In Bermuda, employers and self-employed individuals are required to contribute to the Payroll Tax. This tax is progressive, with rates depending on the total annual remuneration. Payments for this tax are due quarterly, specifically on January 15, April 15, July 15, and October 15.

Social Insurance (Contributory Pension Fund)

Employers are also required to make monthly contributions to Bermuda's Contributory Pension Fund for all employees over the age of 17 who work more than four hours weekly. Employees over 65 are exempt from their portion of contributions, though employers must still pay their share.

Land Tax

Land tax is another responsibility for employers, particularly for those who are landlords or property owners. This tax is levied on the Annual Rental Value (ARV) of land holdings in Bermuda. Under specific circumstances, tenants may be liable for this tax.

Corporate Services Tax

Providers of corporate services to exempted companies and exempted partnerships are subject to the Corporate Services Tax. This is a 7% levy on gross revenue earned from services such as corporate administration, management, registered office provision, and specific financial services.

Important Considerations

Exempt undertakings, such as exempted companies and permit companies, may be exempt from Payroll Tax contributions. Additionally, employers may be indirectly involved with other taxes such as customs duties or stamp duty in certain situations.

Payroll tax is a progressive tax deducted from an employee's gross salary. The rates for this tax are based on your annual remuneration.

Payroll Tax Deduction

The basis of payroll tax deduction is the gross salary of an employee. The rates of deduction are progressive and depend on the annual remuneration of the employee.

Social Insurance (Contributory Pension Fund)

In Bermuda, employees are required to contribute to the Contributory Pension Fund. This is a mandatory deduction made from your salary. The total amount of weekly deduction is split in half between the employee and the employer. Employees over 65 are exempt from contributing their portion, but the employer portion is still required.

Other Potential Deductions

If your employer provides health insurance, you may have premiums deducted from your paycheck. Additionally, you may choose to make voluntary contributions to retirement plans or other savings programs through payroll deduction.

Important Considerations

Employees under 16 or working limited hours may be exempt from Payroll Tax and Social Insurance. Students employed during school breaks may be totally exempt from Social Insurance. It's your responsibility to keep track of your payslips and tax deductions for your tax records.

Bermuda is unique in that it does not impose a Value-Added Tax (VAT) or a general sales tax. This absence of VAT makes it a tax-favorable environment for both businesses and individuals.

Bermuda's Tax System

While Bermuda does not have VAT, it does have other forms of taxation. These include:

• Payroll Tax
• Social Insurance
• Customs Duties
• Land Tax
• Corporate Services Tax
• Other Minor Taxes such as stamp duties, passenger taxes, and various company fees applied in specific situations.

Reasons for No VAT in Bermuda

There are several reasons why Bermuda has chosen not to implement VAT:

• Small Market: The relatively small population and market size of Bermuda might make VAT administration less cost-effective.
• Tourism Reliance: A VAT could potentially have a negative impact on the tourism industry, which is a key economic sector for Bermuda.
• Competitive Advantage: The absence of VAT offers Bermuda a competitive advantage as an attractive location for international businesses and investment.

Bermuda offers a range of tax incentives that make it an attractive destination for businesses. The most significant incentive is the absence of corporate income tax, profits tax, or capital gains tax. Additionally, Bermuda doesn't impose withholding taxes on dividends, interest, or royalties paid to non-residents.

Tax Assurance Certificates

The Government of Bermuda can issue Tax Assurance Certificates to exempted companies (and other qualifying entities). These certificates guarantee exemption from any future taxes on profits, income, capital gains, or asset appreciation up to March 31, 2035.

Payroll Tax Concessions

Companies that receive exempted status may qualify for full or partial concessions on payroll tax liabilities. Eligible businesses may also receive Employer Relief Certificates, granting various payroll tax reductions.

Other Potential Incentives

Certain eligible businesses, especially those involved in manufacturing or international trade, may receive concessions on customs duties. In some cases, the Minister of Finance may grant a business "Pioneer Status," providing a wide range of potential tax benefits tailored to the business. This is reserved for enterprises significantly contributing to Bermuda's economic development.

Important Considerations

Tax incentives in Bermuda are typically tied to specific industries, business activities, or job creation goals. Companies must fulfill the requirements to qualify. In response to international regulations, Bermuda has implemented Economic Substance Requirements for relevant companies. This may impact eligibility for certain incentives. With the planned introduction of limited Corporate Income Tax on large multinationals, it's advisable to monitor the evolving tax landscape.