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Key Takeaways

  • A Bermuda company can hold listed securities, funds, and bonds tax-neutrally, with no local tax on portfolio dividends, interest, or capital gains.
  • Because Bermuda lacks a treaty network, inbound dividends and interest may face withholding tax that a treaty-based structure could reduce.
  • Foreign owners should weigh CRS and FATCA reporting and economic substance rules against a passive holding position before choosing this vehicle.
  • Brokerage and custody access can be a practical hurdle, since only some brokers and custodians accept a Bermuda entity.

A Bermuda investment and portfolio holding company can hold listed equities, bonds, ETFs, and fund interests for its own account with no Bermuda-level tax on the income or gains those assets produce. For a foreign owner, that tax neutrality is the central appeal, and it is grounded in a long-established corporate framework rather than any treaty advantage.

The vehicle of choice is the exempted company, incorporated by non-Bermudians to do business outside the islands. Its incorporation, share structure, and officers are governed by the Companies Act 1981.

Treated as a non-resident for exchange-control purposes, an exempted company may pay dividends, distribute capital, open foreign bank accounts in any currency, and buy securities free of local exchange controls. The jurisdiction also sits on the EU white list of cooperative tax jurisdictions and is recognised by the United States as a Designated Offshore Securities Market.

One point deserves early emphasis. A corporate income tax of 15 percent took effect on 1 January 2025 under the Corporate Income Tax Act 2023, but it reaches only members of multinational groups with annual revenue of at least 750 million euros in two of the preceding four years.

A single-owner or family holding company sits far below that threshold and stays fully outside the regime. This article explains what the structure can hold, how it is taxed, where it works, and where it does not. It is most relevant to non-resident individuals and families consolidating a cross-border portfolio in one entity, particularly those who are themselves in a low-tax or territorial jurisdiction.

As a non-resident for exchange-control purposes, the company can acquire securities of any description without governmental controls. In practice that means listed shares, government and corporate bonds, exchange-traded funds, and units in collective investment schemes, all held for the entity's own account.

A distinction matters here, and it determines whether costly regulation applies. The Investment Funds Act 2006 governs the authorisation of investment funds, and no fund may operate in or from the islands unless registered under it.

The Act's definition of an "investment fund" is broad, reaching any arrangement that lets participants share in profits from holding or disposing of property. That breadth catches pooled vehicles with multiple investors.

It does not catch a single-owner company that passively holds its own portfolio. Such an entity is not operating as a fund, so it falls outside fund registration entirely.

The Investment Business Act 2003 sets the other boundary. It regulates "investment business," including managing investments for others, but a self-managed company that does not manage third-party money is not carrying on licensable investment business.

The line that matters

Managing your own portfolio is not regulated activity. Managing investments for an investment fund is the "fund management" relevant activity and pulls the entity into licensing and full economic-substance obligations.

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Holding securities requires an account, and that is where the practical work begins. The broker or custodian must complete corporate onboarding before the entity can trade.

Expect to provide certified constitutional documents (memorandum of association and bye-laws), the register of directors, evidence of beneficial ownership, and full anti-money-laundering and know-your-customer files. Bermuda has kept a register of beneficial owners accessible to competent authorities since the end of the Second World War, so ownership transparency is built into the structure.

A US broker will also request a Form W-8BEN-E to establish the entity's non-US status. This affects withholding, not eligibility: there is no income-tax treaty with the United States covering portfolio income, so no reduced rate is available on US-source dividends, which are generally withheld at 30 percent.

Onboarding friction is real. Some private banks apply enhanced due diligence to offshore holding structures even from white-listed jurisdictions, while institutional-grade prime brokers tend to be more direct about their requirements.

Acceptance varies sharply by institution type. The pattern is consistent: institutional and prime platforms generally onboard offshore corporates, while retail apps often refuse them outright.

Account access for a Bermuda exempted company
Provider Position
Interactive Brokers Accepts non-US corporate entities; a Form W-8 must be on file and renewed every three years
HSBC Bermuda Operates a commercial banking presence and handles Bermuda-entity reporting compliance
Bank of N.T. Butterfield & Son Bermuda-domiciled bank known to serve local holding companies; verify product scope directly
Saxo Bank, Swissquote Generally accept offshore corporates from FATF-compliant, white-listed jurisdictions; terms vary
Robinhood, Trading 212 Typically do not accept non-US corporate accounts at all

Local custody options are limited. Only banks licensed by the Bermuda Monetary Authority under the Banks and Deposit Companies Act 1999 may conduct banking business there, and the jurisdiction is not an international banking center.

Two further caveats apply. Private and prime banks in Europe, Singapore, and the United States subject offshore holding structures to enhanced due diligence, and some fund platforms will admit the company only if it qualifies as a professional or eligible investor under their own rules.

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This is the structure's strongest feature. A Bermuda company pays no income, profit, withholding, or capital gains tax locally, and the jurisdiction imposes no withholding on outbound payments of any kind.

For a sub-750-million-euro single-owner or family vehicle, the result is clean: zero local tax on dividends received, bond interest received, realised gains, and unrealised appreciation. There is no stamp duty, inheritance tax, estate duty, or gift tax on portfolio holdings.

Exempted companies routinely obtain a Tax Assurance Certificate under the Exempted Undertakings Tax Protection Act 1966. It guarantees freedom from local tax on profits, income, and capital gains until at least 2035.

One limit must be understood plainly. This certificate protects against Bermuda tax only; it does nothing about tax withheld at source in the country where the underlying asset sits. That source-country drag is the subject of the next section.

Here is the candid weakness. Bermuda has no income-tax treaty covering portfolio dividends, interest, or royalties with any country.

A treaty with the United States exists, signed in 1986 and in force from 1988, but its scope is confined to insurance enterprises. It gives a non-insurance holding company nothing on portfolio income.

The jurisdiction does maintain a wide information-exchange network through more than 40 bilateral Tax Information Exchange Agreements and the OECD Convention on Mutual Administrative Assistance in Tax Matters. These instruments exchange data; they do not reduce a single percentage point of withholding tax.

The consequence falls hardest on US dividend income:

  • US dividends: 30 percent withholding, no treaty reduction available
  • EU dividends (Germany, France, Netherlands): statutory domestic rates, typically 15 to 30 percent, with no treaty relief
  • UK dividends: generally paid gross under UK domestic law, so no treaty is needed
  • US-source portfolio bond interest: generally exempt from US withholding for non-US holders
  • Canada, Australia, Japan, Switzerland: standard domestic rates, typically 15 to 30 percent, with no relief

Compare the alternatives. A holding company resident in Ireland, the Netherlands, Luxembourg, or Singapore would typically suffer 5 to 15 percent on US dividends instead of 30. For a dividend-heavy US equity portfolio, a Bermuda vehicle is a materially suboptimal home, and that deficiency cannot be drafted away.

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Transparency obligations attach to the structure from the outset. Financial institutions in Bermuda have applied Common Reporting Standard due diligence to new accounts since 1 January 2016, and a Model 2 intergovernmental agreement with the United States implements FATCA, under which local financial institutions report directly to the IRS.

Classification of the holding company itself requires care. If its gross income is predominantly passive (dividends, interest, gains), it may be treated as an Investment Entity, which is a Reporting Financial Institution with its own registration and filing duties; otherwise it is likely a Passive Non-Financial Entity whose controlling persons are reported by the account-holding institution.

Either way, the outcome for the owner is the same. The ultimate beneficial owner is identified and reported to their jurisdiction of tax residence, so the structure offers no informational privacy from a home tax authority.

CRS returns are due no later than 31 May of the year following the reporting period. Getting the classification right at inception matters, because the wrong label triggers the wrong reporting regime and creates compliance risk.

The Economic Substance Act 2018, effective 1 January 2019, requires entities carrying on a "relevant activity" to demonstrate real activity in the jurisdiction. "Holding entity" is one such activity, and most passive portfolio companies fall within it.

The good news for a passive holder is that this category attracts a reduced test. Compliance is usually met by maintaining a leased local presence with people on the ground commensurate to the activity, and by holding board meetings within the jurisdiction.

The full test applies to fund management, not to a single-owner portfolio. A company managing its own assets is not managing an investment fund and therefore does not face the heavier obligations introduced by the Amendment Regulations effective 1 January 2022.

In-scope entities file an Economic Substance Declaration with the Registrar of Companies within six months of their financial year-end. For a 31 December 2024 year-end, that declaration is due by 30 June 2025.

The practical demands of the reduced test are modest but not free:

  • A Bermuda registered address
  • At least one Bermuda-resident director
  • Board meetings held in Bermuda with proper minutes
  • Strategic decisions genuinely made on the islands

These line items carry registered agent fees, director fees, and annual government charges. They are manageable for a substantial portfolio and harder to justify for a small or dormant one.

The fit is clearest for a family consolidating global market instruments into a single legal entity for succession and governance, where the underlying portfolio is not dominated by dividend-paying US equities. White-list standing reduces the risk of defensive measures from the owner's home country, the legal system is well understood, and the reduced substance test keeps compliance proportionate.

Zero local tax on portfolio income and gains, freedom to hold accounts in any currency, and a clean estate-planning wrapper round out the positive case. For a passive holder below the multinational threshold, the governance burden is low relative to fund or financing categories.

The shortfalls are equally concrete:

  • No treaty relief on portfolio income, so US, EU, Canadian, Australian, and Japanese dividend withholding hits at full statutory rates. This is the single most significant structural defect.
  • Limited local banking and custody, since the jurisdiction is not an international banking center, and enhanced due diligence from private banks abroad that can delay or block onboarding.
  • No informational privacy: CRS and FATCA report the owner to their home tax authority regardless of classification.
  • Fixed annual substance overhead that is poorly justified for a small or inactive holding.
  • Unsuitable for US persons, whose offshore holdings face PFIC and Subpart F characterisations that erase any benefit.

The withholding leakage on US equities is the problem most worth engineering around. Holding US shares through an Irish-domiciled UCITS ETF, rather than directly, lets the fund take US dividends at 15 percent under the US-Ireland treaty instead of the 30 percent a direct Bermuda holder would suffer.

A layered design extends the same logic. A Bermuda parent can own a treaty-resident subsidiary, such as a Luxembourg SOPARFI or a Maltese company, that accesses treaty networks for specific asset pools while the parent remains the top entity for succession purposes.

That structure buys treaty efficiency at the price of added cost and administration. The custodian's jurisdiction does not alter the entity's withholding position, though a UK or Singapore sub-custodian may ease onboarding.

On governance, resident directors and regular local board meetings are the standard route to meeting substance requirements, and established administrators offer director and substance packages. The Economic Substance Guidance Notes set out the official expectations, available here.

Two further steps are routine but should not be skipped:

  1. Obtain and renew the Tax Assurance Certificate to lock the zero-tax guarantee through 2035.
  2. Have a qualified administrator formally classify the company for CRS and FATCA at inception, and handle the IRS filing separately from the local CRS return.

For families, a Bermuda exempted company held beneath a trust governed by the Trustee Act 1975 combines holding efficiency with trust-law protection. None of this changes the owner's personal tax position at home; the structure performs best when the beneficial owner already sits in a low-tax or territorial jurisdiction.

The case for a Bermuda portfolio holding company rests almost entirely on local tax neutrality and a clean, transparent corporate base, and it works best for families with diversified, non-US-dividend-heavy portfolios who want one estate-planning wrapper. Set against that is a hard structural limit: with no treaty relief on inbound dividends, a portfolio weighted toward US or European equities will bleed withholding tax that a treaty-resident holding company would largely avoid.

Before committing, weigh the expected withholding drag on your actual asset mix against the savings and simplicity the structure delivers, and confirm you are not a US person for whom the model collapses.

Expanship assists foreign owners in forming and running a Bermuda exempted company as a private investment and portfolio holding vehicle, from selecting the right structure to keeping it compliant with substance and reporting rules year after year. The same team supports the wider needs of a foreign-owned entity on the islands.

  • Incorporating your exempted company and arranging the Tax Assurance Certificate
  • Providing a registered agent and registered office address
  • Supporting economic-substance positioning and CRS/FATCA classification and filings
  • Managing ongoing corporate compliance and annual government filings
  • Handling accounting and bookkeeping for the portfolio company
  • Introducing brokers, custodians, and banks suited to a Bermuda entity

To discuss your structure and next steps, contact Expanship Bermuda.

No. A single-owner exempted company that passively holds listed equities, bonds, and fund interests for its own account is not operating as an investment fund under the Investment Funds Act 2006 and is not subject to fund registration. Registration is triggered by pooling outside money, not by holding your own portfolio.

Almost certainly not. The Corporate Income Tax Act 2023 applies the 15 percent rate only to members of multinational groups with annual revenue of at least 750 million euros in two of the preceding four years. A single-owner or family holding company falls well below that threshold and remains outside the regime.

US-source dividends paid to the company are generally withheld at 30 percent, with no treaty reduction available because there is no US treaty covering portfolio income for a non-insurance holding company. A holding company in Ireland, the Netherlands, or Singapore would typically face 5 to 15 percent instead, which is the main reason this structure suits US-dividend-light portfolios.

No. Under CRS and the Model 2 FATCA agreement, the beneficial owner is identified and reported to their jurisdiction of tax residence regardless of how the company is classified, and a beneficial ownership register has been accessible to competent authorities since the end of the Second World War. The structure offers no anonymity from a home tax office.

A passive equity holder generally falls under the "holding entity" category, which carries a reduced test satisfied by a local registered address, at least one resident director, and board meetings held on the islands. An in-scope entity files an Economic Substance Declaration within six months of its financial year-end.

It is not. US persons investing through an offshore holding company face PFIC and CFC characterisations that create adverse tax treatment and reporting burdens, eliminating any benefit the structure might otherwise provide.

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.