customers and products in respect of which no, or limited, customer due diligence measures are required (referred to as simplified due diligence), and those customers and circumstances where enhanced due diligence is required. Provision for reliance on third parties in the carrying out of customer due diligence measures are also set out.
• The customer due diligence measures that must be carried out involve: identifying the customer, and verifying their identity; identifying the beneficial owner, where relevant, and verifying his identity; and obtaining information on the purpose and intended nature of the business relationship.
• For incorporation: the approval of the Bermuda Monetary Authority must be obtained in connection with the incorporation of any Bermuda exempted company. A personal declaration signed by each of the ultimate beneficial owners (holding 10 per cent or more) of the proposed company is required for submission to the Bermuda Monetary Authority. By the declaration, each such beneficial owner attests to their good standing in any other Bermuda operations and generally.
• An application for permission to issue shares of a company (together with the supporting information on the ultimate beneficial owners, including their personal declarations) is submitted to the Bermuda Monetary Authority. For a company proposing to carry on certain types of restricted business activity, consent of the Ministry of Finance is required. On receipt of such permission (and consent, if needed) the memorandum of association is registered with the Registrar of Companies who issues a certificate of incorporation.
• The confidential disclosure of information to the Bermuda Monetary Authority has allowed Bermuda to take a unique firm stance in resisting pressure from the UK on its Crown Dependencies and Overseas Territories to implement public registers of beneficial owners of companies.
• The Personal Information Protection Act 2016 requires the broadly defined 'use' of personal information that is not already publicly available to be justified by conditions defined under the legislation.

Key resources for further information

PUBLICATIONS

• AML/ATF Sector Specific Guidance Notes for Trust Business on the Prevention and Detection of Money Laundering and the Financing of Terrorism: https://financedocbox.com/Tax_Planning/75319907-Bermuda-monetary-authority.html
  

WEBSITES

• Bermuda legislation: www.bermudalaws.bm
• Registrar of Companies: www.roc.gov.bm
• Bermuda Monetary Authority: www.bma.bm

STEP branches in Bermuda

There is one STEP branch in Bermuda, which forms part of STEP's Caribbean and Latin America region.

• STEP Bermuda

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