International Business in Bermuda
This page is about my findings on the following areas:
1) Why there are increasing number of international companies setting up offshore operations in Bermuda;
2) What are the benefits that Bermuda itself derives from the international and offshore businesses;
3) Market study results showing the volume of International Business in Bermuda and the island's relative position in world wide trade;
4) Some major sectors thriving in International & offshore business in Bermuda.
NOTE: For professional or financial advice, you may contact a well known Management Service
Why Bermuda as the destination for International Business?
Bermuda welcomed its first international business (The Shell Oil Company) way back in 1947 even before a legislation was created for such an industry. Today over 18,000 international companies and partnerships are operating out of Bermuda. Out of these, over 400 have a physical presence in the island. But none actually has any manufacturing operation here due to the small size of the island. Most use the island for the purpose of administration of their off shore operations.
75% of the Fortune 100 largest companies in America and their European counterparts have operations in the Island.
Bermuda has always encouraged growth of e-commerce. It was among the first jurisdictions in the world to pass relevant legislation, the Electronic Transactions Act 1999, which enabled e-commerce activities to operate from the Island.
There is no corporation tax, withholding tax, capital gains tax, capital transfer tax, estate duty or inheritance taxes in Bermuda for international companies - Bermuda is a tax free haven
. So it is quite obvious that most of the international companies having offshore operations actually set up their business in Bermuda for reducing their tax burden. You will notice that very few of them were actually incorporated in Bermuda.
But that is fine with Bermuda Authorities as long as the Internal Businesses do not compete with the island's domestic businesses, and instead help in the island's economy and employment. Actually there do exist various forms of other direct and indirect taxes that are levied on these companies either by Bermuda itself or by other jurisdictions.
For example, the Bermuda insurance companies writing US risks, pay Federal Excise Tax. Many Bermuda captive insurance companies pay US tax on their earnings. Many countries tax their companies on worldwide earnings, regardless of where they might have been earned.
Employees resident in Bermuda pay a tax on earned income - payroll tax in Bermuda (recovered by the employer) plus income tax back in the home country (for example in case of US expatriates). Of course the overall tax for employees are at a lower rate than in other jurisdictions. Although it may be called a payroll tax in Bermuda, a tax on income is an income tax, other than by the name.
Additionally, doing business in Bermuda is not cheap by any means. There are substantial costs associated with company formation, annual fees, costs for local attorneys and so on. Also, local accounting is usually required under the parent company’s accounting practice. Such accounting may also be required separately where Bermuda Government demands so, and that too may be under a different set of standards. Officials of the company might have to travel to and from Bermuda as and when required and that involves significant costs.
So what has made Bermuda so attractive to International Business over the last 65 years? Here are all the real reasons:
Bermuda Location and Time Zone
: Geographic location of Bermuda and time zone happens to be quite strategic to international business. Click the above link to find out why so.
Bermuda Corporate Existence
: Setting up a corporation in Bermuda is not arduous. However a thorough check is done on the credentials of sponsors.
Bermuda Legal System and Legislation
: A review of the laws of Bermuda including legal system and legislation. Includes company law, immigration, trust, litigation, Bermuda court system etc.
Bermuda's Stock Exchange
: Bermuda Stock Exchange (BSX) is the world's largest offshore and electronic securities market.
It offers a full range of listing and trading opportunities for international and domestic companies for equity, debt, depository receipts, derivative warrants etc.
: Quality of human resources available locally within Bermuda and also the ability to attracted talented international professionals have always been a strength of Bermuda.
: There is no corporation tax, withholding tax, capital gains tax, capital transfer tax, estate duty or inheritance taxes in Bermuda for exempted companies. Companies with international business are usually granted tax exemption by the Bermuda Government until 2035.
: Find out all about currency of Bermuda - how Bermuda dollar trades in the island compared to the US dollar, ATM locations and more.
In 2012, the Premier of Bermuda & Minister of Finance Ms. Paula Cox said in a message: "The shifting tides in the global economy have created timely investment and relocating opportunities in Bermuda and with the introduction of legislated incentives we have never looked more attractive. Our reputation, solid infrastructure and country wide ‘At your Service’ attitude enables us to offer less red tape and more red carpet. The Bermuda Monetary Authority’s measured and proactive approach in supervising companies in Bermuda has promoted stability in the insurance and financial sectors..."
Bermuda's Benefits from International Business
The International Businesses provide multiple benefits to Bermuda's Economy
. It is one of the largest providers of Jobs to Bermudians
. There are many local businesses that are formed to support this sector and make revenues from the companies in International Business.
The International Business sector's operation has resulted in continued erection of large number of buildings in Bermuda that support the construction industry. And finally the sector provides government with hefty revenue from taxes and fees.
In 2009, the insurance and reinsurance sector reported total assets of $442 billion. In comparison, the banking sector had total assets of $22.8 billion, and the Island’s investment funds sector reported an aggregate Net Asset Value (NAV) of $171 billion.
When you look at employment, the international business sector is the largest provider of jobs compared to the other industrial sectors. In 2008 the sector provided 4,701 jobs, or about one job out of every eight.
International business is the major source of foreign exchange earnings in Bermuda. During the first 9 months of 2008, foreign exchange earnings of the international companies increased by $427 million to $1.5 billion, accounting for a 38.7 per cent increase year-on-year.
Study Results of Bermuda's International Business (2012)
Business Bermuda has come out with a study results of Bermuda's International Business and its impact and relationship with the world economic forces like USA, Europe and Asia. The 2012 study (called the Economic Impact Study) has been conducted for the period 2004 to 2011. The study considered 10 major world trade partners of Bermuda including USA, UK, China, Singapore, Hong Kong, Switzerland, Netherlands, Germany, France and Ireland.
The analysis shows that in 2010 alone, Bermuda's two-way trade with the world amounted to $80 billion. Although USA remains as the largest business trade partner of Bermuda, economic relationship with Asia is actually growing at the fastest rate. Trade with Singapore, Hong Kong and China had grown by 200% during the period 2004 - 2011. Bermuda holds $20 billion investments from Singapore and China. The European Union is also a large economic partner of Bermuda with $25 billion 2-way trade mainly in the insurance and finance sectors.
Major International Businesses in Bermuda
Here are the major sectors/industries that contribute the majority in Bermuda's international business in terms of annual trade & revenue.
Bermuda's Insurance Industry
: Insurance and Re-Insurance industry form the largest international business in Bermuda. Here is a review of this sector (both international and domestic) and its role in Bermuda's economy.
Bermuda Shipping Industry
: A review of why international shipping industry in Bermuda has been a thriving business. It includes ship finance, registration, company incorporation and management.
1) Check out Bermuda Economy
to know all about economic factors and trends of Bermuda.