Hamilton GMT -4
address:
Box HM 463
HMBX
address:
Bermudiana Road
HM08
Principal Tax Contacts
Bailey
Jaison Hinshaw
A. At a glance
Corporate Income Tax Rate
Gains Tax Rate
Tax Rate
Tax
(441)
B. Taxes on corporate income and gains
Bermuda does not impose income, withholding or capital gains taxes.
C. Fees and other taxes
Annual fee. An annual government fee, based on the assessable capital, is imposed on companies. The following is a schedule of the fees for exempted companies (see Section D).
Capital
company
Certain types of entities
These entities
not subject to the annual fee described
required
Entity
Overseas (Permit)
business is
pay the following annual fees.
fee (BMD)
insurance or operation of an
mutual
other business
Entity Annual fee (BMD)
Overseas (Permit) company with a physical presence in Bermuda 2,095 Overseas (Permit) company that does not have a physical presence in Bermuda whose principal business falls within one of the specified categories 2,095
Unit trust management company 3,050
Exempted and overseas partnerships 2,350 Segregated accounts companies 295
Payroll tax. Payroll tax is imposed on all employers on the remu neration paid in their business. Taxable remuneration equals the sum of wages, salaries and benefits paid in cash or in kind to employees for services rendered during the tax period.
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 tax cap on gross earnings from BMD750,000 to BMD900,000, effective from 1 April 2017. It also changed the structure of the 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 employers remain responsible for the payment of both por tions. However, they have the option of deducting the employee portion from employee remuneration in full or in part.
The employers are 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 BMD500,001 to BMD1 million: 9%
• Annual payroll from BMD200,000 to BMD500,000: 7%
• Annual payroll less than BMD200,000: 1.75%
Effective from 1 April 2017, 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 em ployee portions) to the Office of the Tax Commissioner still rests with the employers.
Effective from 1 April 2020, the employee portion is calculated using the following marginal tax rate structure:
• On the first BMD48,000 of annual payroll: 2%
• On the next BMD48,000: 8.5%
• On the next BMD139,000: 9%
• Thereafter: 9.5%
Items exempt from the payroll tax base include employers’ contributions to social insurance, the Hospital Insurance Plan, approved retirement plans, hospital and health schemes, life insurance schemes, and workers’ compensation schemes.
Social security. All employers and employees must contribute to the national insurance scheme. The social insurance contribution rate is BMD71.84 per employee per week (based on a 52-week year). The cost is typically shared equally between the employee and the employer. As a result, BMD179.60 is generally deducted from each employee’s monthly paycheck in a five-week month and BMD143.68 is deducted from each employee’s monthly pay check in a four-week month. This amount, together with the em ployer’s matching contribution, is remitted to the Bermuda Social Insurance Department.
Incorporation fees. The Bermuda Monetary Authority charge for an application to register a company is BMD305. The government fee for registering a memorandum of association is BMD90.
Financial Services Tax. Effective from 1 April 2017, Financial Services Tax (FST) is imposed on the following financial ser vices providers:
• Banks: 0.005% on consolidated gross assets at the end of a tax period
• Domestic insurers: 2.5% of gross premiums written in a tax period, excluding premiums relating solely to health insurance
• Money service businesses: 1% of aggregated income and out going money transmission volume in a tax period
For purposes of the FST, the tax period is each period of three calendar months beginning with the months of April, May and June 2017.
Every financial services provider subject to FST must within 30 days after the end of each tax period submit to the Office of the Tax Commissioner a return specifying the consolidated gross assets, gross premiums or aggregated income, and outgoing money transmission volume and pay the FST due with respect to that tax period.
General Services Tax. Under a proposal, a General Services Tax (GST) would be levied on turnover from the provision of most services by service providers to the public. It is proposed that the GST would be levied at a rate of 5%. This proposed tax would not be implemented until 1 April 2019, at the earliest. Notable excep tions to the GST would be in the sectors of banking, insurance and health care. Small service providers would also be exempt from GST.
D. Stamp duty
Stamp duty is charged on various legal instruments, including those detailed below.
Conveyance or transfer on sale of land or property. The follow ing 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%
For non-Bermuda property, the rate is 1%.
Lease or agreement for lease. The following are the amounts of stamp duty for a term lease:
• Term of up to three years: 1% of the aggregate rent
• Term of more than three years: 1% of the aggregate rent pay able for the first three years of the lease, plus 0.5% of the aggregate rent payable for any additional period beyond three years
E. Miscellaneous matters
Types of companies. The limited liability company is the most common form of business entity in Bermuda. Limited liability companies may be local, exempted or permit, as described below.
Local companies. Local companies are required to have at least 60% of their issued share capital beneficially owned and con trolled by Bermudians. Because this type of company is usually formed for the benefit of residents of Bermuda, the local compa nies may transact business worldwide or in Bermuda only.
Exempted companies. An exempted company is the most com mon form used by international businesses to transact business from Bermuda. Exempted companies are exempted from the requirement imposed on local companies that at least 60% of the equity be owned and controlled by Bermudians, as provided for by the Companies Act of 1981. In general, exempted companies may not compete with local companies in the Bermuda market nor own real estate in Bermuda. However, they may carry on busi ness outside Bermuda or with other exempted undertakings in Bermuda. Examples of exempted companies include investment holding companies, trading companies, mutual fund companies, insurance companies and foreign sales corporations.
Permit overseas companies. Permit overseas companies are companies incorporated in jurisdictions other than Bermuda, but have a permit to transact business from Bermuda. Permits are obtained through a license granted by the Ministry of Finance. An example of a permit overseas company is a ship-owning company that is incorporated and has ships registered in another country, but by permit conducts business from Bermuda.
Exempted Undertakings Tax Protection Act, 1966. Under the Exempted Undertakings Tax Protection Act, 1966, as amended, all exempted undertakings in Bermuda, such as exempted and permit companies, partnerships and unit trusts, may apply for an under taking by the government that taxation introduced in Bermuda will not apply to the exempted company until 28 March 2016. Under a recent amendment to this act, the assurance of tax-neutrality is extended from 28 March 2016 until 31 March
2035 if proper application is made with the Registrar of Companies and if a fee of BMD160 is paid.
Foreign-exchange controls. Exempted companies and permit com panies are designated as nonresident for exchange control pur poses. The nonresident designation allows these entities to operate free of exchange control regulations and enables them, without reference to the Bermuda Monetary Authority, to make payments of dividends, distribute capital, open and maintain foreign bank accounts, maintain bank accounts in any currency and purchase securities. However, the issuance and transfer of shares and the change of beneficial ownership of shares in a Bermuda exempted company must be approved by the Bermuda Monetary Authority. The remittance and repatriation of funds by exempted companies and permit companies are not subject to exchange controls. Similarly, trust settlements on behalf of nonresidents are generally free from exchange controls. Under the Exchange Control Act 1972 and the Exchange Control Regulations 1973, certain exchange controls apply to Bermuda residents and to local com panies. No capital or exchange control regulations apply to non residents.
The Bermuda dollar (BMD) is pegged to the US dollar at an equal exchange rate, and the two currencies are used interchangeably in Bermuda.
The Bermuda-dollar accounts of residents and local companies are subject to a 1% tax on the purchase of a foreign currency.
Transfer of shares. Although the consent of the Bermuda Monetary Authority is ordinarily required for the issue or transfer of any share or security, blanket permission for share issues and transfers may be granted, such as for publicly traded securities.