NU Online News Service, June 8, 11:57 a.m.EDT

BERMUDA—An agreement between Canada and Bermuda on the exchangeof tax information will take effect July 1, according to Paula A.Cox, Bermuda premier and minister of finance.

Upon its enactment, Canada will extend a benefit to Bermuda thatpreviously had been confined to countries with which Canada has adouble tax treaty in force.

Dividends of foreign affiliates resident in Bermuda that arepaid to their Canadian parent companies out of the active businessincome earned in Bermuda will be exempt from Canadian taxation,according to the Ministry of Finance.

In a session at the Bermuda Captive Conference here, titled“Bermuda—A New Domicile For Canadian Captives,” panelists observedthat the playing field has been leveled, providing Bermuda withopportunities that previously had only been afforded to the captivedomicile of Barbados.

Barbados, they said, currently has 246 Canadian captives.

They noted that Bermuda offers a number of benefits includingthat fact that it is convenient to much of Canada; provideseasy access to the commercial reinsurance market; has qualityservice providers, offering “one-stop shopping”; and now has theCanadian-Bermuda Tax Information Exchange Agreement (TIEA) as ofJuly 1.

Jill Husbands, a managing director and head of the Bermudaoffice of Marsh Management Services (Bermuda) Ltd., recently toldNU Online News Service, “We are seeing great interest from Canadiancompanies to set up captives in Bermuda.”

Cox noted in a statement that, “currently, there are 1,145entities with Canadian interest, and this number is expected togrow exponentially.”

The industry has been looking forward to this news, the Ministryof Finance said, adding that Canadian companies are heavilyinvolved in the captive, hedge-fund and private-equity areas of theinternational business sector and more recently in the bankingarena.

Bermuda has 24 agreements with provisions for the exchange ofinformation for tax purposes, the Ministry of Finance said.

Upon signing the TIEA with Canada, Bermuda has 22 signedagreements with provisions for the exchange of information for taxpurposes.

Bermuda has signed TIEAs with the United States, Australia,United Kingdom, New Zealand, the Nordic countries (Sweden, Norway,Finland, Denmark, Iceland, Greenland, Faroe Islands), Netherlands,Germany, Ireland, Netherlands Antilles, France, Mexico, Aruba,Japan and Portugal. Further, Bermuda has a double-taxationagreement with the Kingdom of Bahrain.

Bermuda's proposed TIEA with Canada includes all standard meansto ensure due process is followed in tax information requests toBermuda, including provisions to protect the confidentiality ofinformation provided, as well as adhering to public policy;provisions related to protecting legal privilege; and provisions toensure that requests for information from Canada are relevant totax investigations being conducted by Canadian authorities, theMinistry of Finance said.