The negotiation of 18 Tax Information Exchange Agreements ("TIEAs") by Bermuda's treaty negotiating team (the "Treaty Team") may well create economic opportunities for the Island beyond those first envisioned.

Bermuda's productive and professional Treaty Team were already negotiating TIEAs with a number of other nations when, in April of this year, both the Organisation for Economic Co-operation and Development ("OECD") and the G20 nations announced a new, hardened approach to tax evasion. They were motivated to do so by the global financial crisis. Both bodies argued that an increase in transparency among nations, and access to tax related information, would rid the world of tax evasion, which some commentators have alleged is supported by low tax, or no-tax jurisdictions — which, in many cases, have been mischaracterised as "tax havens".

The OECD announced that offshore business centers must sign 12 OECD compliant TIEAs in order to earn "White List" status with the organisation. Bermuda, already ahead of the game, was able to act quickly in signing off those TIEAs already under negotiation and begin and complete negotiations with other nations to exceed the 12 required. The result was that the Island earned "White List" status in June, indicating our commitment to the OECD's internationally accepted standards of transparency and co-operation. The TIEAs entered into by Bermuda in 2009 are all OECD compliant for the purposes of the OECD initiative on harmful tax practices.

Bermuda, of course, is no stranger to the TIEA negotiating table. We signed our first TIEA in 1983 with the United States. What's new is that the OECD's model tax information exchange agreement (the "OECD Model TIEA") has become the global measure for whether a nation is being cooperative and compliant in meeting the standards set down by the OECD and demanded to be adopted by the G20.

Bermuda's positive approach to negotiating TIEAs has meant that the Treaty Team has been able to make the most out of the opportunity. The Treaty Team has proactively negotiated TIEAs with a focus on securing mutually beneficial terms for the citizens and businesses of both Bermuda and the other nation involved. The TIEAs signed thus far are structured on the OECD Model TIEA but have been modified to account for the specifically negotiated terms in each case.

One example of the benefits that can be negotiated into a TIEA is the removal or reduction of withholding or other similar taxes levied by certain onshore jurisdictions against income received by persons or businesses resident in those jurisdictions from investments they hold in Bermuda, or in Bermuda businesses. Although many of the more recently signed TIEAs will not come into effect until next year or beyond, foreign businesses are already beginning to open their eyes to the unexpected opportunities that will begin to arise for them to invest in Bermuda once TIEAs containing tax related benefits relevant to their home jurisdiction become effective.

Some may find it surprising that Bermuda has actually taken a leading role in the OECD; however the Island was a member of the OECD Working Group that created the first draft of the OECD Model TIEA back in 2002. More recently, Bermuda was elected by 178 global delegates — led by the United States — to be a joint Vice-Chair of the OECD's Global Forum Steering Committee ("Steering Committee"). The Steering Committee's work will focus on improving tax transparency and the exchange of information so that countries can fully enforce their tax laws in order to protect their tax base.

Bermuda's involvement on the Steering Committee, and its continued efforts to negotiate and sign more TIEAs, will remind people the world over that Bermuda is a well-regulated, forward-looking, attractive and leading offshore financial jurisdiction that is at the forefront of compliance with the international tax information exchange and transparency standards.

Attorney Steven Rees Davies is an Associate and a member of the Telecommunications and Technology Team within the Corporate and Commercial Practice Group at Appleby. A copy of Mr. Rees Davies' column can be found on the Appleby website at www.applebyglobal.com.

This column should not be used as a substitute for professional legal advice. Before proceeding with any matters discussed here, persons are advised to consult with a lawyer.