Failing the Bermuda Economic Substance test triggers serious consequences. For a first instance, the Bermuda Registrar of Companies imposes a penalty of BMD $25,000. For a second consecutive year of failure, the penalty escalates to BMD $250,000. Persistent non-compliance can result in the entity being struck off the Bermuda register — effectively dissolving the company. Additionally, under OECD automatic information exchange, the Registrar notifies partner jurisdictions including the United States IRS.