Our last quarterly update on the developments of the economic substance regimes in the British Virgin Islands, the Cayman Islands and Bermuda related largely to reporting procedures and deadlines issued by the relevant regulatory bodies. Since that update, important developments have occurred with respect to the applicability of the economic substance regime. Specifically, amendments are proposed that will bring partnerships (or, in the case of Bermuda, more types of partnerships) into scope.
Currently in Bermuda partnerships (exempted, exempted limited and overseas) which have elected to have separate legal personality in accordance with section 4A of the Partnership Act 1902 are "relevant entities" and therefore in scope of the economic substance regime. A bill relating to the Economic Substance Amendment Act 2021 (the "Bill") was tabled in the House of Assembly of Bermuda on 5 June 2021, which will ensure that all partnerships (even those that do not elect to have separate legal personality) are included in the definition of "relevant entity". As such, these partnerships will have to make a determination of status and, unless exempted, comply with the applicable economic substance test.
Existing partnerships which will become "relevant entities" following these amendments shall have six months from the coming into operation of the amending act to comply with the economic substance requirements.
The Bill has been introduced in response to commitments made to the EU Code of Conduct Group, and similar amendments have also been proposed in the other British Overseas Territories as well as the Crown Dependencies of isle of Man, Guernsey and Jersey.
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