BERMUDA: An Introduction to Corporate & Finance
Trends and Developments for 2025
In Bermuda, 2024 was a year of continued growth following the previous years of uncertainty. This being said, there were a number of new challenges, prompting reflection on both the events of the year and the outlook for the year ahead.
We have recently seen central banks around the world reduce interest rates for the first time in four years. As the United States is one of Bermuda’s largest trade partners, Bermuda is exposed to any volatility in the US economy. Global trends inevitably affect Bermuda, and the effects of ongoing wars, rising energy, food and commodity prices and soaring inflation worldwide have been experienced in Bermuda.
Over the course of 2024, we have seen an increase in cyber incidents which can cause significant financial losses and reputational damages to companies and multinationals around the globe. The Bermuda Monetary Authority has focused on addressing cybersecurity risks, especially in the digital asset business sector.
Governments, professionals and multinationals around the world continue to be mindful of the international sanctions that exist due to the war in Ukraine. As a British Overseas Territory, Bermuda typically implements the same international sanctions as the UK and relies on the UK’s framework for sanction implementation.The Russia (Sanctions) (EU Exit) (Amendment) Regulations 2022 impose financial, trade, aircraft, shipping and immigration sanctions for the purpose of encouraging Russia to cease actions which destabilise Ukraine, or undermine or threaten the territorial integrity, sovereignty or independence of Ukraine. The largest sectors affected in Bermuda are aircraft and shipping.
Current Economic Conditions
There have not been any significant legislative or regulatory changes affecting the rights of lenders or secured creditors over the past year, nor any that would affect Bermuda’s status as a leading creditor-friendly jurisdiction.
While Bermuda is a major international financial centre and Bermuda entities are used in a variety of cross-border structures and transactions, there is no real loan market to speak of in Bermuda because such deals are mostly originated in one of the major onshore jurisdictions. As a result, deals featuring Bermuda entities are inevitably susceptible to market trends and developments in such jurisdictions.
As a leading fintech and digital assets sector jurisdiction, Bermuda continues to enhance its associated regulatory framework. The Bermuda Monetary Authority (BMA) continues to ensure that the digital asset legislative framework is fit for purpose and keeps pace with the digital asset business environment, which continues to evolve rapidly.
The combination of flexible corporate structuring options, compliance with international standards including FATCA/CRS, and the EU Securitisation Regulation, has ensured that Bermuda is not only the global market leader in insurance-linked securities but also the “blue-chip” jurisdiction of choice for corporate entities entering into secured finance transactions.
New Legislation
Bermuda has seen legislative and regulatory developments in the following sectors: corporate income tax, anti-money laundering (AML) and anti-terrorist financing (ATF), digital assets and cybersecurity and privacy.
Corporate income tax
The Corporate Income Tax Act 2023 (CITA) will come into effect on 1 January 2025. Under this Act, corporate income tax will be chargeable to certain Bermuda-based entities (referred to in the CITA as “Bermuda Constituent Entities”) for fiscal years beginning on or after 1 January 2025. CITA will apply to any Bermuda Constituent Entity incorporated or formed in Bermuda that is part of a multinational enterprise group with an annual revenue of EUR750 million or more in a fiscal year, pursuant to the consolidated financial statements of the ultimate parent entity. The corporate income tax will be chargeable at a rate of 15% of net taxable income. CITA has been imposed in response to the Organisation for Economic Co-operation and Development’s global anti-base erosion model rules (Pillar Two) (the “GloBE Rules”).
AML and ATF
The Bermuda Monetary Authority (BMA) released an updated version of its Anti-Money Laundering and Anti-Terrorist Financing Guidance Notes, which provide financial institutions with guidance on how to comply with its regulatory requirements. The Guidance Notes reflect a continued focus on strengthening AML/ATF compliance and mitigating financial crime risks.
Digital assets and cybersecurity
The BMA implemented the following to address cybersecurity risks: the DAB Operational Cyber Risk Management Code of Practice (the “Cyber Risk Code”) and the Digital Asset Business (Cyber Risk) Rules 2023 (the “Cyber Risk Rules”). The Cyber Risk Code came into effect on 1 January 2024 but all existing digital asset businesses
had until 30 June 2024 to be in compliance. The Cyber Risk Code applies to all digital asset businesses and provides standards and procedures for the stable and secure management of information technology systems of those regulated entities. The Cyber Risk Rules became operative on 1 January 2024 and introduced rules around the filing of a Cyber Risk Annual Return.
Personal Information and Protection Act
The Personal Information Protection Act 2016 (PIPA) has been implemented in phases but all remaining provisions will come into effect on 1 January 2025.
PIPA sets out a comprehensive regime to protect a broad range of personal information, including information that may disclose an individual’s address and contact information, family status, financial circumstances and their physical and mental health. It applies to every organisation in Bermuda that uses personal information either wholly or partly by automated means and to the use, other than by automated means, of personal information that forms, or is intended to form, part of a structured filing system.
Companies that use any form of personal information in Bermuda must ensure, by 1 January 2025, that they: (i) understand both the privacy rights of individuals and the obligations and requirements of their organisations under PIPA; (ii) develop a critical path to adopt and implement the compliance measures and policies that will be required; and (iii) train their employees in the systems, activities and procedures that must be adopted and implemented to ensure their compliant use of personal information.
Outlook
There may be new challenges on the horizon, such as the introduction of corporate income tax in Bermuda for the first time, uncertainty regarding inflation and increased regulation. However, Bermuda remains one of the pre-eminent offshore jurisdictions for cross-border structures and fund products, with a reputation for quality clients and innovative structures, and is emerging as a popular jurisdiction for digital assets and crypto funds given Bermuda’s highly regarded fintech regulatory framework.