Bermuda: Domestic Corporate Taxation

In Bermuda there are no taxes on profits, dividends or income; there is no capital gains tax, no withholding tax and no sales tax. The main tax impinging on companies is payroll tax. See Types of Company for details of annual fees payable depending on status.

When the European Savings Tax Directive came into effect in 2005, most offshore dependent territories of the UK and other EU member states rolled over and accepted the necessity of implementing a withholding tax on savings interest payments to EU residents. Bermuda, however, appears to have escaped the worst.

Bermuda Payroll Taxes

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 2004/2005 financial year, the 12.75% rate was raised to 13.5% for firms with payrolls amounting to more than BMD200,000 per year. In the February budget for 2005/2006, Bermuda’s Minister of Finance Paula Cox announced a restructuring of the payroll tax system in an attempt to assist small and medium-sized enterprises and attract new business to the jurisdiction.

In the 2008/9 budget, the standard rate of payroll tax was raised again, by 0.5% 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:

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Bermuda Social Insurance

Bermudan employers must pay social insurance contributions in respect of every employee over 16 years old, and who works more than 4 hours per week; half of the amount paid may be deducted from the employee's pay.

Foreign (non-Bermudian) employees are covered by the tax, retrospectively if necessary, if they work for six months or more in the country.

Employers must provide the Social Insurance Department at the Government Administration Building with a list of their employees and their social insurance numbers; the Department bills employers monthly.

For 2011, the social insurance contributions are BMD60.80 per week, BMD30.40 due from each of the employer and employee and is unchanged from 2010.