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Modification to Mexico Tax Laws Will Benefit Bermuda's Captive Insurance Companies

"This is wonderful news and could not have come at a better time," Premier Cox said on learning that Ministry of Finance and Public Credit officials in Mexico City had confirmed modifications have been made to the Miscellaneous Tax Regulations.

Bermuda is the leading captive insurance center and one of the preferred jurisdictions of choice for captives.

" Many Bermudians work directly in our captive insurance industry and we hope that the news will spur further growth in this important sector by encouraging Mexican nationals to establish captive insurance companies in Bermuda," Premier Cox said.

While other jurisdictions who have established Tax Information Exchange Agreements with Mexico will receive the same benefit Premier Cox said this development will help strengthen Bermuda's international business sector. "Bermudians not directly employed in the captive insurance company sector will also benefit from our efforts to further strengthen our international business sector.

Premier Cox as Minister of Finance signed the TIEA with Mexico in October 2009 which was the catalyst for today's news. Earlier that year Mexico hosted the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum) that saw Bermuda elevated to the leadership of the OECD Global Forum as Vice Chair. All of which arose from Bermuda's leadership role in signing TIEAs and being first to ascend to the OECD White List on signing 12 TIEAs after the April 2^nd 2009 G20 meeting.

Premier Cox said that Bermuda does not provide tax advice but recommends that companies should consult with their tax advisors to assess the full range of benefits contained in the modifications. "However, I can advise that Mexico has made certain modifications to the Miscellaneous Tax Regulations whereby such modifications will avoid the application of the informative tax return obligation and the application of the 40% withholding tax set forth in the Income Tax Law," she said.

With effect from January 1st, 2011 the following rules now apply to Bermuda;

• Rule I.3.17.15 of the Miscellaneous Tax Regulations states that when the payments are made to a resident of a country having an Agreement for Exchange of Information on tax matters or a Double Tax Agreement which is considered "broad" , then the 40% withholding tax will not apply. Instead, such income will be subjected to the regular applicable withholding rate set forth in Title V (Non Residents).
• Annex 10 of the Miscellaneous Tax Regulations includes a list of the Agreements which are considered "broad" . The Bermuda/Mexico TIEA is included in such list.
• Rule II.3.10.7 of the Miscellaneous Tax Regulations states that as from the dates set forth below, income of any kind derived from the following territories, may not file the informative tax return referred to in the Income Tax Law.

Bermuda, in its capacity as a Vice Chair of the Steering Group of the OECD Global Forum works closely with Mexico. Additionally the Secretary General, Mr. Angel Gurría of the OECD is a former finance minister of Mexico. Delegates from Mexico are expected to visit Bermuda this May 31st when Bermuda hosts the 2011 OECD Global Forum on Transparency and Exchange of Information for tax Purposes.

Ministry of Finance Treaty Unit
Tele: 4412955151
Email: wlbrown@gov.bm, ljhershey@gov.bm, dsimons@gov.bm
or
Marston Webb International
Victor Webb/Bill Keegan, 212-684-6601
Email: marwebint@cs.com