Bermuda is a set of 181 islands situated between Europe and North America. It combines pink sandy beaches, crystal blue oceans. It’s known as a popular tourist destination. In fact, 2018 saw record-breaking statistics in the tourism industry with visitors spending more than $500 million.

But what happens for those who aren’t just looking for a holiday? What are the advantages of setting up a company in Bermuda, and just how easy is it? Bermuda is only 53.2 square kilometres (20.6 square miles) and has a population of just 70,000. So it might surprise some to know that there are 18,000 Bermuda-based exempted and international businesses on the Island – and business is booming.

Bermuda is a major international business centre. It is ranked No.1 in the world as an offshore centre for Insurance and Reinsurance with approximately 1,500 businesses in this industry.

It’s also in the Top 3 for shipping and investment. More than 75% of the Fortune 500 companies have some presence in Bermuda. This may not mean that their head offices are located here, but these companies are carrying out activities in Bermuda for good reasons.

What are the advantages of setting up your business in Bermuda?

Most people who have any business experience in Bermuda will already know that there are tax and other advantages to having a presence there. In fact, you do not have to pay the following:

  • Corporation taxes
  • Withholding taxes
  • Capital tax gains
  • Capital transfer tax
  • Inheritance taxes
  • Estate duty payable

There is also no income tax though there is a payroll tax. The employer is liable for 10.25%, while a further 6.5% is deducted from the employee’s salary. Some companies are able to apply for an assurance, guaranteeing that the company will continue with these tax rates until March 2035, even if new tax legislation is enacted.

Bermuda is part of the Organisation for Economic Co-operation and Development and the International Monetary Fund. This is due to the fact that Bermuda holds a very high reputation for its business practices. Those running a company in Bermuda are known for their openness and transparency while keeping the country totally above board. This is further helped by its advanced legal infrastructure.

The absence of currency exchange controls in Bermuda makes the Island appealing for businesses that need to trade in various currencies. This saves costs and makes life a lot simpler. It also encourages a lot of international investment.

Bermuda also boasts an excellent fibre-optics network. The Internet connection is fast and reliable. This is certainly a benefit for anybody who is wishing to set up an e-Commerce business.

The geographical position of Bermuda is ideal for people based in both Europe and The States. There is just a four-hour time difference with London and it’s just one hour ahead of New York, therefore reducing the need to stay up for half the night to communicate with your employees unlike some other offshore jurisdictions. There are daily flights to a number of worldwide destinations.

Different types of companies based in Bermuda

Companies can be separated into two categories: Exempted companies and local companies.

  • Exempted companies are those working internationally. They are able to conduct business outside of Bermuda and with other exempted companies. Although not common, a licence can be obtained for an exempted business to carry out business transactions with local companies. Exempted companies in Bermuda include Signet Group PLC (the largest diamond jewellery retailers globally) and Bacardi. HSBC Bank Bermuda is an example of a company having a registered location in Bermuda with a head office in another country
  • Local companies are typically run or co-owned by the native Islanders. Such local businesses are the only type of company that are permitted to carry out their business activities within the Bermudian borders: for example, transacting with other Bermuda-based companies

Each of the above types of companies can be defined as a:

  • Company Limited by Shares – the most common type of company that limits the liability of each shareholder to the amount that remains unpaid on the shares held
  • Company Limited by Guarantee – often used for charitable businesses. A memorandum limits the amount that shareholders might need to pay towards a company’s assets in the case of closing the activity
  • Unlimited Liability Company – there is no limit on the liability a shareholder may face. This type of company has many of the standard traits, such as a Board of directors etc
  • Limited Duration Company – in contrast to focusing on capital, a limited duration company literally has an expiration date when the company will dissolve. This could be after a certain activity has been completed, or it could be set for an unspecific date, like the death of a shareholder

The majority of people looking to set up a business in Bermuda will usually be setting up an exempted company (i.e. to transact only with off-Island businesses).

Setting up a company in Bermuda | Some things to consider

It usually takes less than 7 days to incorporate a new company on the Island. It can have one or more directors of any nationality and as few as one shareholder and, as we have seen, there are no taxes payable on profits, income or dividends, and no capital gains tax applies. Bermuda prides itself on its speed of incorporation and small private companies can be up and running in a matter of just a few weeks. Here are a few things to consider when setting up operations.

Costs:

  • Expect to pay around $18,000 for the entire company set-up process. This will include an annual government fee that exempted companies are obliged to pay. The amount depends on assessable capital with a minimum amount of $1,995

Minimum Capital and Company Members:

  • There is a minimum share capital of $1 for a local and exempted company. Insurance companies wishing to write their own accounts need a minimum share capital of $120,00. There must be a minimum of one shareholder and one director; these can be residents or non-residents
  • A secretary is obligatory for companies in Bermuda. The secretary must be a Bermudian resident. Between the director/shareholder and secretary, proper financial records must be kept
  • Electronic signatures are permitted and this is definitely worth setting up if you don’t plan to reside in Bermuda

Location:

  • The most popular area for setting up a business is in the capital, Hamilton. It’s situated north of Hamilton Harbour and is the financial and administrative centre of the Island. 13,340 professionals work in Hamilton, however, only 1,010 people live here. It’s one of the smallest capitals in the world. Nevertheless, this hasn’t stopped globe-spanning companies setting up their offices here

Permits:

  • Overseas companies will have to apply for a permit. As will some specific activities such as businesses handling alcohol, oil, and the registration of charities. Costs will vary depending on the activity and the size of the business. For more information on licences and permits, look on the Registrar of Companies’ website www.roc.gov.bm

READ PART 2 OF THIS ARTICLE HERE

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The information provided above is for general introductory purposes only. If you are interested in setting up a company in Bermuda, be sure to take appropriate professional advice. If you are setting up a business and would like assistance in staffing up your team, book a Discovery Call with us today.