Bermuda

Value-added tax (VAT)

There is no VAT or sales tax in Bermuda.

Customs duties

Customs import duties are imposed on almost all goods arriving on the island at varying rates. The most common rate of customs import duties is at 25%.

Excise taxes

There are no excise taxes imposed in Bermuda.

Property taxes

A land tax is imposed on all developed land in Bermuda, with exceptions for government land, Bermudian pensioner’s primary homesteads, and certain charitable organisations. The tax is based on an assessed annual rental value (ARV) of each valuation unit.

The land tax rates are as follows, effective 1 July 2019:

* Private dwellings ae subject to graduated land tax rates based on the ARV of the unit. 

Vacation rental tax and annual fee

Effective November 2018, the proprietor of a vacation rental unit or a holder of a vacation rental (rent control) certificate, or an agent acting on behalf of either, shall pay to the Bermuda tax authorities a vacation rental fee equal to 4.5% of the rack rate charge made by the proprietor in respect of the vacation rental unit.

Effective 1 September 2023, Bermuda imposes an annual rental property fee between 1,500 and 2,500 Bermudian dollars (BMD) based on the ARV of the property.

Transfer taxes

There is no transfer tax imposed in Bermuda.

Stamp taxes

Bermuda imposes stamp duty on a wide variety of legal instruments, such as transfers of property, deeds, and rental agreements. However, international businesses and partnerships ordinarily register as exempted companies and, as such, are not subject to stamp duty.

Payroll tax

Historically, the Bermuda payroll tax was imposed on the employer, and the employer had the right to recover up to a prescribed percentage of the payroll tax from its employees. Effective April 2017, the payroll tax is ‘split’ into being imposed upon the employer and the employee; however, the tax payment obligation remains with the employer.

Bermuda imposes a payroll tax on employers at a rate determined by the employer category or the total annual payroll as detailed below. Special rates may apply for certain businesses, such as farmers, fisherman, restaurants, hotels, and retailers. International businesses, which normally register as exempted undertakings, are liable for the employer category only at a rate of 10.25% of applicable employee remuneration of any kind. There is an employer portion exception for new Bermudian hires, among other special situations.

Employees include officers and directors of exempt companies if there is a contract for services and they regularly perform managerial functions on a day-to-day basis. However, a person who ordinarily works outside of Bermuda and whose period of employment in Bermuda does not exceed four consecutive weeks is exempt from payroll tax entirely. We note the application of these rules is complex; as such, we recommend you consult your tax adviser.

Remuneration is interpreted broadly and includes salaries and the value of employee benefits paid or given to an employee for services to the employer wholly or mainly in Bermuda. Specifically, employee benefits include, but are not limited to, fees, bonuses, leave pay, profit sharing, redundancy settlements, housing allowances, any positive difference between the fair market value of stock options and the option price as of the vesting date, and all other payments or value given from an employer to an employee. In case of dispute, the burden of proof is on the employer to prove that any payment or benefit from the employer to an employee was not compensation. For further guidance on the details of taxable remuneration, we recommend you consult your tax adviser.

The maximum taxable remuneration per employee is set at BMD 1 million, above which there is no liability for payroll tax.

Payroll tax is payable on a quarterly basis, commencing on the first day of April, July, October, and January. Payments are due within 15 days of the end of each tax period.

Effective 1 April 2023, a reduction in payroll tax was introduced for all workers earning less than BMD 48,000, with incremental increases being made to the payroll taxes in respect of the four remaining bands. As such, the employee portion of the payroll tax will be calculated using a marginal tax rate structure as follows:

As noted above, the obligation to remit payroll tax (in its entirety) remains with the employer. Additionally, the cap on total remuneration subject to payroll tax has been raised from BMD 900,000 to BMD 1 million as of 1 April 2023.

A payroll tax relief previously offered to hotels, bars, and restaurants as a result of the negative economic effects of COVID-19 has ended as of 31 March 2023. Tax returns must be submitted reflecting payment using the revised employer and employee portions of tax. There is a 5% rate of tax on the employer portion and regular rate for the employee portion as provided above for hotels and restaurants.

Social insurance

Bermuda’s contributory pension scheme requires employers to make monthly contributions to the Contributory Pensions Fund for every employee above 17 years of age for each week in which the employee works more than four hours. An employer must ensure that each qualifying employee registers with the department and obtains a social insurance number. Civil and criminal penalties may apply to employers for failure to register or pay in for each qualifying employee.

Employees contribute a matching sum via weekly payroll deduction, with several exceptions. Full-time students under the age of 26 who are employed during holidays, weekends, and summer breaks, and their employers, are entirely exempt from social insurance contributions. Employees over the age of 65 are exempt from contributing their half, although the employer must still contribute its part.

The current total contribution per employee per week is BMD 71.84. The employer portion is BMD 35.92 and the employee portion is BMD 35.92. Self-employed individuals must contribute the total BMD 71.84 contribution.

Annual company fee

Bermuda imposes an annual company fee, payable on registration and then every January thereafter. The assessable capital is defined as the total of the company’s authorised share capital and its share premium account or the company’s reserve account where the company is a mutual company. For an exempted company, the current rate schedule is:

Other annual fees apply to companies designated as a Foreign Sales Corporation (FSC), overseas permit companies, non-resident insurance undertakings (NRIU), and local companies. 

Annual partnership fee

Exempted partnership fees are due on registration and annually in January thereafter. This fee is set at BMD 2,350 per year. For an initial registration after 31 August, the fee is half the annual fee.

Corporate services tax

Bermuda imposes a 7% corporate services tax on the providers of corporate services on the gross revenue earned from exempted companies and partnerships. Corporate services are defined to include corporate administration, corporate management, corporate secretarial, the provision of a registered office, and accounting and financial services. Directors and resident representation services are subject to the tax where the provider is in the business of providing corporate services.

Banking, auditing, and managing an insurance company are not considered corporate services when determining corporate services tax.

Financial services tax

A financial services tax is charged on the following financial services providers at the following rates effective 1 April 2019:

• Banks: 0.0075% of consolidated gross assets.
• Domestic insurers: 3.5% of gross premiums written in a tax period, excluding premiums relating solely to health insurance and annuities.
• Money service businesses: 1% of aggregated outgoing money transmission volume in a tax period.

Financial service providers must submit a return and pay financial services tax quarterly within 30 days of each tax period. The tax periods end 30 June, 30 September, 31 December, and 31 March.

Foreign Currency Purchase Tax

Foreign Currency Purchase Tax is imposed at the rate of 1.25% on foreign currency purchased by a resident from a local bank. See Foreign exchange controls in the Other issues section for exemption information.