BermudaTax Obligations Detailed

In Bermuda, employers face payroll tax obligations, calculated based on total remuneration and specific employer categories.

Employer Payroll Tax

• General Rates: Rates vary from 1% to 10% based on annual payroll. Those with a payroll under BMD 200,000 pay 1%, while those exceeding BMD 1 million pay 10%. Progressive rates apply between these thresholds.
• Exempt Undertakings: These businesses, typically international, face a 10.25% rate on employee remuneration. Some exceptions exist, like for new Bermudian hires.
• Special Categories: Certain sectors, like hotels and restaurants, have special rates. For hotels and restaurants there is a 5% rate on the employer portion and a regular rate on the employee portion.
• Maximum Taxable Remuneration: Payroll tax is only applicable up to BMD 1 million per employee annually. Any remuneration beyond this is exempt.

Employee Payroll Tax

• Marginal Rates: A progressive system applies with rates ranging from 0.5% to 12.5% based on employee earnings.
• Thresholds: The lowest rate of 0.5% applies to earnings up to BMD 48,000. Rates increase for income bands up to BMD 1 million, above which no further payroll tax is due.
• Employer Responsibility: Although calculated based on employee income, employers are responsible for withholding and remitting this portion along with their own.

Filing and Payment

• Quarterly Returns: Payroll tax returns are filed and paid quarterly, within 15 days of the quarter's end. Quarters begin on the first day of January, April, July, and October.
• Online Filing: E-filing is mandatory for exempted companies and those with annual remuneration exceeding BMD 200,000.
• Payment Methods: Various payment options are available.
• Penalties: Late filing and underpayment result in penalties.

Corporate Income Tax (CIT)

As of 2025, Bermuda introduced a 15% CIT applicable to multinational enterprises (MNEs) with annual revenue of EUR 750 million or more. This is based on book income with adjustments. Businesses outside this scope remain exempt from income tax.

Other Relevant Taxes

While Bermuda has no VAT, sales tax, or excise taxes, other taxes like customs duties (generally 25% on imported goods), land tax (on developed land), and corporate services tax exist.

In Bermuda, employee tax deductions primarily consist of social insurance contributions and payroll tax, which are withheld from employees' salaries by their employers.

Social Insurance Contributions

Social insurance contributions fund Bermuda's contributory pension scheme. Both employers and employees contribute to this scheme.

• Employee Contribution: BMD 35.92 per week. This amount is matched by the employer.
• Total Weekly Contribution: BMD 71.84 per week (BMD 35.92 from employee + BMD 35.92 from employer).
• Exemptions: Full-time students under 26 working during holidays, weekends, or summer breaks, and their employers, are exempt. Employees 65 and over are exempt from contributing, but their employers must still contribute.
• Refunds: Expatriates and other employees who contribute but don't qualify for a pension can apply for a refund of their and their employer's total contributions at age 65.

Payroll Tax

Payroll tax is levied on employers based on employee remuneration, and the employee portion can be deducted from the employee's salary. The tax calculation is done by applying marginal tax rates to different bands of remuneration. Here are the applicable bands and rates as of today February 5, 2025:

• Annual Remuneration Bands and Rates (Employee Portion):
  • Up to BMD 48,000: 0.50%
  • BMD 48,001 to BMD 96,000: 9.25%
  • BMD 96,001 to BMD 200,000: 10.00%
  • BMD 200,001 to BMD 500,000: 11.50%
  • BMD 500,001 to BMD 1,000,000: 12.50%
• Remuneration exceeding BMD 1,000,000 is not subject to payroll tax.
• Payment: Payroll tax is payable quarterly (January 15th, April 15th, July 15th, and October 15th).

New Hire Relief

A New Hire Relief program provides exemptions from the employer portion of payroll tax for newly hired employees in certain circumstances. Key aspects of this program for the 2024-2026 period are:

• Eligible Employers: Exempted companies and other employers with annual remuneration exceeding $500,000
• Eligible Employees: Employees hired between April 1, 2022 and March 31, 2026
• To qualify, employers must expand their workforce compared to a baseline measurement taken in March 2022.

Other Taxes:

Bermuda does not have income tax, capital gains tax, or withholding tax at the employee level. Other taxes levied include import duties, real property tax, corporate services tax, a vacation rental tax and customs duties.

Important Note: This information is based on the latest available data as of today, February 5, 2025, and is subject to change due to potential future legislative amendments. Consulting with a tax advisor is recommended for personalized advice.

Bermuda does not have a Value Added Tax (VAT) or Goods and Services Tax (GST) system. Instead, the government's primary revenue source comes from customs import duties, which are levied on nearly all imported goods. There are other taxes in Bermuda including payroll tax, corporate service tax and land tax. As of January 1, 2025, a corporate income tax (CIT) has come into effect for multinational enterprises with annual revenue of €750 million or more. This new CIT is set at a rate of 15%.

Customs Duties

• A customs duty is imposed on almost all goods imported into Bermuda.
• The standard rate for most goods is 22.25%.
• Food items typically have a lower duty rate ranging from 5% to 15%.
• Certain goods are duty-free, such as some medicines, corrective eyewear, and reading materials.
• Vehicles designed for passenger transport are subject to a duty of 75% on the first $10,000 of value and 150% on any value exceeding $10,000. There are different rates for vehicles with ten or more seats and hybrid vehicles, which are dutiable at 33.5%.
• Vehicles primarily for transporting goods are dutiable at 33.5%.
• The duty on motorcycles is 33.5%.
• Some relief from customs duty is available in specific situations, including for approved local manufacturers.

Corporate Income Tax (CIT)

• Effective for fiscal years beginning on or after January 1, 2025.
• Applies to multinational enterprise groups with annual revenue exceeding €750 million.
• The CIT rate is 15%.

Other Taxes and Duties

• Payroll Tax: Applies to employers and self-employed individuals. E-filing is mandatory for entities with payrolls of $200,000 or more annually. Filed quarterly with a 15-day grace period.

• Corporate Services Tax: A 7% tax levied on gross revenue derived from providing corporate services to exempted companies and partnerships. Services covered include:

  • Corporate administration
  • Corporate management
  • Corporate secretarial services
  • Provision of a registered office
  • Accounting and financial services.

• Land Tax: Imposed on developed land based on an assessed annual rental value (ARV). Exemptions exist for government land, primary homesteads of Bermudian pensioners, and certain charitable organizations.

• Stamp Duty: Applies to various legal instruments, including property transfers, deeds, and rental agreements. Exempted companies are generally not subject to stamp duty.

It's important to note that tax laws and regulations are subject to change. Consulting with a tax professional is recommended for the most current and specific advice.

Bermuda's tax landscape is evolving, with new corporate income tax measures taking effect in 2025 for certain multinational enterprises while other tax incentives remain in place.

Corporate Income Tax (CIT)

As of January 1, 2025, Bermuda has implemented a Corporate Income Tax (CIT) applicable to multinational enterprise (MNE) groups with annual revenue of €750 million or more. The CIT rate is 15%. This applies even if a company has a Tax Assurance Certificate, which guarantees no new taxes until March 31, 2035, for exempted undertakings. The CIT aligns with international tax regulations (OECD's BEPS Pillar Two), aiming to ensure a minimum tax on large MNEs' profits.

• Eligible Entities: Bermuda constituent entities of in-scope MNE groups.
• Exemptions and Credits: Certain exemptions, such as the international shipping income exclusion, and foreign tax credits are available. Further details on specific tax credits designed to support Bermuda's economy are forthcoming.

Other Tax Incentives and Relief

While historically Bermuda has offered limited specific tax incentives, various forms of tax relief and other incentives exist.

• Payroll Tax Relief: Employers might qualify for payroll tax relief and exemptions to encourage job creation. Details and eligibility criteria are available through the Economic Development Department (EDD).
• Customs Duty Relief: This relief may be available to support new business ventures or expansions, alongside other support programs.
• Work Permit Concessions: Incentives related to work permits aim to assist businesses in attracting and retaining talent.
• Land Tax Relief: Individuals 65 years or older who own and occupy a private dwelling with an Annual Rental Value (ARV) up to $45,500 can receive a land tax exemption. This exemption is capped at $1,566 annually. Amounts above this ARV threshold are taxable. Please note, proposed updates exist for future periods; consult official sources for the most up-to-date figures.

Application Procedures

For specific tax incentives and relief programs, applications and further information are available through the relevant government bodies, such as the Economic Development Department (EDD) and the Office of the Tax Commissioner. Regarding CIT, further administrative guidance, information on the Corporate Tax Agency, and details on a potential Qualified Refundable Tax Credits (QRTC) program are expected.

Please note that this information is current as of February 5, 2025, and may be subject to change. Consulting with a tax professional is recommended for specific situations.