Bermuda corporation tax implementation making strong progress
Bermuda’s corporate income tax regime is in a strong position, according to the head of the new Bermuda Corporate Income Tax Agency.
Mervyn Skeet (pictured), the chief executive officer, said Bermuda elected to implement a domestic tax on Bermuda-based multinationals. He was speaking at the Bermuda Risk Summit, which is taking place in Bermuda this week.
Other countries chose to impose an extra-terrestrial tax which would have enabled it to collect taxes from other countries which did not join the global minimum tax system.
The tax levies a 15% tax on the profits of multinationals which earn more than €750 million a year.
That should help to insulate the island from countries like the US where the Trump Administration has come out against the global minimum tax masterminded by the Organisation of Economic Cooperation and Development.
Skeet’s comments came during a panel discussion on the CIT, which came into effect on January 1.
Skeet said the agency was developing regulations for passage through parliament. It has also found office space, is hiring staff and is beginning development of an online portal which will be used for tax payments.
Jeff Thompson, executive vice president and head of tax at Arch Capital, said Bermuda had a rare opportunity to create an entirely digital income tax system.
He said the system should eliminate the need for paper submissions. There should also be the means to track submissions, and for interim commenting online.
“It will not be bound by decades and decades of missteps,” he said.
Skeet said the system would be as digital as possible although it would be built over time on a modular basis. The first modules would be for registration and payments on account, he said.
Thompson said there were ways that the tax could be used to help to reduce the cost of doing business.
“One way is to lower cost of doing business through job credits,” he added. “It is very expensive to employ and live in Bermuda.”
However, Robert Moncrieff, partner at EY, said the focus was likely to be on lowering the cost of doing business and hiring Bermudians. Credits were available for infrastructure or housing expense, he said.
But he added that the OECD did not look favourably on measures that increased competitiveness.
"The fear that if it was introduced, CIT would lead to companies leaving the island has turned out to be untrue,” Moncrieff said. “It is all about substance, not a paper credit. Any changes must be on the back on increased substance on the island.
“We need to take care that any solution is durable and will survive the degree of scrutiny that the OECD will take to ensure Bermuda is compliant with OECD guidance,” he said.
Moncrieff said the government need to devise appropriate incentives for companies but cautioned that tax credits were likely to come under the scrutiny of the OECD. And he warned that tax credits were an unhelpful term.
People who want to find out more about the CIT can email askmervyn@cita.bm.
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