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Bermuda: Domestic Corporate Taxation

Payroll Tax

As specified in the Payroll Tax Act 1995 and later legislation, payroll tax in Bermuda is a tax on employers based on the pay packages (total salary plus benefits) paid to all employees; the self-employed are also liable. Total taxable pay is capped at BM$900,000 per annum per person.
Previously payroll tax only had an ‘employer’ component; the employer had the right to recover a portion of this from their employees. As from April 2017, an ‘employee’ component has been introduced, though both components are still payable by the employer.

Certain types of business and other organisations benefit from a reduced rate of payroll tax. For all other entities, payroll tax is levied progressively according to the table below.
Payroll
BM$
Tax Rate
0 - 200,000 1.75%
200,001 - 500,000 7%
500,001 - 1,000,000 9%
Over 1,000,000 10.25%

Exempted undertakings, under which category international businesses normally register, are liable for the top tax rate of 10.25%. The reduced rates of payroll tax and the situations to which they pertain are given in the table below.

Employment category or other circumstance Tax Rate
The government, parish councils, government boards, Bermuda College, approved schools, registered charities, religious and cultural organizations and the Bermuda Festival Ltd., new start-up businesses and an employer in an Economic Empowerment Zone. 0%
Payments excluding bonuses made to employees in special situations e.g. persons on jury duty or on duty with the Bermuda Regiment; persons employed as farmers, fishermen or horticulturists; hotel and restaurant employees from November to March; retail establishments from January to March; employees with permanent disabilities and persons hired as entertainers or musicians. 0%
Educational, sporting or scientific institutions, associations or societies,  farmers, fishermen or horticulturists. 1.75%
The Bermuda Hospitals Board and the Corporations of Hamilton and St. George’s. 3.5%
Taxpayers operating a hotel or restaurant with an annual payroll of $200,000 or greater. 6%
Retail establishments with annual remuneration over $500,000 and whose primary business is the sale of fashion, shoes, jewellery and perfume. 7%

The employee portion of the payroll tax is calculated according to the table below.

Total Pay
BM$
Tax Rate
0 - 48,000 4%
48,001 - 96,000 6.5%
96,001 - 235,000 7.75%
Over 235,000 8.755%

Under the Acts, taxable pay 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 a 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 BM$600 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.

As from the second quarter of 2019, all taxpayers with annual payrolls of BM$500,000 or greater are obliged to file their taxes electronically.

 

 

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