Introduction
Bermuda, is located off the east coast of the United States, it is situated around 1770 km (1,100 mi) northeast of Miami, Florida, and 1350 km (840 mi) south of Halifax, Nova Scotia, Canada. It has a total land mass of 53.3 sq km surrounded by 103km of coastline.
A July 2008 estimate put Bermuda’s population at 66,536 (July 2008 est.). The ethnic makeup of Bermuda is black, white, and multiracial. The islands have a small but growing Asian community. A significant segment of the population is also of Portuguese ancestry, the result of immigration from Portuguese-held islands (especially the Azores) during the past 160 years. English is the official language, but some Portuguese is also spoken.
Bermuda is very susceptible to hurricanes. Its position along the Gulf Stream means that it is often directly in the path of hurricanes recurring in the westerlies, although they have usually begun to weaken as they approach the island. It is often affected by these hurricanes, although the island’s small size means that direct landfalls are rare. The last hurricane to cause significant damage to the islands was category 3 Hurricane Fabian on September 5, 2003. Its eastern eye wall hit the territory and four people were killed.
The only source of fresh water in Bermuda is rainfall, which is collected on roofs and catchments (or drawn from underground lenses) and stored in tanks. Each dwelling usually has at least one of these tanks forming part of its foundation.
Business Environment
The Bermuda Stock Exchange (BSX) first established in 1971 is now the world’s largest fully electronic offshore securities market, with a current market capitalization (excluding mutual funds) in excess of US$ 330 billion. There are four hundred securities listed on the stock exchange, of which almost three hundred are offshore funds and alternative investment structures, attracted by Bermuda’s regulatory environment. The Exchange specializes in listing and trading of capital market instruments such as equities, debt issues, funds (including Hedge Fund structures) and depository receipt programmes.
Tourism is Bermuda’s second largest industry, with the island attracting over one-half million visitors annually, of whom more than 80% are from the United States. Other significant sources of visitors are Canada and the United Kingdom. Tourists arrive either by cruise ship or by air at Bermuda International Airport, the only airport on the island.
Economic Environment
As the offshore domicile of many foreign companies, Bermuda has a highly-developed international business economy; it is a financial exporter of financial services, primarily insurance, reinsurance, investment funds and special purpose vehicles (SPV). Finance and international business now constitute the largest sector of Bermuda’s economy.
Large numbers of leading international insurance companies are based in Bermuda making the territory one of the world’s largest reinsurance centres. Those internationally owned and operated businesses that are physically based in Bermuda – of which there are around four hundred – are represented by the Association of Bermuda International Companies (ABIC). In total, over 1,500 exempted or international companies are currently registered with the Registrar of Companies in Bermuda.
Taxation
In Bermuda there is no income tax, capital gains tax, VAT, sales or use tax or wealth tax. The local tax system is based upon import duties, payroll taxes and consumption taxes. Local businesses must be controlled by Bermudians but offshore operations take place through ‘exempt’ or ‘permit’ companies.
There is in fact no distinction between the employees of resident or non-resident operations. Most types of compensation and benefit paid to employees are subject to the payroll tax, which is the only significant tax for individuals; there are no special privileges or exemptions for expatriat
Banking
Since switching from the Bermuda pound in 1970, Bermuda’s currency has been the Bermudian dollar (BMD), which is pegged to the US dollar. US notes and coins are used interchangeably with Bermudian notes and coins within the islands for most practical purposes; however, banks levy a small exchange rate for the purchase of US dollars with Bermudian dollars.
Bermuda offers a wealth of sophisticated corporate management services, local management consultants, and management services companies, as well as trust companies and brokerage firms. There are also a number of law firms in Bermuda which cater to the needs of international clients.
Offshore Banking
Bermuda is a good offshore location for U.S. clients located along the Atlantic coast, as there are daily flights from most major cities to Bermuda. Bermuda is probably the offshore location “of choice” for most eastern U.S. citizens. For the same reason, however, Bermuda is not as readily accessible to clients from the western U.S. as, say, the Cayman Islands or Belize.
Generally, the forms of company and partnership for offshore operations are allowed to trade freely from Bermuda with external partners, but must limit their dealings on the island to other exempt entities, to dealing in securities, (for mutual funds) to selling shares, and to managing the affairs of other exempt or non-resident entities. It is possible to obtain a license from the Minister of Finance to carry out other types of business activity on the island, if he considers it is in the interests of Bermuda. In view of the Government’s support for e-commerce, these licenses are readily issued for Internet providers and infrastructure companies.
Exempt entities are not allowed to buy freehold property on the island, but may lease office accommodation for their own use. An exempt entity can hold a mortgage on a Bermudian property (usually to assist an executive in purchasing accommodation) but needs the consent of the Minister of Finance if the amount is greater than $50,000.
