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%.
The 2018/19 Bermuda Budget reduced to 0% the duty tax for certain healthy foods. Furthermore, the most recent Budget proposes an increase to the scope of items subject to a 75% 'sugar tax' imposed on certain 'non-nutritive luxury' food items.
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.
Effective 1 July 2019, the progressive scale of tax rates ranges between 0.80% and 50.00% based on the ARV of the unit.
Although a temporary 5% increase in land taxes on commercial properties ends 30 June 2019, the 2019/20 Bermuda Budget includes a new general rate of 9.5% effective 1 July 2019. In addition, a new category has been introduced for tourist properties with a tax rate of 8%. The land tax on commercial properties in a designated Economic Empowerment Zone will remain at 7%.
Vacation rental tax
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.
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 ‘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 for 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)||Rate (%)|
|Less than 200,000||1.75|
|200,000 to 500,000||7.00|
|500,000 to 1 million||9.00|
|Greater than 1 million and exempted undertakings||10.25|
The 2020/21 Bermuda Budget created two new employer payroll bands between the annual payroll thresholds of $200,000 and $500,000 for small and medium sized businesses. The bands are as follows:
- Between $200,000 and $350,000 at a tax rate of 3.5%, and,
- Between $350,000 and $500,000 at a tax rate of 6.5%.
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.
Effective 1 April 2020, 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 three remaining bands. As such, the employee portion of the payroll tax will be calculated using a marginal tax rate structure as follows:
|Annual remuneration (BMD)||2020/21 rate (%)|
|Less than or equal to 48,000||2.00|
|48,001 to 96,000||8.50|
|96,001 to 235,000||9.00|
|235,001 and above||9.50|
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, the employer portion of payroll tax for all disabled employees has been eliminated, and an annual charge of BMD 1,000 to taxi operators to be settled upon registration has been implemented.
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.
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||1,995|
|12,001 to 120,000||4,070|
|120,001 to 1,200,000||6,275|
|1,200,001 to 12,000,000||8,360|
|12,000,001 to 100,000,000||10,455|
|100,000,001 to 500,000,000||18,670|
|500,000,001 or more||31,120|
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.
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 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 incoming and outgoing money transmission volume in a tax period.
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.