Corporate tax in Bermuda

Summary

Corporate Income Tax Rate (%) 0
Capital Gains Tax Rate (%) 0
Branch Tax Rate (%) 0
Withholding Tax (%) 0

Taxes on corporate income and gains

Bermuda does not impose income, withholding or capital gains taxes.

Fees and payroll 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 of company

Exceeding
BMD
Not exceeding
BMD
Annual fee BMD
0 12,000 1,995
12,000 120,000 4,070
120,000 1,200,000 6,275
1,200,000 12,000,000 8,360
12,000,000 100,000,000 10,455
100,000,000 500,000,000 18,670
500,000,000 31,120

 

Certain types of entities are not subject to the annual fee described above. These entities are required to pay the following annual fees.

Entity Annual fee (BMD)
Overseas (Permit) company whose principal
Business is:
Finance, insurance or operation of an open-end mutual fund 4125
Any other business 1995
Exempt company parent of a wholly owned exempted company carrying on insurance business 1995
Unit trust management company 2905
Exempted and overseas partnerships 2235
Segregated accounts companies 280

Payroll taxes. Payroll tax is imposed on the total value of cash and benefits paid to employees for services rendered during the tax period. Graduated rates are imposed according to, in general, the annual payroll level of the taxpayer. Employers may withhold up to 5.5% of an employee’s remuneration to pay the payroll tax.

The following are the payroll tax rates:

  • A 14.5% rate applies to taxpayers with an annual payroll of greater than BMD1 million and to exempt undertakings.
  • A 13.25% rate applies to taxpayers with an annual payroll of greater than BMD500,000 and up to BMD1 million.
  • An 11.25% rate applies to taxpayers with an annual payroll of at least BMD200,000 and up to BMD500,000.
  • A 10.25% rate applies to taxpayers operating a hotel or restau­rant with an annual payroll of BMD200,000 or greater.
  • An 8.25% rate applies to remuneration paid to employees in special situations. These are persons on jury duty or on duty with the Bermuda Regiment or Bermuda Volunteer Reserve, and hotel employees in November, December, January, February or March.
  • A 7.75% rate applies to the Bermuda Hospitals Board and the corporations of Hamilton and St. George’s.
  • A 7.25% rate applies generally to employers with an annual payroll of less than BMD200,000, self-employed persons carry­ing on business as taxi drivers, fishermen, farmers or horticul­turists and educational, sporting or scientific institutions, asso­ciations or societies that, in the Minister of Finance’s opinion, are operated for purposes other than for the purpose of gain by the entity’s individual members.
  • A 5.5% rate applies to the government and various gov ern ment agencies, registered charities, religious and cultural organiza­tions, the Bermuda Festival Ltd. and employers who establish a business that is located in an Economic Empowerment Zone (designated under Section 2A of the Economic Develop ment Act 1968) and that are registered by the Bermuda Small Busi­ness Development Corporation under Section 4(1)(c) of the Bermuda Small Business Development Corporation Act 1980. However, such employers may not be chargeable to tax at the 5.5% rate for a period exceeding nine tax periods beginning in and including the tax period in which the business is established.

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

Taxpayers must report actual remuneration up to a maximum annual remuneration of BMD750,000 per employee. However, taxpayers paying at the rates of 10.25%, 11.25%, 13.25% or 14.5% are allowed a quarterly reduction in remuneration of BMD600 per employee if the employee is on the payroll at the end of the tax period and if the employee has worked for the employer for a minimum of 180 hours during the relevant quarter.

Social security. All employers and employees must contribute to the national insurance scheme. The social insurance contribution rate is BMD64.14 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, BMD160.35 is generally deducted from each employee’s monthly paycheck in a five-week month and BMD128.28 is deducted from each employee’s monthly pay­check 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 BMD291. The govern­ment fee for registering a memorandum of association is BMD86.

Stamp duty

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

Conveyance or transfer on sale of land or property. 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%

For non-Bermuda property, the rate is 1%.

Lease or agreement for lease. If property is granted in consider­ation for rent, the following are the amounts of stamp duty:

Monthly amount of value in rent (BMD) Stamp duty (BMD)
Under 1,200 75
1,200 or more but under 1,500 100
1,500 or more but under 2,500 150
2,500 or more but under 3,500 200
3,500 or more but under 5,000 300
5,000 or more 400

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 con­trolled by Bermudians. Because this type of company is usually formed for the benefit of residents of Bermuda, the local compa­nies may transact business worldwide or in Bermuda only.

Exempted companies. An exempted company is the most common 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 business 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 companies. Permit 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 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 under­taking 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 BMD179 is paid.

Foreign-exchange controls. Exempted companies and permit com­panies are designated as nonresident for exchange control pur­poses. 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 ex change controls apply to Bermuda residents and to local companies. No capital or exchange control regulations apply to nonresidents.

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.