Key Takeaways
- Foreign-owned entities should confirm whether they fall within scope, as the article sets out which companies must file the Economic Substance Declaration in Bermuda.
- Non-resident entities and those carrying on no relevant activity still face reporting obligations, with specific information required on the declaration form.
- Filing is overseen through CITA and submitted via the ROC e-Portal, typically with the support of the entity's registered agent.
- Missing the filing deadline or failing to file can lead to penalties, and recent legal changes may affect how the obligation applies going forward.
Understanding the Economic Substance Declaration in Bermuda
The Economic Substance Declaration is the annual filing through which a Bermuda entity tells the regulator whether it carries on any of nine defined "relevant activities" and, where it does, whether it meets the substance requirements that attach to that activity. It applies under the Economic Substance Act 2018, and the obligation reaches companies, limited liability companies, and certain partnerships formed or registered in the jurisdiction. This article explains who must file, what the form captures, when it is due, where it goes, and what happens if it is filed late or not at all. It will matter most to foreign owners of a holding company, financing vehicle, or service entity that touches one of the in-scope activities. The official Economic Substance Guidance Notes remain the primary reference behind the rules described here.
Brief Recap of the Economic Substance Regime Behind the Declaration
The economic substance regime exists because international standard-setters concluded that jurisdictions with no or only nominal corporate tax should not host structures that book profits without genuine local activity. Bermuda's response was the Economic Substance Act 2018, which took effect on 31 December 2018 and has been amended several times since.
Nine activities fall in scope: banking, insurance, fund management, financing and leasing, headquarters, shipping, distribution and service centre, intellectual property, and holding entity. An entity is treated as carrying on one of these as a business where it earns any gross income from that activity during the financial period in question.
For an in-scope firm conducting such activity, the substance test has three parts: the core income-generating activities must take place in the jurisdiction, adequate physical presence must be maintained there, and an adequate number of suitably qualified people must be present locally. The bar is highest for "high-risk intellectual property business," which is presumed to fail the test unless the entity can show genuine local control of the relevant intangible asset by full-time, qualified staff resident in the jurisdiction.
Non-compliance carries a consequence that reaches beyond local enforcement. Where an entity is found not to meet the requirements, its declaration and supporting information are automatically exchanged with each jurisdiction where its owners and beneficial owners sit, through the OECD's information exchange channel.
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Which Entities Must File the Economic Substance Declaration
The filing obligation rests on Bermuda "registered entities" that either carry on a relevant activity or wish to claim non-resident status. That category covers companies incorporated or registered under the Companies Act 1981 (including permit and overseas companies), limited liability companies under the LLC Act 2016, and partnerships registered as exempted, exempted limited, or overseas partnerships that have elected separate legal personality.
Partnerships without separate legal personality came into scope on a staggered basis. Those formed or registered on or after 1 July 2021 were subject to the rules immediately; those formed earlier became subject from 1 January 2022.
A "relevant entity" that conducts no relevant activity is not free of the regime, but its duty is light: it submits an annual declaration stating that fact and nothing more. An entity that is not a relevant entity at all sits outside the law and owes nothing under it.
Pure equity holding entities receive a reduced substance standard. Such a holding company meets the minimum requirements if it complies with the corporate governance rules in the governing companies, LLC, or partnership legislation, files its declaration for any period in which it holds equity, and shows adequate people and premises in the jurisdiction for holding and managing those participations.
The relevant financial period follows the entity's own financial year as set in its constitutional documents. The first period was the first financial year commencing on or after 1 January 2019.
Reporting Obligations for Non-Resident Entities and Entities With No Relevant Activity
Many foreign-owned structures will qualify as a "non-resident entity," which removes the substance requirements but not the filing duty. To qualify, the entity must be resident for tax purposes in a jurisdiction outside Bermuda that is acceptable to the regulator and is not on Annex 1 of the EU list of non-cooperative jurisdictions.
A jurisdiction does not count for this purpose if it has no corporate tax regime, or if residence there does not subject the entity to equivalent substance requirements. Places that may be excluded on this basis include Anguilla, the Bahamas, Bahrain, Barbados, the British Virgin Islands, the Cayman Islands, the Turks and Caicos Islands, and the United Arab Emirates.
A non-resident entity still files an annual declaration. It confirms whether it conducts any relevant activity and, where it relies on foreign tax residence, supplies evidence to support that residence. It does not complete the detailed activity disclosures, because it is not in scope for substance.
What counts as acceptable evidence is defined. A letter or certificate from the competent tax authority of the foreign jurisdiction confirming residence will suffice, as will a tax assessment, a confirmation of self-assessment, a tax demand, proof of payment, or an equivalent document from that authority.
- If full-year evidence is not available at filing, a provisional claim may be made; final evidence is then due by a date the regulator sets, and in any event no later than 12 months from the provisional claim.
- Unless the entity is publicly traded, beneficial ownership details (as defined in the Companies Act) must accompany the residency confirmation.
- Any official document not in English must be filed with a certified English translation.
A separate, lighter path applies to an entity that conducts a relevant activity but earns no gross revenue from it during the period. That entity files only a "nil" Economic Substance Declaration Form and is not required to meet the substance requirements for that period.
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What the Economic Substance Declaration Form Requires You to Report
The form is the regulator's primary source for judging whether an entity meets its obligations, so its content is detailed. Most data points are reported per relevant activity rather than for the entity as a whole, which lets the regulator assess each activity on its own footing.
Expect to disclose:
- Key financial figures, including gross revenue and expenses for each relevant activity
- The nature and frequency of board and management meetings
- The residency of employees and directors
- The location of premises used by the entity
- Details of any core income-generating activities outsourced to a local provider
- Ownership and beneficial ownership information
High-risk intellectual property business carries an extra burden. Such an entity must submit a business plan setting out the commercial rationale for running the IP business locally, together with fuller detail on its staff and on where decisions are made.
Record-keeping sits alongside the filing. Entities must keep records of their activity in the jurisdiction, particularly those most relevant to assessing compliance, such as employee qualifications and time records, detailed financial records, and evidence of business conducted. The regulator runs an ongoing monitoring exercise, and selected entities receive requests to verify information on declarations filed in earlier years.
No fixed retention period stated as a number of years is prescribed under the Economic Substance Act 2018, and no government filing fee for the declaration was identified. The working rule is that records sufficient to prove compliance should be kept in the jurisdiction for as long as the regulator might need them, consistent with local corporate record-keeping practice.
Filing Deadline and Frequency for the Economic Substance Declaration
The declaration is an annual filing, due within six months of the last day of the entity's financial year. One form covers each relevant financial period, meaning each year in which a relevant activity was carried on or non-resident status is claimed.
| Financial year-end | Declaration due |
|---|---|
| 31 December 2025 | 30 June 2026 |
Entities may file ahead of the deadline once any financial statements they need have been prepared. The 2026 amendments left the deadlines and frequency untouched.
No formal extension mechanism was identified in the available sources, so treat the six-month window as firm and plan the underlying accounting work to land well inside it.
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Where to File: CITA Oversight and the ROC e-Portal
Oversight of the regime moved on 31 March 2026 from the Registrar of Companies (ROC) to the Corporate Income Tax Agency (CITA), as part of a wider consolidation of the jurisdiction's international tax compliance functions under one tax regulator. The same change designated CITA as the competent authority for automatic exchange of information under the relevant tax information exchange and treaty legislation.
The filing route did not change with the transfer. Economic Substance Declaration Forms continue to go through the ROC's Online Register Portal at registrarofcompanies.gov.bm, and operational processes run uninterrupted until further instruction. Correspondence about the regime should go to CITA at essupport@cita.bm.
CITA now holds the enforcement powers previously exercised by the ROC. These include inspecting an entity during working hours on reasonable notice, requesting information and documents, and imposing penalties for breaches. The regulator can also examine the records of entities that consider themselves out of scope, a power often described as "policing the perimeter." Information it receives is passed to the foreign competent authority of any jurisdiction where a holding entity, ultimate parent, owner, or beneficial owner sits.
The Registered Agent's Role in the Economic Substance Declaration Process
No statutory provision compels the registered agent to file the declaration for you. In practice, corporate service providers and law firms act as the main interface with the portal: they assess in-scope status, prepare the form, file it, and advise on what records to keep.
For a pure equity holding entity, using appropriate local service providers to manage equity participations can satisfy the "directed and managed" element of the substance test. That arrangement is common, but it does not shift liability.
Because the declaration is filed in the entity's own name, the entity, not the registered agent, is the party exposed to penalties for late, missing, or inaccurate filing.
Penalties for Late Filing or Non-Filing of the Economic Substance Declaration
Sanctions survived the 2026 amendments unchanged but are now written expressly into the Act. A daily fine of between $100 and $500 applies where an entity fails, without reasonable excuse, to file required information by the prescribed date, to respond to notices, or to permit access to premises. Late filing of the Economic Substance Declaration Form is a typical trigger for this daily charge.
Enforcement escalates through a sequence of notices. A first notice follows initial non-compliance; a second issues if the failure continues; a third follows if it persists further. The civil penalty climbs with each notice.
| Stage | Minimum | Maximum |
|---|---|---|
| Second notice to comply | BD$25,000 | BD$100,000 |
| Third notice to comply | BD$50,000 | BD$250,000 |
If a third notice goes unanswered, the regulator may ask the courts to regulate or restrict the entity's business, or to strike it from the register. Before imposing any civil penalty, the regulator first issues a warning notice setting out the proposed amount and its reasons, and entities keep a right to appeal certain decisions, including penalties.
Knowingly providing false information is a criminal offence. On summary conviction it carries a fine of up to BD$10,000, imprisonment of up to two years, or both. Where an entity commits the offence with the consent or connivance of an officer, both the officer and the entity may be prosecuted.
Recent Legal Changes Affecting the Economic Substance Declaration in 2026
The Economic Substance Amendment Act 2026 and the Economic Substance Amendment Regulations 2026 came into force on 31 March 2026. Their central effect was to move administration, monitoring, and enforcement of the regime from the ROC to CITA.
The Act was redrafted to reflect that handover. Section 2 gained a definition for the new "Agency," references to the "Registrar" were replaced with "Agency" throughout, and new sections 4A to 4E set out CITA's functions for inspection, regulation, and related enforcement.
For the person actually filing, little changed. The content of the declaration and the filing process stayed the same, in-scope companies continue to submit through the ROC portal until further notice, and deadlines held steady.
A transitional rule governs the cut-over. The ROC may still enforce any notice, fine, or penalty it issued before 31 March 2026 that remains unpaid or unresolved, while any historic conduct for which no notice had issued before that date now falls to CITA. The sensible course is to watch for further guidance as the new regulator settles into its expanded role.
Conclusion
For most foreign-owned structures the practical question is narrow: do you carry on a relevant activity, and if not, can you evidence tax residence somewhere acceptable? Get that classification right and the filing is an annual confirmation; get it wrong, and you face daily fines, escalating penalties up to BD$250,000, and automatic disclosure of your information to the authorities where your owners sit.
The next step worth taking is a clear-eyed scoping of each entity you hold against the nine activities, well before the six-month deadline, so the declaration and any residency evidence are ready rather than rushed.
How Expanship Can Help Your Business in Bermuda
Expanship handles the Economic Substance Declaration end to end, from confirming whether your entity is in scope, to preparing and filing the form through the ROC portal, to advising on the records you must keep locally. The same team supports the wider compliance footprint a foreign-owned entity carries in the jurisdiction.
- Company formation and registration for companies, LLCs, and partnerships
- Registered agent and registered office services
- Ongoing compliance and filing management across annual obligations
- Accounting and bookkeeping aligned to your financial period
- Economic-substance assessment and beneficial-ownership support
- Introductions to banking partners
To scope your filing or review an existing structure, contact Expanship Bermuda.
Frequently Asked Questions
A pure equity holding entity is still required to file an Economic Substance Declaration for any period in which it holds equity participations, though it meets a reduced substance standard. It must show adequate people and premises locally for holding and managing those participations and comply with the corporate governance rules in the applicable companies, LLC, or partnership legislation.
An entity that is tax resident outside Bermuda in a jurisdiction acceptable to the regulator, and not on the EU Annex 1 list, can claim non-resident status and falls outside the substance requirements. It still files an annual declaration with evidence of that residence, such as a certificate from the foreign tax authority or a tax assessment, plus beneficial ownership details unless it is publicly traded.
The form is due within six months of the last day of the entity's financial year. An entity with a 31 December 2025 year-end, for example, must file by 30 June 2026, and no formal extension mechanism was identified in the available sources.
Filing still goes through the ROC's Online Register Portal at registrarofcompanies.gov.bm, despite oversight passing to CITA on 31 March 2026. Correspondence about the regime should be sent to CITA at essupport@cita.bm.
Late filing can attract a daily fine of between $100 and $500 for each day the default continues. If non-compliance persists through the notice stages, civil penalties rise to a maximum of BD$100,000 on the second notice and BD$250,000 on the third, with possible strike-off if a third notice is ignored.
Yes, registered agents and corporate service providers commonly prepare and submit the declaration through the portal as a client service. Liability for the accuracy of the filing nonetheless rests with the entity, which remains the party exposed to penalties for late or inaccurate submission.
Legal Disclaimer
The information provided in this article is for general informational purposes only and does not constitute legal, tax, or professional advice. While we strive to ensure the accuracy and timeliness of the content, laws and regulations are subject to change, and the application of laws can vary widely based on specific facts and circumstances.
Readers should not act upon this information without seeking professional counsel tailored to their individual situation. Expanship and its authors disclaim any liability for actions taken or not taken based on the content of this article.
For specific advice regarding your business setup, compliance requirements, or any legal matters, please consult with qualified legal and tax professionals in the relevant jurisdiction.
