Possible introduction of corporate income tax in Bermuda

The Government of Bermuda recently announced that it was conducting a series of two consultations regarding the possible introduction of corporate income tax that would apply to Bermuda businesses that are part of Multinational Enterprise Groups (“MNEs”) with annual revenue of €750M or more. The proposed corporate income tax would satisfy the Organization for Economic Cooperation and Development (“OECD”) Global Anti-Base Erosion (“GloBE”) Rules created as part of the OECD’s Pillar Two Tax Framework. The GloBE rules are intended to ensure that income earned by an MNE is subject to an effective tax rate of 15% in every jurisdiction in which the MNE operates. It is estimated that the proposed corporate income tax would apply to about 2,000 of the island’s 16,000 international companies.

The Government has issued a public consultation paper, Introduction of Corporate Income Tax in Bermuda, as part of the first consultation seeking public feedback by 8 September 2023 on high-level questions concerning the proposed corporate income tax. A second, more detailed consultation, considering specific aspects of the proposals such as how taxable income and creditable taxes are computed, to address detailed questions as to scope, and to address transitional matters is expected later this year. 

The public consultation paper states that the “Government of Bermuda will conduct further analysis to determine the appropriate corporate income tax rate, but currently believes a rate within a range of 9 to 15% may be appropriate to address the policy considerations”. The proposed corporate tax regime would not come into effect before 2025 and taxes paid under it would be those which would be payable to other jurisdictions under the global minimum tax framework. Certain tax credits which support Bermuda’s economic goals and maintain Bermuda’s global attractiveness are included. The public consultation paper also states that the Tax Reform Commission will examine the possibility of restructuring the island’s existing tax regimes. The restructuring would potentially involve offsets from other taxes, such as payroll taxes or import duties, in order to keep Bermuda economically competitive.  

Please contact Kennedys if you have any questions regarding the proposed corporate income tax or would like us to submit comments on your behalf.