An Overview of Tax Compliance in Bermuda
Bermuda is a British Overseas Territory. It is located in the North Atlantic Ocean and lies in the east of the United States. Bermuda is an attractive destination for overseas business as it has a favorable tax compliance environment. Having an overseas business in Bermuda reduces the tax burden as it has no corporate income tax, capital gains tax or withholding tax. Its strategic location along with several tax treaties entered by the government of Bermuda with other countries provides additional tax benefits to businesses. It has a stable political environment which makes it safe and secures to carry on business in Bermuda. Additionally, Bermuda provides high security and protection to businesses and individuals. It follows strict confidentiality laws protecting sensitive business data. It is best for businesses looking to protect their assets from potential litigation or creditors. Thus, the tax environment in Bermuda offers a range of benefits.
Tax Compliance in Bermuda
Every homeowner or long-term tenant in Bermuda is required to pay Land Tax twice every year. Land Tax becomes due in March and September on a date specified in the demand note issued by the Tax Commissioner. One is eligible to pay land tax if he/she/it is a:
- Sole proprietor of a property
- A life tenant of a property
- A leaseholder for a minimum of 3 years
- A periodic tenant of a property owned by the Government of Bermuda
One is exempted from Land tax in Bermuda only if one is 65 years old or more and occupies a private dwelling land. Annually an amount of $1941 is exempted. However, this exemption applies only if the annual rental value is up to $45,500. If the annual rental value is more than $45,500 then tax will be levied.
Financial Service Tax
Financial Service Tax is charged on the following financial service providers from 1st April 2019 onwards:
- Banks at the rate of 0.0075% on its consolidated gross assets at the end of tax period;
- Domestic insurers at the rate of 3.5% of gross premiums written in a the tax period, excluding premiums relating to health insurance;
- Money Service Business at the rate of 1% on aggregated outgoing money transmission volume in a tax period.
The Financial Service Tax period is filed quarterly, commencing from April- June. Every Financial Service provider is required to submit a return to the Office of the Tax Commissioner within 30 days from the end of every quarter. The Financial Service Tax Return shall specify the consolidated gross assets or gross premiums or aggregated outgoing money volume. But before filing the return, the Financial Service Provider has to register with the Office of the Tax Commissioner within 30 days after the coming into operation of Financial Services Tax 2017 or within 30 days after becoming a financial service provider. If a financial service provider fails to comply with the registration it shall be guilty of an offence, shall be liable for a fine not exceeding %1000.
Payroll Tax is a tax on all employers, self-employed persons, and deemed employees on the remuneration in business. This tax is levied under the Payroll Tax Act 1995 and the Payroll Tax Rates Act 1995. Payroll tax must be paid on the 15th day of the month succeeding the end of a quarter I.e., 15th January, 15th April, 15th July and 15th October every year. All exempted companies or companies with an annual remuneration of more than $200,000 must file Payroll Tax online at www.etax.gov.bm. Exemption from Payroll Tax in Bermuda is available for the following:
- A person under 16 years of age who is an employee or a person who is employed for less than 16 hours in each month of a tax period.
- Students on weekend or vacation employment and certain layoff allowances are excluded from taxable remuneration.
- Bermudian employees on training that have been approved by the National Training Board.
- Employees who care for a person with a physical/mental disability at that person's home.
- Employer contributions to approved pension, life insurance and health insurance schemes.
- All scheme applications must be accompanied by a Tax Status Certificate issued by the Office of Tax Commissioner within 30 days from the date of application. However, if the application is incomplete, it will not be processed.
Corporate Service Tax
A company or an individual providing corporate services to an exempt undertaking in Bermuda will have to pay a corporate service tax on the revenue earned at the rate of 7%. Individuals, companies, partnerships, associations or bodies of persons, whether incorporated or unincorporated, are required to pay Corporate Service Tax. The Corporate Service Tax Return must be filed within 15 days from the end of each calendar quarter.
Foreign Currency Purchase Tax
All foreign currency purchased by a resident of Bermuda from a local bank shall be subject to a 1.25% foreign currency purchase tax from 1st April 2019 onwards. The payment of Foreign Currency Purchase Tax becomes due at the end of each calendar quarter. If a bank fails to collect or remit any Foreign Currency Purchase Tax then a fine of up to $5000 or triple the amount of tax payable, whichever is greater, shall be imposed.
Stamp Duty on Legal Transactions
Stamp duty is paid for getting certain documents stamped. Stamped documents are produced for legal transactions and proceedings. Stamp Duty varies depending on type of document or transaction. From 1st April 2023 onwards, a charge of $212 shall be imposed by the Office of the Tax Commission for adjudicating each item.
Hotel Occupancy Tax
A Hotel Occupancy Tax is charged at the rate of 7.25% on all hotel owners in Bermuda under the Miscellaneous Taxes Act 1976 and Miscellaneous Taxes (rates) Act 1980. This tax is levied on all hotel owners under the Hotels Licensing and Control Act 1969. This tax is levied on the total charge levied to the guests for accommodation. For payment of this tax, the hotel must register within 7 days from the end of the month in which the hotel starts operating. Tax payments are due on the 15th day of the month succeeding the tax period. Exemption from payment of Hotel Occupancy Tax applies to Diplomats and Consular staff.
Timesharing Service Tax
This tax is charged on the managing agent of a timesharing property as a percentage of the membership, maintenance fee is charged in respect of the operational and maintenance costs of the timesharing scheme. Timesharing Service Tax is charged under Miscellaneous Taxes Act 1976 and Miscellaneous Taxes (Rates) Act 1980. This tax is paid monthly at the rate of 5%.
Timesharing Occupancy Tax
Timesharing Occupancy Tax is levied on the developing owner of a timesharing property. It is charged on the initial purchase and resale of each interval. It is charged at a rate of 10% and is payable within a specified period of the sale or resale of each timesharing interval. It is charged under Miscellaneous Taxes Act 1976 and Miscellaneous Taxes (Rates) Act 1980.
There are two types of Passenger taxes levied by the Office of the tax commissioner:
- Cruise Ship Passenger Departure Tax It is a fee administered by the Bermuda Tourism Authority under the Bermuda Tourism Authority Act 2013. Passenger Departure Tax applies to the owner, operator or agent of a vessel. Passenger Departure Tax return is filed within 7 days from the date of departure of the ship from Bermuda.
- Transport Infrastructure Tax Transport Infrastructure Tax is applicable in place of Large Ship Infrastructure Tax from 1st May 2020 onwards. Transport Infrastructure Tax is charged on the owner, operator or agent of a vessel by the Office of Tax Commissioner in respect of each visit by a passenger ship to Bermuda, where the ship is docked or is at anchor with a tender to the dockyard. Transport Infrastructure Tax return must be filed within 7 days from the departure of the ship from Bermuda.