Value-added tax (VAT)
There is no VAT or sales tax in Bermuda.
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%.
There are no excise taxes imposed in Bermuda.
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 progressive scale of tax rates ranges between 0.60% and 23.00% based on the ARV of the unit, while commercial properties are taxed at a single rate of tax of 5.50%.
There is no transfer tax imposed in Bermuda.
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.
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 now ‘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. International businesses, which normally register as exempted undertakings, are liable by the employer category only at a rate of 10.25% of total employee remuneration of any kind. There is an employer portion exception for new Bermudian hires, among other special situations.
|Annual payroll (BMD)
|Less than 200,000
|200,000 to 500,000
|500,000 to 1 million
|Greater than 1 million and exempted undertakings
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 900,000, 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.
An employer may retain up to 6% of the payroll tax from an employee’s remuneration until the period ending 30 June 2017. This provision was put in place to provide additional time for employers to update their processes to the new progressive payroll tax that is imposed upon the employee.
Effective 1 July 2017, the employee portion of the payroll tax will be calculated using a marginal tax rate structure as follows:
|Annual remuneration (BMD)
|Less than or equal to 48,000
|48,001 to 96,000
|96,001 to 235,000
|235,001 and above
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 750,000 to BMD 900,000.
Additionally, as the new payroll tax structure now imposes a portion of the tax upon the employee, we believe any portion of the employee payroll tax that is paid by the employer is considered additional remuneration subject to payroll tax.
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 64.14. The employer portion is BMD 32.07 and the employee portion is BMD 32.07. This rate has not risen since 2013.
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. A mutual company is defined as an insurance or re-insurance company. The current rate schedule, which has not changed since 2008, is:
|Assessable capital of the exempted company (BMD)
||Annual company fee (BMD)
|0 to 12,000
|12,001 to 120,000
|120,001 to 1,200,000
|1,200,001 to 12,000,000
|12,000,001 to 100,000,000
|100,000,001 to 500,000,000
|500,000,001 or more
Annual partnership fee
Exempted partnership fees are due on registration and annually in January thereafter. This fee is set at BMD 2,235 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.
Foreign Currency Purchase Tax
Foreign Currency Purchase Tax is imposed at the rate of 1% on foreign currency purchased by a resident from a local bank. See Foreign exchange controls in the Other issues section for exemption information.