Bermuda mulls hitting reinsurers with corporation tax

The Government of Bermuda will issue a public consultation paper as it considers whether to introduce a corporate income tax in line with a global drive to install a global minimum tax.

A Government statement said that, if implemented, the corporate income tax would apply to Bermuda businesses that are part of multinational enterprise groups with annual revenues of €750 million ($820 million) and would come into effect for 2025.

The Government is also considering the possibility of restructuring the island’s existing tax regimes as a means of lowering the cost of living and doing business in Bermuda, the statement said.

The statement added: “Bermuda is considering a corporate income tax that would be taken into account in calculating the effective tax rate of Bermuda businesses under the Organization for Economic Cooperation and Development’s global minimum tax rules.

“These rules require companies in scope to pay a minimum tax of 15% in every jurisdiction in which they operate. The taxes paid under the proposed Bermuda corporate income tax regime would be those which would be payable to other jurisdictions under the global minimum tax framework.

“Any new corporate income tax adopted would also include certain tax credits which support Bermuda’s economic goals and maintains Bermuda’s global attractiveness.”

Bermuda Premier David Burt said: “Our approach is to use tax reform to bolster policy initiatives that will enhance Bermuda’s economic growth prospects.

“The Government continues to guide Bermuda to sustainable economic growth and development. We must attract and retain business in Bermuda, boost foreign investment, increase employment opportunities while expanding the workforce, and build our local economy to its fullest potential. These efforts will further our policies to make our island a better place to live and work.

“To assist in the appropriate policy development it is critical that organisations and individuals provide feedback on the matters addressed in the public consultation document.”

The statement noted that Bermuda has been committed to global compliance and transparency and is considered by the EU to be a fully cooperative tax jurisdiction. Bermuda currently has 41 bilateral Tax Information Exchange Agreements (TIEAs) and more than 125 multilateral treaty partners.

“The Government believes this proposed tax regime is supportive of Bermuda’s status as a leading international financial centre,” the statement said. “Bermuda plans to continue to invest in key policy initiatives including reduction in the cost of living, job creation, and other programs to stimulate the economy and enhance its attractiveness to MNEs.”

The first consultation period begins today and ends on September 8.

As noted, the initial consultation period begins on August 8, 2023.

All comments should be submitted prior to the deadline of September 8, 2023. For more information visit: https://www.gov.bm/.

The consultation questions are here:

1. Are there any aspects of the proposed scope of the Bermuda corporate income tax and the determination of which entities are within the scope that present concerns or require further clarification?

2. Are there any proposed aspects of the definition of tax residency which require further clarification or present concerns?

3. Do you have any comments on the proposed effective date of January 2025?

4. Do you have any general comments or suggestions regarding the computation of Bermuda taxable income? Are there any specific comments regarding the accounting standards to be used as the starting point for the calculation of Bermuda taxable income or other adjustments in the calculation of Bermuda taxable income?

5. Do respondents have recommendations as to the appropriate rate of corporate income tax?

6. Do you have any comments or suggestions regarding possible QRTCs to be incorporated into the Bermuda corporate income tax regime?

7. Do you have any views regarding the administrative aspects of reporting and payment obligations under the Bermuda corporate income tax regime?

8. Are there simplification options which should be considered for the Bermuda corporate income tax regime?

9. Are there aspects of the current tax regime in Bermuda that should be changed to ensure Bermuda’s competitiveness?

10. Are there any other considerations of significance that should be considered in the development and implementation of a Bermuda corporate income tax?