Benedek Lewin is able to provide advice to clients of Omnium Corporate Services Limited and to assist them to assess their business and to implement any changes required to comply with Bermuda’s new economic substance legislation.
You can download the OCSL – Economic Substance Bulletin – 2 Aug 2019 here.
Peter Sanderson, Head of Litigation
Bermuda has various procedures in place for the automatic exchange of information with other jurisdictions, pursuant to the Common Reporting Standard (CRS). The information exchanged is with respect to account holders, and includes the name, address, account number, account balance or value, and various other sensitive financial details relating to an account. Some of the jurisdictions receiving automatic information have a dubious commitment to adhering to the rule of law or human rights standards.
Some people who have financial connections to Bermuda are rightly concerned about sensitive information being filtered back to their home jurisdiction, where the authorities might have less than pure intentions regarding the use of that information.
The CRS regime, allowing blanket automatic disclosure of private information, raises immediate privacy concerns. The Bermuda Constitution provides for freedom from interference with a person’s correspondence, which includes sensitive financial information.
The Constitution only allows for interference with correspondence if it is reasonably required for certain limited purposes, including public order or morality, or protecting the rights and freedoms of others.
It is questionable whether automatic exchange of information with a foreign jurisdiction meets any of these conditions, arguably rendering the entire CRS regime void and unlawful. Even if one of the exceptions allowing interference is engaged, the exchange of information must be “reasonably required”, and it could be open to a concerned party to challenge the exchange of information in the Bermuda courts if there are legitimate human rights concerns in the circumstances of their case.
A challenge could be made by application to the Supreme Court. Given the sensitivities involved, an anonymity order could be obtained to protect the identities of the parties. This is something the Supreme Court has readily provided for in other cases.
In the event of a person suffering adverse effects as a result of information being disclosed under the CRS, substantial damages may be available if it can be shown that the disclosure was in breach of the Bermuda Constitution.
Peter Sanderson is the Head of Litigation at Benedek Lewin Limited. He has had conduct of many cases before the Supreme Court and Court of Appeal concerning constitutional rights, some of which have been reported in international law reports. He is able to advise further on these issues and others engaging privacy concerns and the CRS regime.
Peter Sanderson, Head of Litigation at Benedek Lewin Limited, looks at the radical changes to payroll tax in the 2018 budget:
Introduction
The Payroll Tax Amendment Act 2018 has brought in some radical changes to how tax is treated. It has scrapped the concept of ‘notional remuneration’ and replaced it with a tax on actual remuneration “for services rendered by the employee or deemed employee”. Remuneration includes any scheme or arrangement under which a person in any way whatsoever shares his employer’s profit, including by way of dividend. However, for self- employed persons, there is no reference to services rendered, and so tax would appear to apply to all remuneration.
What is caught by the amendments?
Directors, officers and shareholders of a company are deemed to be employees of a company, and so will be required to pay payroll tax on any sums received, that can be said to be in respect of services rendered to the company.
The net has been so widely cast now that even businesses that were not traditionally viewed as being caught by Payroll Tax, such as the operation of a rental property, may now be liable for payroll tax according to how the law is written.
Even overseas business interests are caught by the Payroll Tax Act, if carried on outside Bermuda from a place in Bermuda. A person in Bermuda running a business remotely may be liable to pay payroll tax on income received.
The Payroll Tax amendments impact particularly harshly on unincorporated sole traders, who are now required to pay tax on all remuneration. Sole traders earning at least moderate sums ought to strongly consider incorporating so as to pay tax only on income for services rendered rather than on all remuneration.
Companies could also consider putting in place procedures so as to clearly demarcate what income is in respect of services rendered, so as to make it easier to justify if ever challenged by the Tax Commissioner.
There may also be other arrangements that can be put in place to minimise tax liability. This is a matter that must be considered carefully, to avoid falling afoul of anti-avoidance or evasion provisions. We can advise further if required.
It is important that employers get this right, as directors and officers of a company (including the corporate secretary) are jointly and severally liable for any taxes owed by the company.
Disabled employees
Another amendment is tax relief for disabled employees. Disability has been defined in the Act as a functional impairment, whether physical, intellectual, neurological, psychiatric or sensory, that limits or prevents the carrying out of normal day to day activities. A disabled person must be in possession of a medical certificate confirming that the disability impacts the person’s ability to find or retain suitable employment.
Disabilities could include common conditions such as diabetes or obesity (if causing impairment).
The Act does not give further clarification on how severe a limitation must be, or how far the disability must impact an ability to find employment. A minimal measure of limitation or impact may be sufficient to qualify, as long as the disability is bona fide.
Challenging tax decisions
We anticipate an increase in tax disputes as a result of these amendments – both on remuneration and disability issues. In the event that a person is dissatisfied with a decision of the Tax Commissioner, there is a right of appeal within 30 days to the Tax Appeal Tribunal. It is important to get the grounds of appeal right, as the appeal is limited to the grounds stated in the objection. A natural person may represent themselves before a tribunal, but an incorporated entity will need to be represented by an attorney. There can be a further appeal on points of law to the Supreme Court.
Lodging an appeal does not relieve any tax obligation in the meantime.
Benedek Lewin Limited is able to assist with any questions you may have regarding this:
Dispute resolution – Peter Sanderson, psanderson@benedeklewin.com, 299-7057
Corporate, incorporations and trusts – Simon Benedek, sbenedek@benedeklewin.com, 296-2896
This article is not intended to be relied on as legal advice.
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