Bermuda TIEAs in Latin America

23 September 2010

Please note this article is not to be interpreted as legal advice.

Tax information exchange is not a new concept to those experienced in international business.  For years the OECD has been preparing for the moment when the global political and financial climate would provide the opportunity to forge forward with its plans for an international regime of cooperation amongst all nations for cross jurisdictional tax information exchange.  That moment came in April 2009, when such agreements were heralded by the OECD and G20 as a key ingredient in solving the world’s financial problems.  At their respective meetings, both bodies argued that such transparency among nations and access to tax related information would rid the world of tax evasion, a problem many commentators have alleged is supported by low tax, or no-tax jurisdictions.  In many cases, such jurisdictions have been mischaracterized as “tax havens”.  

Leading the Offshore World

Having seen the positive side of negotiating tax information exchange agreements (“TIEAs”) the world over, Bermuda has developed a professional, productive and successful treaty negotiating team.  Through a positive and embracing approach Bermuda has made the most out of the opportunities created by proactively negotiating TIEAs with a focus on securing mutually beneficial terms for the citizens and businesses of the TIEA parties.  The TIEAs which have been signed thus far are structured on the OECD Model TIEA but have been modified to account for the specifically negotiated terms in each case.

Bermuda was elevated to the OECD White List earlier this year evidencing Bermuda’s leading role in compliance with the new standards of international tax information exchange and transparency.  Since then Bermuda has signed numerous TIEAs, thereby exceeding the number of exchange agreements that the OECD regards as the minimum threshold for countries who have substantially implemented the OECD standards of tax transparency. 

Bermuda was the first offshore jurisdiction to sign an OECD compliant TIEA with a Latin American nation – The United Mexican States – and it is continuing to expand its commitment to Latin America through its negotiations with Argentina and other Latin American nations. 

Bermuda and Latin American Business

The Bermuda Minister of Finance announced that the entry into the Mexican-Bermuda TIEA and related Memorandum of Understanding would enable Bermuda to benefit from Mexican laws and regulations that enhance trade between Mexico and Bermuda. 

Although full details of the terms negotiated between Mexico and Bermuda and the intended benefits and implications for the citizens and businesses of both countries have not been made public, it is expected that these terms will relate to the tax treatment of capital flows between the two countries.

Any such terms negotiated as part of the Mexican-Bermuda TIEA would be a huge boost for Mexican businesses already invested or doing business in Bermuda and an attractive opportunity for those seeking to do business in Bermuda.  This would be particularly exciting for those Mexican businesses who seek to benefit from Bermuda’s renowned reinsurance market which provides substantial reinsurance coverage to insurers worldwide.

It is hoped that, as with many of the other recently negotiated and signed TIEAs, Bermuda will continue to position itself as an attractive proposition for other Latin American nations, and to negotiate TIEAs that will serve to promote, encourage and support business investment into and through Bermuda from the expansive Latin American markets and economies.

As time goes by and Bermuda signs more TIEAs, it will become even more apparent that Bermuda is a well-regulated, forward looking, attractive and leading offshore financial jurisdiction which is at the forefront of compliance with the international tax information exchange and transparency standards. 

Steven Rees-Davies

Appleby