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TAX INFORMATION EXCHANGE AGREEMENTS


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International Agreements


Bermuda
Double Tax Treaties

Since Bermuda does not levy direct taxes, there are no double tax treaties between Bermuda and other nations. There is however a tax treaty with the US which exempts insurance premium payments from US franchise taxes, and grants tax breaks to US companies holding conventions in Bermuda.

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Bermuda
Tax Information Exchange Agreements

In December, 2005, Bermuda's House of Assembly voted to approve new legislation facilitating the exchange of tax information with other nations in a bid to cooperate in the stamping out of international tax evasion.

The International Cooperation (Tax Information Exchange Agreements) Act 2005, is umbrella legislation to give effect to Tax Information Exchange Agreements with countries in the OECD and the European Union.

The bill came hot on the heels of Bermuda's sealing of a TIEA with Australia, which was signed by Paula Cox and then Australian Treasurer Peter Costello in Washington, DC in November.

According to Cox, tax exchange agreements would not only distance Bermuda from its old "tax haven" label, but also boost trade in financial services and improve commercial relations.

"As such it is important to our national economic interest that Bermuda directly negotiates with such countries," she stated.

According to Ms Cox, the Australian agreement marked the first treaty that Bermuda had entered into following a commitment to ban harmful tax practices five years previously.

However, since Bermuda does not have an income tax, and therefore does not stand to directly gain from an exchange of tax information, Mrs Cox indicated that the Bermudian government pushed for additional clauses that would result in a "measurable and reciprocal" benefit for the island, such as closer commercial relations between the two countries.

According to Mr Costello, the agreement would not only provide for full exchange of information on criminal and civil matters between Australia and Bermuda, but also boost economic ties between the two.

"These agreements are an essential tool in Australia's efforts to reduce offshore tax evasion," Costello explained in a statement.

In December 2007, the UK and Bermuda finally exchanged letters setting up an arrangement for the exchange of tax information, which follwed three years of discussions between the two governments.

The agreement commits the UK government to be able to obtain requested information from banks and trustees, regardless of whether any crime has been committed, and without the knowledge of the subject of an investigation or any requirement for a court order.

This was the first such arrangement entered into by the United Kingdom and the third concluded by Bermuda. The arrangement, says the OECD, confirms Bermuda’s commitment to high international standards and its stature as a responsible international financial centre.

In a press release from HM Revenue & Customs, the Financial Secretary to the Treasury, Jane Kennedy welcomed the arrangement, saying: “These new arrangements represent a significant step in our efforts to counter and prevent tax evasion and avoidance. I commend the Government of Bermuda for its willingness to implement the high standards of transparency and exchange of information to which it is committed and for its continuing leadership in this important global tax policy area.”

In 2009, Bermuda signed 8 new tax information exchange agreements, with 7 Nordic economies – Denmark, Sweden, Finland, Greenland, Iceland, Norway and the Faroe Islands and with New Zealand, bringing the number of agreements it holds to eleven. It had previously signed agreements with Australia, the United Kingdom and the United States.

Bermuda was one of the first jurisdictions to commit to the international standards of transparency and exchange of information in May 2000, and one of 11 jurisdictions that contributed to the development of the Model Agreement on Exchange of Information in Tax Matters in 2002, on which the bilateral agreements with the Nordic economies are based. Since then it has been working to develop its network of exchange of information agreements.

The latest agreements mark a further acceleration in international efforts to implement the standards developed by the OECD’s Global Forum on Transparency and Exchange of Information, which brings together both OECD and non-OECD economies to review issues relating to the implementation of international standards in these areas. Over the last few weeks, a number of economies - including in Asia, Europe and Latin America, as well as the Caribbean - have announced plans to remove impediments to the exchange of bank information for tax purposes and to implement the international standards within specific time frames.

Commenting on the recent signings, Jeffrey Owens, Director of the OECD’s Centre for Tax Policy and Administration, said: “ Bermuda is an important financial centre that played a constructive role in developing the standards now endorsed by all major financial centres. I am very pleased that it has taken another significant step in implementing the standards. I know that it is determined to implement the standards fully and that other agreements will follow shortly.”

In April, 2009, Paula Cox released a statement regarding Bermuda’s placement on the OECD’s list of uncooperative territories. The OECD’s list features Bermuda in the second tier of compliant territories who have not substantially implemented the OECD standard.

In a statement after the OECD’s announcement, Paula Cox described the OECD's latest list as a ‘progress report’ announcing that Bermuda would be in the top tier of ‘fully compliant’ countries by the end of 2009.

“A TIEA with Germany is planned for the near future, bringing Bermuda's total to 12 in fairly short order. At least two more TIEAs are expected to be signed by the end of this year or early next year,” reassured Cox.

"Based on our understanding that the OECD standard was very recently set at 12 treaties, Bermuda will have met the standard before the close of 2009 and most probably ahead of the next G20 Summit Meeting which is scheduled for later in the year,” Cox concluded.

Bermuda was removed from the OECD 'grey' list later in 2009 and has continued to sign TIEAs with various countries. The latest to come into force is a TIEA with Canada, on July 1, 2011.

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