Bermuda: Domestic Corporate Taxation
Under the Payroll Tax Act 1995 and later legislation, Bermudan employers have traditionally had to pay a tax of 12.75% of payroll; in the case of 'local' companies or partnerships, ie those with 60% Bermudan ownership, this is calculated on the actual payroll cost; in the case of exempt or permit companies or partnerships, ie those with foreign ownership, there is a choice between paying 12.75% on actual salaries like local companies, or paying the 12.75% on a notional amount of BMD66,000 per employee, when it amounts to BMD7,920 per employee per year. (See Types of Company for descriptions of the different types of company.)
Employers have also been able to recover 4.5% of the payroll tax from employees (on their actual salary, not the notional amount).
In the 2008/9 budget, the standard rate of payroll tax was raised to 14%, for businesses with annual payrolls of BMD1 million or more. The payroll tax salary cap, which was raised from BMD225,000 to BMD235,000 in 2004/5, and to BMD350,000 in 2007/8, was left on hold in the 2008/9 budget. In the 2009/10 budget, the salary cap was raised to BMD750,000 and the tax raised by two percentage points to 16%.
In an attempt to stimulate Bermuda's economy the tax rate was rolled back to 14% in the 2011/12 budget, keeping the salary cap at BMD750,000.
The 2011 rates are as follows:
- 14.00% applicable to: Taxpayers with an annual payroll greater than BMD1m and exempt undertakings.
- 12.75% applicable to: Taxpayers with an annual payroll greater than BMD500,000 and up to BMD1m.
- 10.75% applicable to: Taxpayers with an annual payroll between BMD200,000 and BMD500,000.
- 9.75% applicable to: Taxpayers operating an hotel or restaurant with an annual payroll of BMD200,000 or greater.
- 7.75% applicable to: Remuneration paid to employees in special situations, e.g. persons on jury duty or on duty with the Bermuda Regiment or Bermuda Volunteer Reserve, persons employed as farmers, fishermen or horticulturists and hotel employees in December, January or February.
- 7.25% applicable to: Employers and self-employed persons with an annual payroll of less than BMD200,000, educational, sporting, or scientific institutions or societies, taxi drivers, farmers, fishermen and horticulturists, the Bermuda Hospitals Board and the Corporations of Hamilton and St. George’s.
- 5.25% applicable to: The Government, Parish Councils, Government Boards, the Bermuda College, approved schools, registered charities, religious and cultural organizations and the Bermuda Festival Ltd.
Under the Acts, taxable remuneration is defined to include various benefits, including pension contributions, rental value, profit-sharing, stock option gains, etc.
Taxpayers paying the top three rates of payroll tax and those operating an hotel or restaurant are entitled to Special Relief. Taxpayers in this category are entitled to a deduction from total remuneration paid during the tax period. This deduction is equal to BMD600.00 per employee per quarter.
The qualifying criteria are that the employee must be on the payroll at the end of the tax period and must have worked for the employer for a minimum of 180 hours in that quarter. However, the amount of Payroll Tax payable by any such employer in respect of an employee whose remuneration is subject to the Special Relief, cannot be less than 5.25% of gross remuneration. Self-employed persons and deemed employees are not eligible for Special Relief.
'Employer' means anyone, company or individual, who employs another person; however, there are reduced rates for employers with a payroll below BMD100,000 annually. Just about enough to have a part-time gardener in Bermuda.