Bermuda reporting and U.S. foreign trust forms

Bermuda's Common Reporting Standard

Bermuda describes the Common Reporting Standard (CRS) as an international system for automatic exchange of financial account information for tax purposes. Bermuda Reporting Financial Institutions (RFIs) obtain account information for residents of jurisdictions with which Bermuda has agreed to exchange it, then report it to the Corporate Income Tax Agency for annual exchange with relevant jurisdictions.^[2]

The Bermuda rules set out the information to exchange, the institutions and account types covered, and due diligence procedures. RFIs register with the Corporate Income Tax Agency through the Bermuda Tax Information Reporting Portal. A CRS report is due by May 31 following the reporting calendar year, while the annual compliance form is due by September 30.^[2]

Bermuda's CRS reporting reminders for RFIs cover account holder and controlling person details. RFIs are to follow due diligence requirements when collecting taxpayer identification numbers and dates of birth, and include full addresses where those details are available in their records or account documentation.^[3]

Financial institutions have reporting and due diligence duties. Whether particular accounts or individuals are reportable depends on the CRS rules, including residence in a jurisdiction with an exchange arrangement.^[2]

FATCA agreement status for Bermuda

The U.S. Treasury jurisdiction table lists Bermuda's FATCA agreement as Model 2 and gives its status as In Force. FATCA requires foreign financial institutions to report information about accounts held by U.S. taxpayers or by certain foreign entities with substantial U.S. taxpayer ownership.^[4]

Trust licensing

The Bermuda Monetary Authority (BMA) licenses trust business through limited and unlimited licenses.^[1]

The BMA says a limited license restricts the holder from acting as sole trustee and generally caps the trust assets held at $30 million unless the Authority agrees to a higher amount. Its licensing criteria include governance processes, prudent business conduct, record keeping, and adequate insurance.^[1]

The BMA says some entities or individuals conducting trust business may apply for a limited license, while specified companies and partnerships may apply for an unlimited license.^[1]

IRS reporting for U.S. persons connected to foreign trusts

The IRS lists Form 3520, Form 3520-A, Form 8938, and FinCEN Form 114, known as the FBAR, among the information reporting requirements that can apply to a U.S. person who has a foreign trust transaction, is treated as an owner, or receives a distribution. The applicable requirement depends on the person's facts and the rules for each form.^[6]

Form 3520 and trust activity

The IRS says Form 3520 generally applies when a U.S. person creates or transfers property to a foreign trust, makes a loan to a foreign trust, receives a distribution, uses trust property, or is treated as the trust's U.S. owner under grantor trust rules. The form also reports certain foreign gifts.^[6]

For U.S. owners, Form 3520 includes reporting of foreign trust ownership under the grantor trust rules. The IRS says that an owner may have to complete Part II even if there were no transactions involving the trust during the tax year. A U.S. beneficiary who receives a distribution from a foreign non-grantor trust generally reports a share of distributable net income, with Form 3520 instructions addressing distribution reporting.^[7]

Form 3520-A and owner statements

The IRS describes Form 3520-A as the annual information return for a foreign trust with a U.S. owner. The trust files it and provides required annual statements to U.S. owners and beneficiaries. If the trust does not file, the IRS says the U.S. owner must complete a substitute Form 3520-A and attach it to the owner's timely filed Form 3520.^[6]

The owner statement contains information about trust income the owner reports on a U.S. income tax return. The IRS also says a beneficiary may receive a grantor trust or non-grantor trust beneficiary statement describing distribution taxability; Form 3520 instructions cover reporting even when a statement is not received.^[6]

Form 8938 and FBAR

The IRS identifies Form 8938, Statement of Specified Foreign Financial Assets, and FinCEN Form 114, the FBAR, as possible reporting requirements in addition to Forms 3520 and 3520-A. The applicable thresholds and reporting rules determine whether one or both forms are required.^[6]

The Form 3520 instructions likewise state that an individual may be required to file an FBAR and may be required to file Form 8938. Neither filing is automatic solely because a person is an owner or beneficiary of a foreign trust.^[7]

Bermuda and U.S. treaty and FATCA listings

The IRS A-to-Z income tax treaty list does not include Bermuda.^[5] Treasury's FATCA table lists Bermuda as In Force under a Model 2 intergovernmental agreement.^[4]

The IRS describes income tax treaties as country-specific rules that may reduce or exempt tax on certain income. Foreign residents may receive reduced U.S. tax rates or exemptions on certain U.S.-source income, while U.S. residents or citizens may receive reduced foreign tax rates or exemptions on certain foreign-source income. Treaty effects vary by country and income type.^[5]

If a treaty does not cover an income type, or no treaty exists between the relevant country and the United States, the applicable U.S. tax return instructions describe the tax treatment and rates.^[5]

FATCA is a U.S. reporting framework involving foreign financial institutions. Treasury says it requires those institutions to report to the IRS information about financial accounts held by U.S. taxpayers or foreign entities with substantial U.S. taxpayer ownership. Institutions may register with the IRS or comply with intergovernmental agreements treated as in effect in their jurisdictions.^[4]

Treasury describes model intergovernmental agreements as a means to improve tax compliance and implement FATCA, and its table includes different models, including Model 2. Bermuda's In Force, Model 2 entry concerns its FATCA agreement status; income tax treaty status is a separate matter.

Questions and answers

Related resources

Related glossary terms

• Section 679: Section 679 addresses certain transfers by U.S. persons to foreign trusts. A U.S. person who transfers property to a foreign trust that has a U.S. beneficiary is generally treated as the owner of the part of the trust tied to that transfer.
• Financial account (CRS): The Common Reporting Standard defines accounts at financial institutions, including deposit and custody accounts, plus equity and debt interests and insurance.
• Reporting financial institution: The Common Reporting Standard classifies a financial institution as reporting when it falls within the relevant jurisdiction's rules and is not non-reporting.

Related articles and guides

• Jersey information exchange and U.S. trust reporting: Jersey sets CRS filing formats and the duties of reporting institutions, with separate FATCA and CRS reports and IRS foreign trust reporting for U.S. persons.
• Mauritius reporting rules and U.S. foreign trust forms: Mauritius publishes CRS and beneficial ownership reporting rules. U.S. citizens who own or receive distributions from a foreign trust file the IRS forms.
• Guernsey reporting and U.S. foreign trust forms: Guernsey's information exchange and reporting frameworks, with the IRS rules that apply to U.S. citizens who own or benefit from a foreign trust there.

Tools and official documents

• FATCA agreement lookup: Look up any jurisdiction in the U.S. Treasury FATCA table and see its agreement model and status as the Treasury lists them, with a link to the source.
• Foreign trust reporting role finder: Tick the roles that describe a connection to a foreign trust or foreign account to see the forms the IRS and FinCEN instructions discuss. Roles can overlap.

Related pages

• Bermuda: overview: Start page for this jurisdiction.
• Types of trusts
• Trustee regulation and licensing
• Taxation of trusts