Compliances

Tax Compliance Services in Bermuda

Tax Compliance Services

Bermuda is a British Overseas Territory situated on the Bermuda archipelago in the North Atlantic Ocean and to the east of the United States. It is under the sovereignty of the UK responsible for defence and foreign relations. Bermuda has over 70,000 people, and its official language is English.

The Government of Bermuda is a parliamentary representative democratic dependency under the constitutional body. The Constitution of Bermuda provides for the self-government of the state. The authority is responsible for company registration and incorporation in Bermuda. The legislative framework is the Companies Act 1981[1].

Benefits of tax compliance services in Bermuda

Bermuda is a well-known place for international businesses due to its favourable tax compliance services, policies, procedures, solid legal system and strategic location. There are several benefits of company registration in Bermuda, including:

  • Minimise tax burden– Bermuda is known for its favourable tax compliance services, with no capital gains tax, corporate income tax, or withholding tax. This makes Bermuda a strategic location for companies seeking to minimise their tax burden. Additionally, Bermuda has signed several tax treaties with other countries, which can provide additional tax benefits to businesses.
  • Reliable political stability– Bermuda has a reliable political environment, making it a safe and secure business location. Bermuda is a significant business centre like New York, London and Toronto, making business more accessible. 
  • Minimalist shareholder requirement- As per the Companies Act of 1981, businesses need only one director and one shareholder for incorporation. LLCs need only one member and manager. In each case, this may be the same person.
  • Credibility- Bermuda is well known for being a strategic location for businesses with credibility and genuineness. Tax compliance services can provide several global financial institutions and bring talent and expertise. The jurisdiction educational system is modelled after the British system, which can provide businesses access to a workforce familiar with global business practices and standards.
  • Strong regulatory framework-The tax compliance services in Bermuda a backup from the World Bank. Therefore, it has a streamlined regulatory environment and efficient business infrastructure. The jurisdiction has a robust legal system and a well-developed regulatory framework, which can make it easier and cost-effective for businesses to set up and operate in Bermuda.
  • Flexibility- Bermuda tax compliance services offers a range of corporate structures, including exempted companies, limited liability companies, and partnerships. And also provide businesses with flexibility regarding their legal structure and tax planning.
  • Privacy- Bermuda tax compliance services provides high-security protection for businesses and individuals. The jurisdiction has strict confidentiality laws protecting businesses’ sensitive data and information. And also has strong assent protection laws, making it an attractive location for businesses looking to protect their assets from potential litigation or creditors.
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However, tax compliance services in Bermuda can offer businesses a range of benefits, including tax efficiency, access to talent, a robust legal system and regulatory framework, a reputation for being a well-regulated financial centre, and flexibility in legal structures and tax planning.

Tax compliance services in Bermuda

In Bermuda, the tax compliance services where individuals in Bermuda don’t pay personal income tax, but the Government of Bermuda levies a Payroll Tax.

  • Payroll Tax

Payroll Tax follows the law and procedure under the Act 1995, and it applies to all employers, deemed employees, and self-employed persons on the remuneration paid in their business.

Taxable remuneration includes wages/salaries and benefits paid in cash or kind to employees, self-employed persons, and deemed employees due to services provided in Bermuda. Remuneration is capped at USD 900,000 per annum per person and is taxed in the Employer and Employee portions. Foreign contractors and subcontractors in Bermuda also pay Payroll Tax.

  • Exemptions from Payroll Tax

The following persons are exempted from Payroll Tax in Bermuda:

  • An individual is not considered an employee if he is under 16 years old or employed by an employer for 16 hours or less each month of a tax period. The 16-hour rule does not apply to self-employed persons.
  • Students on weekends or vacation employment and specific lay-off allowances are excluded from payroll tax.
  • Payroll Tax is not charged for Bermudian employees on training schemes approved by the National Training Board of Bermuda.
  • There is no Payroll Tax for employees who care for a person with a physical or mental disability at that person’s home. To be eligible for this exemption, the Office of the Tax Commissioner reviews and processes the application for the Minister of Finance’s approval. A letter seeking the exemption is submitted to the Office of the Tax Commissioner together with the following information and supporting documents is required:
    • Name of the caregiver
    • Employment terms and conditions
    • Name of the person being taken care of
    • Duration of the employment
    • Work permit of the caregiver
    • A doctor’s certification is required for the patient’s illness or incapacity.
    • Employer contributions to pension, health insurance, and life insurance schemes are exempted from payroll tax.
  • Land Tax Compliance
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All residents and long-term tenants of Bermuda must pay Land Tax twice yearly. The following persons are required to pay the land tax:

  1. a life tenant in a property
  2. the sole proprietor of a property
  3. a leaseholder for three or more years
  4. a periodic (yearly or monthly) tenant of a property owned by the Government of Bermuda
  • Financial Services Tax (FST) compliances
  • Financial Services Tax (FST) is a tax charged on the following financial services providers with rates, and it is effective from April 1, 2019;
  • Banks with 0.0075% on its consolidated gross assets as at the end of a tax period;
  • Domestic insurers with 3.5% of gross premiums in a tax period, excluding premiums relating solely to health insurance and
  • Money service business with 1% on aggregated outgoing money transmission volume in a tax period.

The tax period is three calendar months with April, May and June. Every financial services tax provider chargeable to financial service tax is within 30 days after each tax period and after that, submit to the Office of the Tax Commissioner a tax return specifying the gross premiums, consolidated gross assets, or aggregated outgoing money volume and then pay the financial services tax due in respect of that tax period.

The financial service providers are also required to register the services with the Office of the Tax Commissioner within the following:

  • Thirty days after the commencement of the Financial Services Tax  Act 2017; or
  • Thirty days after becoming a financial services provider,

A financial services provider who fails, without reasonable excuse, to comply with registration is guilty of an offence and liable, on conviction by a court of summary jurisdiction, to a fine not exceeding USD 1,000.

  • Corporate Services Tax Compliances

Whether incorporated or not, any individual or company providing corporate services to an exempted undertaking in Bermuda must pay a 7% corporate services tax on the revenue earned. An exempted undertaking company is defined in the Companies Act 1981 and includes an exempted company, an exempted partnership company or a permit company.

Companies, individuals, partnerships, associations, or bodies of persons—incorporated or not- must pay the levied tax.

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Corporate services include the following:

  • Administrative services
  • Management services
  • Secretarial services
  • functioning as a director or resident representative of accounting and financial services
  • Banking, auditing, and insurance company management are not considered corporate services for the Corporate Service Tax.

Taxes for persons operating businesses in Bermuda

Businesses operating in Bermuda are required to pay Payroll Tax. And certain businesses pay additional taxes depending on the industry or service.

  • Betting duty

A betting duty of 20 % is charged on all bets made in Bermuda.

  • Corporate Services Tax

Any individual or company providing corporate services to an exempted company in Bermuda is required to pay a Corporate Services Tax.

  • Financial Services Tax
    • Banks- with 0.0075% of gross consolidated assets;
    • Domestic insurers – With 3.5% of non-health related gross premiums written
    • Money Service Business – With 1% on aggregated outgoing transmission volume.
  • Foreign Currency Purchase Tax

All residents of Bermuda purchases from a local bank are subject to a 1.25% per cent tax.

  • Hotel Occupancy Tax

A Hotel Occupancy Tax is 7.25% charged to all hotel owners in Bermuda.

  • Land Tax

All residents of Bermuda and long-term tenants must pay Land Tax twice yearly. The following persons are required to pay the land tax:

  • a life tenant in a property
  • the sole proprietor of a property
  • a leaseholder for three or more years
  • a periodic (yearly or monthly) tenant of a property owned by the Government of Bermuda
  • Passenger Taxes in Bermuda

Taxes are charged to all passengers departing, arriving from, or to Bermuda on ships, aircraft, or private vessels.

  • Stamp Duty Tax

Individuals or businesses must pay a duty to get certain official documents stamped.

  • Timesharing Taxes

Persons operating timeshare properties are subject to Timesharing Services Tax and Timesharing Occupancy Tax.

These providers can help businesses to prepare and file tax returns, manage payroll taxes and ensure compliance with other tax and regulatory requirements. They can also provide guidance and advice on tax planning and structuring and help businesses to optimise their tax position while ensuring compliance with local laws and regulations.

Conclusion

In conclusion, tax compliance services in Bermuda are essential for businesses operating in the jurisdiction. Bermuda offers a tax-efficient jurisdiction; businesses are subject to various tax and regulatory obligations. These include filing annual tax returns, paying payroll tax, complying with transfer pricing regulations, and complying with anti-money laundering regulations and Economic Substance Regulations.

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