Bahrain, Bermuda Sign DTA

by Lorys Charalambous, Tax-News.com, Cyprus

26 April 2010

On April 22, in Washington, D.C., Bahrain and Bermuda signed an avoidance of double taxation agreement (DTA), which also includes provision for the full exchange of information on criminal and civil tax matters consistent with the internationally agreed standard set by the Organization for Economic Cooperation and Development (OECD).

This agreement is the first comprehensive DTA signed by Bermuda, and is also Bermuda's 20th agreement incorporating provisions for the full exchange of tax information (TIEA). The DTA represents a reciprocal arrangement between Bahrain and Bermuda not to tax the repatriated income that an individual or corporate resident of one country has earned in the other country, and which has already been taxed.

Bermuda's TIEA provisions within the DTA with Bahrain were said to include standard means to ensure due process is followed in tax information requests to Bermuda, including, for example, provisions to protect the confidentiality of information provided, as well as anti-fishing provisions to ensure that requests for information from Bahrain are relevant to on-going tax investigations being conducted by Bahrain's authorities.

Following the signing of the DTA, Paula Cox, Bermuda’s Deputy Premier, commented on Bermuda positioning itself as a key jurisdiction for Islamic financial product offerings. She disclosed that “Bermuda and Bahrain have committed to establish a joint economic committee that will meet annually to further develop economic ties between our countries."

"This DTA is a significant step forward in enhancing business ties and investment opportunities between Bermuda and Bahrain that will facilitate our outreach to other countries within the Gulf Cooperation Council,” she continued. “We are seeing an increase in local service providers expanding their offerings to Middle East and North African markets utilizing the Kingdom of Bahrain as a gateway jurisdiction, in addition to offering Middle Eastern clients convenient access to Bermuda.”

She added that: “Many local service providers have extensive experience of Islamic structured finance, including both conventional and Shari'iah investment funds. Moreover, it is likely that the global market for Islamic insurance, or Takaful, will continue to grow, opening exciting possibilities for Bermuda reinsurers."

David Ezekiel, Chairman of the Association of Bermuda Insurance Companies stated: "Coming just after the conclusion of TIEA negotiations with India, this DTA with Bahrain is further good news for the Bermuda international business sector as Bahrain has a growing involvement in our market. Bahrain is emerging as a strong economic force in the Gulf region and already has significant dealings in the Bermudan market, and the signing of the DTA will enhance current relationships and should make Bermuda even more attractive as a business partner for individuals and companies located in Bahrain.”

In addition to the DTA with Bahrain, Bermuda has TIEAs with Australia, Ireland, New Zealand, the Netherlands, the Nordic Group (including Denmark, Finland, Iceland, Norway and Sweden), Netherlands Antilles and Aruba, Mexico and Japan. Negotiations have been concluded with, amongst others, Canada, Spain, Belgium and Portugal.

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