A leAder in internAtionAl commerce, BermudA offers A world-clAss Business environment in A spectAculAr setting. Most people know Bermuda for its pink, sandy beaches and idyllic setting. Most think of it as a great place to vacation — a cultivated hospitality that is perfect for tourism. Whilst that may be true, multinational companies have used Bermuda as an offshore location since the 1930s, and Bermuda’s largest economic sector has been international business for many years. That includes a mix of specialty corporate insurance and reinsurance, trust services and fund-administration services, all of which have flourished on the island, together with a fully electronic trading platform, the Bermuda Stock Exchange. Today, nearly every Fortune 500 company has a link to the island. Employment is dominated by international business, the government and the hospitality industries, with Hamilton as the hub of commerce. The world’s foremost corporations in 100 countries depend on an unparalleled insurance expertise found here — just part of what makes up this blue-chip, global financial centre. An intelligent balance in insurance regulation, the financial strength of the companies, the innovative solutions to corporate problems, together with an abundance of expertise has made the island a key capital for the world’s large risks, with assets of about $500 billion. Regulation Financial activity is regulated by the Bermuda Monetary Authority, which operates independently from the government. The BMA enforces the laws the government makes that relate to financial services in Bermuda, including the licensing and regulation of financial firms. The BMA also acts as a central bank, advising the government on banking and monetary issues. The BMA oversees financial institutions to standards at or above those set elsewhere. Some estimates place the value of assets maintained or registered in, or traded from, Bermuda at well above $1 trillion. Most are owned internationally, registered electronically and highly mobile. These institutions rely on the islands maintaining a sterling reputation. Taxes Considered “tax neutral,” Bermuda levies no income tax and has no capital gains, estate tax or corporate taxes, although it does have a payroll tax for those who work here. It can be as high as 14 percent for companies with a total payroll size of more than $1 million, and as low as 5.25 for government bodies, religious organisations, charities and approved schools. The islands are by no means tax-free for its citizens, however. There are property and Vehicle taxes, hefty duties built into retail prices, and many smaller transaction and ownership taxes, which are necessary to support a government that employs 1 in 6 working citizens and spends more than $1 billion a year. U. S. citizens are taxed on their worldwide income, regardless of where they earn it. To take advantage of Bermuda’s lower-tax environment, they must work and live here. About one-fifth of Bermuda’s workforce is imported, since the economy creates more jobs than there are working locals to fill them. Annual permits are issued to guest workers; however, they are only permitted to stay and work in Bermuda for a limited period of time. Banking Four banks have been granted licences to operate in Bermuda. Each serves a different sector of the community, with some overlap. HSBC Bank Bermuda Limited is essentially a large branch of its international parent, HSBC Holdings. Bank of N. T. Butterfield is akin to a super-regional bank, with operations in seven countries. Capital G is a community bank and high-level financial adviser. And Bermuda Commercial Bank Limited handles wealthy and corporate clients. Visitors primarily bank with Bank of Bermuda and Bank of Butterfield. The financial behaviour of U.S. citizens, in particular, is greatly limited. A banking officer in Bermuda might hint at various financial opportunities you may avail yourself of, but all such activity must be reported to the authorities in your home country. Insurance Bermuda now ranks with New York and London as a global insurance centre, although the majority of its business is wholesale, i.e., reinsurance or “captive” insurance, which is a type of self-insurance that Bermuda pioneered. Other than playing a role in insuring millions around the world, the main contribution made by Bermuda’s insurance industry is in keeping costs down for visitors. Bermuda reinsurers write a large portion of catastrophe business, insuring the world’s insurance companies from risks incurred in hurricanes and earthquakes. Whenever there is a large disaster, Bermuda companies are usually involved with the insurance or reinsurance programs. These companies have been known to pay out billions of dollars following the terrorist attacks on the World Trade Center; Hurricanes Katrina, Rita and Wilma; and recent earthquakes that rocked Japan, Chile and New Zealand. Close to half of all U.S. property catastrophic risk ultimately rests with Bermuda-based insurance companies, of which some 950 have capital of more than $185 billion and assets of more than $525 billion. Bermuda’s reinsurers paid $22 billion to rebuild the U.S. Gulf and Florida coasts from the horrific hurricanes of 2004 and 2005. They provide more than 60 percent of hurricane reinsurance in Florida and Texas. Bermuda carriers also supply up to one-third of U.S. crop reinsurance in key states and support 25 percent of the U.S. medical liability insurance and reinsurance market. Find out more at bermuda-insurance.org. TrusT services Trusts are a core service of the Bermuda economy, with dedicated companies owned by banks, accountants and law firms. They allow assets to be passed down from generation to generation, donated to charities or managed For other purposes, with minimal interference from governments and others. Trust services can be expensive, however, and only really benefit those with significant assets or income. Most countries around the world recognise the legal independence of a trust, into which assets may be injected that stop being the property of the person or company that established the trust. This loss of control usually cannot be revoked. (Assets are managed by trustees for the benefit of named individuals or organisations.) If such a mechanism sounds attractive, a conversation with a trust provider, listed in the Yellow Pages, will quickly bring you up to speed on costs, benefits and limitations. Funds Collective investment schemes, such as mutual funds and hedge funds, are well served in Bermuda. Funds can be operated or administered here. These range from money market funds operated conservatively by banks to private hedge funds and commodity funds on the outer edges of the risk curve. Again, Bermuda funds are not for everyone. Every country has different rules about how their citizens may invest, almost all of whom are taxed on the income from such funds. The best starting point is a conversation with one of the banks or a representative of one of the larger public funds. Bermuda stock exchange The Bermuda Stock Exchange (BSX) is the pre-eminent, all-electronic offshore exchange for the listing of mutual and hedge funds, unit trusts and limited partnerships. Many companies that are listed on one of the larger U.S. or European exchanges maintain a secondary listing in Bermuda to facilitate ownership by international shareholders. OFFshore companies Those doing business internationally often find a Bermuda company useful in their corporate architecture. The islands’ tax neutrality, location, international air connections, political stability and sophisticated workforce can make establishing a Bermuda company the ideal business solution. Applications to form a company are handled by local attorneys, who subject applicants to close scrutiny before passing them on to the BMA, which vets them for suitability to join Bermuda’s exclusive club of about 14,000 international companies and partnerships. Like any well-managed business centre, Bermuda has extensive company legislation and rules of operation, which make consulting a Bermuda attorney an essential first step.
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