Bermuda: Personal Taxation
Under the Payroll Tax Act 1995 and later legislation, Bermudan employers have traditionally had to pay a tax of 12.75% of payroll.
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 2012 rates are as follows:
- 14.00% applicable to: Taxpayers with an annual payroll greater than BMD1,000,000 and exempt undertakings.
- 12.75% applicable to: Taxpayers with an annual payroll greater than BMD500,000 and up to BMD1,000,000.
- 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.
'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.
Taxpayers paying at the rates of 10.75%, 12.75% or 14.00% and those operating an hotel or restaurant and paying at 9.75% 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 $600.00 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.
From August 2012, social insurance contributions are BMD64.14 (BMD60.80 previously) per week, BMD32.07 (BMD30.40 previously) due from each of the employer and employee.