Bermuda Individual Tax Guide

Bermuda

Hamilton GMT -4

EY

Mail address: Street address: P.O. Box HM 463 3 Bermudiana Road Hamilton HMBX Hamilton HM 08 Bermuda Bermuda

Executive contact

Bill Bailey

Immigration contact

Teree Tucker

A. Income tax

+1 (441) 294-5603

Fax: +1 (441) 295-5193 Email: bill.bailey@bm.ey.com

+1 (441) 294-5478 Email: teree.tucker@bm.ey.com

Bermuda does not tax the income or capital gains of resident and nonresident individuals.

B. Payroll tax

For payroll tax compliance purposes, the fiscal year in Bermuda runs from 1 April through 31 March.

The Payroll Tax Amendment Act 2017 took effect on 1 April 2017. It increased the current tax cap on gross earnings from BMD750,000 to BMD900,000, effective from 1 April 2017. It also changed the structure of payroll tax into the following two separate portions:

• Employer portion

• Employee portion

These two portions must be calculated separately and reported by employers on the quarterly payroll tax returns. The sum of the two portions is the total payroll tax payable.

The employer remains responsible for the payment of both por tions. However, they will have the option of deducting the employee portion from employee remuneration in full or in part.

The employer is responsible for calculating the full employee portion regardless of whether they deduct it from the employees.

The following are the payroll tax rates for the employer portion, which are based on gross annual remuneration:

• Annual payroll greater than BMD1 million: 10.25%

• Annual payroll from BMD500,000 to BMD1 million: 9%

• Annual payroll from BMD200,000 to BMD500,000: 7%

• Annual payroll less than BMD200,000: 1.75%

The employee portion of payroll tax is a separate amount and must be calculated separately from the employer portion.

Although as noted above, employers have the option to deduct the employee portion of payroll tax from employee remuneration, the

responsibility to pay the full amount of tax (employer and employee portions) to the Office of the Tax Commissioner still rests with the employer.

The employee portion is calculated using the following marginal or progressive tax rate structure:

• From BMD0 to BMD48,000: 2%

• From BMD48,000 to BMD96,000: 8.5%

• From BMD96,000 to BMD235,000: 9%

• From BMD235,000 to BMD900,000: 9.5%

Items exempt from the payroll tax base include employers’ con tributions to social insurance, the Hospital Insurance Plan, approved retirement plans, hospital and health schemes, life insurance schemes, and workers’ compensation schemes.

C. Estate tax

Estate tax in Bermuda is paid through a stamp duty which is pay able based on the affidavit of value filed by the personal repre sentatives of the deceased with the Supreme Court of Bermuda. For such purposes, the estate of the deceased person includes the following:

• All real and personal property in Bermuda of the deceased at the time of death, together with any property in which the deceased had an interest ceasing at his death to the extent that a benefit arises for someone else as result of the deceased’s death (that is, the value of the remainder interest following the deceased’s death if the deceased jointly owned a life interest).

• Money payable to the deceased’s estate under any insurance policy. However, for a deceased person who was not domiciled in Bermuda, such money is deemed to form part of the estate only if such money is payable in Bermuda or in Bermuda currency.

• The value of a vessel or aircraft, or any share of a vessel or aircraft, belonging to the deceased if the vessel or aircraft is registered in Bermuda at the time of the deceased’s death.

If the deceased is a Bermudian, estate tax is not payable on the value of the deceased’s primary family homestead at the time of the deceased’s death.

The following are the estate tax rates:

• On the first BMD100,000 of the value of the taxable estate: 0%

• On the next BMD100,000: 5%

• On the next BMD800,000: 10%

• On the next BMD1,000,000: 15%

• Thereafter: 20%

D. Social insurance

The Department of Social Insurance advised that a 4.2% increase in social insurance contribution is effective from 1 August 2018. As a result, contributions for Bermuda social insurance are pay able at a flat rate of BMD71.84 per employee per week. The cost is typically shared equally between the employee and the employ er, with each paying BMD35.92. As a result, the amount of BMD179.60 is generally deducted from each employee’s month ly paycheck in a five-week month and BMD143.68 is deducted from each employee’s monthly paycheck in a four-week month. These amounts are remitted together with the employer’s match ing amount to the Bermuda Social Insurance Department.

Exceptions. In some circumstances, individuals can be exempted from contributing to the Contributory Pension Fund. An application must be submitted to the Director of Social Insurance for the following persons:

• A student who works during periods of vacation or public holi days

• A person who earns less than BMD3,000 per year

• A widow or widower who is currently receiving a widow’s or widower’s benefit

• A nonresident who has worked for less than 26 consecutive weeks in Bermuda

E. Stamp duty

Stamp duty is charged on various legal instruments, including those detailed below.

The following are the rates of stamp duty for the sale of Bermuda land or property:

• On the first BMD100,000 of the amount or value or any part thereof: 2%

• On the next BMD400,000 of the amount or value or any part thereof: 3%

• On the next BMD500,000 of the amount or value or any part thereof: 4%

• On the next BMD500,000 of the amount or value or any part thereof: 6%

• Amount in excess of BMD1,500,000: 7%

F. Temporary entry

Visitors flying into Bermuda are normally allowed to stay for an initial period of 180 days. All travelers must hold a passport that is valid for 45 days beyond the expiration date of their travel and/ or work permit. Applications for extensions may be made subse quently at the Department of Immigration’s headquarters in Hamilton. However, in all cases, proof of financial viability for the period being considered must be furnished. This may be done by way of a local resident sponsoring the visit or by furnishing proof of funds and a place of residence. Proof of a valid passport and return airline ticket must also be submitted with a visitor extension application.

Visitors are not permitted to seek work or to engage in gainful occupation while in Bermuda.

Business visitors have the tacit approval of the Minister of Home Affairs to conduct business in Bermuda. There is no need for an employer to obtain Department of Immigration approval to land a business visitor if the business visitor is in possession of a return ticket (as well as a valid multi-re-entry visa if the business visitor is a Visa Controlled National), if the total length of the stay does not exceed 21 consecutive days and if the activities undertaken by the business visitor are limited to the following:

• Attending broker meetings

• Attending director meetings

• Attending shareholder meetings

• Attending general business meetings with employees of an organization if the visitor is not being remunerated by the

Bermuda-based organization (including external examination boards)

• Presenting business seminars or making other presentations if the seminars and presentations are not open to the general pub lic and are not for the purpose of promoting investment schemes or other money-making ventures

• Entering Bermuda for training in techniques and work practic es, if the training is conducted by a company affiliated by an ownership relationship and the training is limited to observation, familiarization and classroom instruction

• Entering Bermuda for a job interview

• Entering Bermuda to gather information, or make a presenta tion, in response to a Request for Proposal or a similar tender ing process, if the business visitor is not being paid for his or her services by the Bermuda-based-organization

• Attending, presenting or exhibiting at conferences

• Internal auditing, including school accreditation and certifica tion audits

• Visiting potential customers, purchasing, checking details or examining goods or services

• Visiting current clients to negotiate deals, contracts, policies and other agreements as a service provider (excluding traveling salespersons)

• Providing advice as a financial advisor if it is not in contraven tion of the 14 Investment Business Act 2003 and related regula tions

• Work lasting not greater than seven days for the following if the services of such business visitors do not extend to clients of the Bermuda business and the training is for a specific, one-off purpose:

— Journalists, models or photographers on an assignment for an international publication or for international electronic media

— Religious officials providing services to a private wedding party

— Advisors, consultants, trainers and troubleshooters, provid ed that they are employed abroad, directly by the same company (or group of companies) to which the Bermuda client belongs

• Interpreters or translators who are existing employees of an overseas organization and who are accompanying the business visitors

• Certified installers of equipment or software entering Bermuda to deploy, troubleshoot or debug and/or enhance their products for a Bermuda company whose purchase agreement includes installation and maintenance

• Fine artists creating works of art who intends to sell paintings of Bermuda abroad

• Sports professionals or professional teams who will be partici pating in a tournament or sporting event (provided they are not compensated by a person or entity resident in Bermuda)

• Lawyers, their clients, witnesses, experts and administrative support professionals visiting Bermuda in connection with international dispute resolution and/or preparation for and par ticipation in international arbitration proceedings

• Lawyers visiting Bermuda to participate in insurance claimsrelated meetings (including mediations and other settlement meetings) involving insurance policies issued to policyholders located outside Bermuda and governed by laws other than the laws of Bermuda

G. Work permits

Standard Work Permit. All persons must obtain specific permis sion by or on behalf of the Minister of Home Affairs responsible for immigration if they are to engage in gainful occupation in Bermuda, unless they are the following:

• A Bermudian

• A spouse of a Bermudian

• A widow or widower of Bermudian

• A permanent resident

For the purposes of the discussion below, these persons are referred to as “Bermudians.”

Prior to making an application for a Standard Work Permit in an open job category, employers must demonstrate that they have made a bona fide attempt to recruit a suitably qualified Bermudian. This includes advertising the role three consecutive times over a period of eight days in a local newspaper as well as a minimum of eight consecutive days on the Bermuda Government Job Board. Employers must disclose to the Department of Immigration the results of such recruitment efforts through the Recruitment Disclosure Form. This form should outline the pub lication dates of the advertisement, each applicant’s contact details and the assessment details for each. Employers are required to inform all unsuccessful Bermudian applicants of the outcome of their applications before submitting work permit applications to the Department of Immigration. If no qualified and interested Bermudians are available, the employer may apply for a work permit to employ a non-Bermudian unless the position is in a closed category.

Advertisements must include the following:

• Title of the job.

• Telephone number and mailing address of the employer.

• Minimum qualifications and experience.

• Brief description of the job to be filled, which should be con sistent with the normal functions associated with the job. An advertisement is invalid if it contains a job description that appears to be tailor-made to fit a particular existing or potential work permit holder.

• Deadline for application.

Unless special circumstances exist, the Department of Immigration imposes the same advertisement requirements for work permit renewals. The work permit application must be submitted within three months of the date on which the position was last advertised.

Work permit applications must be made in writing by the employer and addressed to the Chief Immigration Officer at the Department of Immigration.

With respect to international companies, the following exemp tions to policies that govern domestic companies are in effect:

• Exempt companies are not generally required to advertise for the appointment of a new chief executive officer unless, in the opinion of the Minister of Labour, a special reason exists for doing so.

• Exempt companies are not generally required to advertise the job of an incumbent chief executive officer on expiration of his or her work permit unless, in the minister’s opinion, a special reason exists for doing so.

These exemptions are granted at the discretion of the Chief Immigration Officer and must be requested in writing.

Special category work permits

Global Work Permit. A Global Work Permit allows a person who is already employed by a global company in another jurisdiction to transfer to the Bermuda office without the requirement to advertise the position. The employee must occupy a senior posi tion within the company. To qualify for the Global Work Permit, the following conditions must be satisfied:

• The company must demonstrate that the Global Work Permit holder is not being transferred to fill a vacancy or a pre-existing position in Bermuda.

• The company must demonstrate that the employee has been employed within the organization for at least one year before transferring to the Bermuda office or provide specific reasons for transferring an employee with less than one year of service.

In addition, a Global Work Permit is automatically approved for an individual who earns at least BMD125,000 per year. Applicants earning less than BMD125,000 a year are considered on a case-bycase basis, and approval depends substantially on demonstrating that the addition of the Global Work Permit holder will add value to Bermuda.

A Global Work Permit is not available for positions listed in closed or restricted categories. At the end of the Global Work Permit term, the employer must advertise the position in the normal manner (Section 3.2 of the Immigration Policy Document).

Periodic Work Permit. A Periodic Work Permit is used by employ ers seeking to hire nonresident individuals who will make multiple visits to Bermuda over a period of time, staying no more than 30 days for each visit. The following are key aspects for the issu ance of a Periodic Work Permit:

• Advertising for a Periodic Work Permit is not required.

• Periodic Work Permits may be granted for periods of one, two, three, four or five years.

• After arrival, if the holder of a Periodic Work Permit requires a stay longer than 30 days, the employer can apply for an exten sion of up to 30 more days.

• The Periodic Work Permit holder cannot be in Bermuda for more than a total of 180 days per calendar year.

New Business Work Permit. A New Business Work Permit allows an exempt company that is new to Bermuda to receive up to five work permits for overseas recruits for senior positions within the first six months of obtaining the first new business work permit.

Advertising the positions is not necessary. New Business Work Permit holders may be employed in any job category if their position is not an entry-level position, a graduate position, a trainee position or in the closed/restricted category. At the end of the New Business Work Permit term, the employer must advertise the posi tion as noted above under Standard Work Permit

Short Term Work Permit. Short Term Work Permits are issued at the request of employers who want to employ individuals to work for periods of up to six months. Applications are accepted for terms of up to three, four, five or six months. At the conclusion of the term of the Short Term Work Permit, the holder is expected to leave Bermuda, unless an extension is sought within the proper processing period. An employer must write to the Department of Immigration justifying the issuance of the Short Term Work Permit (and subsequent extension, if applicable). The Department of Immigration must then ensure that no Bermudian is available who can perform the task.

Global Entrepreneur Work Permit. A Global Entrepreneur Work Permit is issued for a one-year period for an individual to work and reside in Bermuda with respect to an exempted company or Section 114B startups.

Work activities may include the following:

• Business planning

• Seeking appropriate government or regulatory approval(s)

• Meeting compliance

• Financial requirements

• Raising capital

To apply for a Global Entrepreneur Work Permit, a letter of appli cation must be sent to the Department of Immigration justifying the request, together with a letter from a Bermudian or Bermuda business services company verifying the intent of the applicant and a completed form.

The Minister of Home Affairs grants a permit if the Minister is satisfied that the applicant is a bona fide investor or businessperson that is likely to domicile a company in Bermuda.

Fintech Business Work Permit. A Fintech Business Work Permit allows a Fintech company that is new to Bermuda to receive automatic approval of up to five Fintech Business Work Permits for the first six months of obtaining the first new Fintech Business Work Permit. There is no need to advertise the posi tions. Fintech Business Work Permits are issued for one, two, three, four or five years. The fees for Fintech Business Work Permits are the same as the fees for Global Work Permits.

Letter of Permission. A Letter of Permission may be granted to a not-for-profit organization, a registered charity or religious insti tution for an individual, such as a coach or teacher of sports, clergy, a speaker or a musician or entertainer, regardless of whether the individual is being remunerated.

Such a person is given permission to stay for 30 days at the time the application is made. After landing, a Visitor’s Extension may be granted (after applying and paying the required fee) as long as

the total stay does not exceed 60 days. If a stay longer than 60 days is required, a work permit should be applied for.

Landing Permit. Landing Permits are issued to assist work permit holders who have a need to travel during the period of time dur ing which a new work permit is being processed.

A Landing Permit provides proof that the work permit holder has a right of residence in Bermuda, and allows the work permit holder to be appropriately landed on return to Bermuda.

In all cases, although the application has been submitted, there is no decision on the work permit at the time of travel.

Emergency Permit. For emergency cases, employers should con tact their respective department representative by phone to dis cuss the emergency request and to obtain instructions, and later submit in writing the particulars of the situation by way of a letter justifying the request for emergency service.

Processing times and fees. The following are the processing times and fees for the various types of work permits.

Type Time frame*

Standard 20 business days

Periodic 10 business days

Fees

BMD966 to BMD6,200

BMD966 to BMD6,200

Short-term 10 business days BMD672 to BMD1,019

Global 10 business days

BMD1,863 to BMD7,103

New Business 10 business days BMD1,863 to BMD7,103

Global Entrepreneur 10 business days

Fintech 10 business days

Letter of Permission 10 business days

Landing 5 business days

BMD1,863

BMD1,863 to BMD7,103

BMD116 to BMD580

BMD37 to BMD252

Emergency 48 hours (decision only) Depends on situation

* Assuming a complete application

Repatriation. In cases in which permission to work has expired and persons are required to leave Bermuda, the Department of Immigration allows 90 days to close off personal residency arrangements. If more time is required, a written request must be submitted to the department including justification for the addi tional time. If an agreement between the employer and the work permit holder provides that the work permit holder must leave Bermuda and/or vacate accommodation in a period of time less than the time frame specified above, the time frame agreed between the employer and the work permit holder prevails. Section 1.13 of the Immigration Policy Document provides that “when extensions of time are granted by the department that exceed the time period agreed with the employer to remain in Bermuda, the

department may require funds for the work permit holder and sponsored dependents (if any) for their repatriation to their country of origin to be deposited with the Chief Immigration Officer pur suant to Section 130 of the Act. Persons who wish to seek alterna tive employment may request permission from the Department to do so.”

Self-employment. Non-Bermudians are normally not permitted to be self-employed in Bermuda.

People who possess Spouses’ Employment Rights Certificates (SERCs) may be self-employed at the discretion of the Minister of Labour. Policies governing self-employment apply to local companies only. Exempt companies may be owned and managed by non-Bermudians.

H. Residence permits

A Residential Certificate gives a retired individual the right to enter and live indefinitely in Bermuda. Holders of this certificate may not undertake employment in Bermuda or elsewhere.

The right to enter or live in Bermuda granted by a Residential Certificate does not extend to the holder’s dependents other than the spouse, who may apply for and receive a certificate that runs concurrently with his or her spouse’s certificate. Other dependents must obtain permission in their own right to enter and reside in Bermuda. Residential Certificate holders may acquire property in Bermuda if its annual rental value exceeds the minimum value for sale to non-Bermudians at the time of purchase.

Eligibility. The following groups of people are eligible to apply for Residential Certificates:

• Group A: Those owning residential property in Bermuda, including the leasehold of condominiums as well as the free hold of houses

• Group B: Those who have been gainfully employed in Bermuda for at least five years

In addition, to be eligible to apply for a Residential Certificate, an applicant must satisfy the following conditions:

• He or she must be retired.

• He or she must be over 50 years of age.

• He or she must have no more than two dependent children on arrival in Bermuda to take up residence.

• He or she must have substantial means (determined on a caseby-case basis).

• He or she must have good character.

Method of application. In general, a non-Bermudian wishing to apply for a Residential Certificate must submit to the Depart ment of Immigration a completed application form.

Fees. No fee is charged for the grant of a Residential Certificate to a Group A applicant because these individuals have already paid substantial fees to the government to acquire property. Group B applicants must pay the appropriate fee set out in the Government Fees Regulations.

Revocation. The Minister of Home Affairs may revoke a Residential Certificate if the holder’s circumstances change (for

example, if a person qualified on the basis of owning residential property sells the property). The minister may also revoke a certificate at his or her discretion at any time.

Restriction on renting property. Residential Certificate holders are not permitted to rent out their residential property for extended periods. Certificate holders may, however, obtain permission from the Minister of Home Affairs to rent their property for short peri ods while they are abroad.

I. Family and personal considerations

Spouses. Spouses of Bermudians may compete for jobs on equal footing with Bermudians. Among the benefits granted to spouses are the following:

• Prospective employers are not required to advertise the jobs in question.

• Although non-Bermudians are normally barred from being selfemployed, the Minister of Labour may approve self-employment for a spouse at the minister’s discretion. Each case is considered on its own merits.

• A spouse may change jobs as often as he or she likes.

Applications are submitted to the Bermudian Status Section of the Department of Immigration.

Dependent children. A dependent child older than 16 years of age of non-Bermudian work permit holders may work with the per mission of the Minister of Home Affairs. The dependent child’s work permit may extend beyond the termination date of the work permit of the parent who is the supporting work permit holder. However, work permits are granted to dependent children on the condition that if the supporting work permit holder’s permit is not renewed, then the dependent’s work permit becomes void imme diately. A dependent who has his or her own work permit may not have his or her name placed on a parent’s confirmation of employment or re-entry letter. Dependent children, on attaining 18 years of age (25 years of age if in college), require permission in their own right to work and reside in Bermuda.

Dependents who wish to remain in Bermuda after the primary work permit holder has left Bermuda require special permission. If the dependent is a work permit holder, the case is determined on its merit. If the dependent is not a work permit holder, he or she is expected to leave Bermuda with the primary work permit holder.

Sponsored dependents residing in Bermuda. Sponsored depen dents of the work permit holder may be given permission to reside with the work permit holder and seek employment provided that the sponsor submits proof of financial support for the sponsored dependents. Proof is a bank reference and evidence of medical coverage. The Department reserves the right to require further proof if required to assess the ability of the sponsor to support the sponsored dependents.

The following are the required salary levels for sponsors:

• Two-person household: salary level of BMD60,000 per year

• Three-person household: salary level of BMD100,000 per year

• Four-or-more-person household: salary level of BMD125,000 per year

English-speaking policy. Persons coming to work in Bermuda under the Portuguese Accord as well as those employed in the construction industry are required to have a working knowledge of the English language. In cases where English language skills are questionable, the person will be landed for seven days and may be required to undergo testing by the Department. Failure may result in the person being asked to leave Bermuda.

Penalties. Section 1.6 of the Immigration Policy Document pro vides that “Section 71A of the Bermuda Immigration and Protection Amendment (No. 2) Act 2013 empowers the Chief Immigration Officer to impose civil penalties of up to BMD10,000 on employers who abuse immigration policy. Employers and employees should review the Act to ensure they understand the consequence of making untruthful applications.”