An age of reform
The introduction of Bermuda’s first Corporate Income Tax appears to be working out so far.
Bermuda’s Corporate Income Tax comes into effect on January 1, 2025, ushering in the most momentous changes to the Island’s tax system in six decades.
So far, fears that it would lead to capital flight, especially in the Island’s all-important re/insurance sector, have not materialised. The Bermuda government, in collaboration with industry, has executed the enabling legislation and framework for the tax successfully and quickly. But there remains a great deal of work to do in just a few months.
Still, business leaders sound confident that the tax, which takes 15 percent of profits from multinational companies with revenues of more than €750 million ($819 million) a year, will not unduly impact affected international companies.
Christian Dunleavy, Aspen group president, who took part in discussions on behalf of the Association of Bermuda Insurers and Reinsurers (ABIR) and the Association of Bermuda International Companies with the government, said both sides worked well together to come up with solutions.
“There was a very genuine industry working partnership to try to understand what this could mean for the industry and for Bermuda reinsurers.
“I think it’s manageable, and in the near term it isn’t going to change the way the Bermuda industry operates dramatically, but it does mean that Bermuda has to be very cognisant of everything that goes into operating on the Island.”
ABIR companies take the load
Until June Collin Anderson, now director of policy for the ABIR, helped coordinate the government’s approach to the tax.
He said: “It is inescapable that ABIR companies are going to be paying the majority of Corporate Income Tax. That’s something that can’t be overstated, and needs to be understood more widely than just within ABIR and the industry.
“Those that are immediately in scope will be paying the bulk of the tax, and there needs to be a recognition of what that contribution will be to the Island. It’s not going to be just a few million dollars in scholarships and charitable giving — now we are talking about the better part of $1 billion.”
Anderson said the question now is what recommendations will be made by the Tax Reform Commission, and how any additional revenue may be used.
“The Corporate Income Tax provides us with a lot more flexibility to introduce things such as qualified, refundable tax credits. There is an opportunity for companies that are making investments in Bermuda to have meaningful tax offsets that would help Bermuda to remain attractive. The ABIR will continue to provide input on that.”
Dunleavy said the tax would be harder to manage than more predictable revenue sources. “Bermuda’s economy is very dominated by the ABIR companies, who tend to make and lose money in the same years, so the government’s tax base could be quite volatile in that scenario.”
But overall, he is sanguine. “For the industry, there’s a lot more to Bermuda than just tax. It’s a genuine market.”
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