Income Tax in Bermuda

Bermuda does not impose an income tax, but rather assesses a Payroll Tax on Employers per the Payroll Tax Act of 1995 (and as amended).

Tax returns and compliance

Payroll Tax:

Effective 01-Apr-17, Payroll Tax is levied on every employer and self-employed person at progressive rates on total remuneration paid, up to a maximum of $900,000 of remuneration per annum per person. Under certain circumstances, employers will recover a portion of the Payroll Tax from employees.

Payroll Tax is determined based on the size of the employer’s annual payroll and the income of individual employees. Employers pay tax according to the size of their annual payroll, as follows:

Over $1 million
Over $500,000
Over $200,000
Below $200,000

Employees pay according to their income. As income rises each dollar above the previous level is taxed at a higher rate. A transitional period rate for the EMPLOYEE portion only is a flat 6% for the period 1 April – 30 June 2017. Effective 01-Jul-17, Employee rates are as follows:

Up to $48,000
$48,001 to $96,000
$96,001 to $235,000
$235,001 to $900,000

The tax base consists of actual remuneration paid, given, or assessed by any employer or self-employed person to every employee or deemed employee. Remuneration includes any benefits derived by the employee/deemed employee or self-employed person as a result of his/her employment, whether paid in cash or in kind. The remuneration of a self-employed person or a deemed employee is the greater of his actual or notional remuneration.

Payroll Tax is not levied with respect to remuneration paid to individuals who are ordinarily employed outside Bermuda, provided that the period of employment in Bermuda (whether for one or more employers) does not exceed four consecutive weeks.

Every employer and self-employed person who is liable for tax must register with the Office of the Tax Commissioner within seven days of the end of the first tax period in which the person commences business. It is a criminal offence to fail to register. Foreign contractors/sub-contractors and professionals, who offer their services on a contract or fee basis, are also required to register and pay Payroll Tax on the value of those services performed in Bermuda.

Tax returns with full payment are due within fifteen days of the end of each period of three months commencing on the first day of April, July, October or January. Tax returns are available from the Office of the Tax Commissioner. Payroll Tax must be paid at the time that the tax return is filed. Tax returns filed late or underpaid are subject to a penalty. The Bermuda fiscal year is 1 April through 31 March.

Residence rules:

Generally, all persons must obtain a work permit to engage in gainful occupation in Bermuda unless they are Bermudian (including a spouse of a Bermudian) or have been granted permanent resident status. However, there is no need for an employer to obtain a work permit to land a business visitor in Bermuda provided that:

·        the business visitor is in possession of a return ticket (as well as a valid multi-re-entry visa if the business visitor is a visa controlled national:
·        the total length of the stay does not exceed twenty-one consecutive days; and
·        the business visitor only undertakes certain activities prescribed by the Department of Immigration.

Employers seeking to hire non-resident individuals who will make multiple visits to Bermuda over a period of time, staying no greater than thirty days for each visit, may apply for a periodic work permit. Periodic work permits may be granted for periods of one to five years.

Employers may use short term work permits to employ individuals to work for periods of up to six months. At the conclusion of the term of the short term work permit, the holder will be expected to leave Bermuda, unless an extension has been sought within the proper processing period. Short term work permit holders will not normally be granted permission to reside and seek employment.

Work permits are granted for periods of one, two, three, five (senior executive or “specialists”), and ten years (special category work permits).

Taxation of investment income and capital gains:

Dividends, interest, and rental income

Not taxed in Bermuda.

Gains from employee stock option exercises

Stock option gains are subject to the Payroll Tax. Capital Gain on disposition of shares are not taxed in Bermuda.

Foreign exchange gains and losses

Not taxed in Bermuda.

Principal residence gains and losses

Not taxed in Bermuda.

Capital losses

Not applicable.

Foreign property reporting

Not taxed in Bermuda.

Note: Information placed here in above is only for general perception. This may not reflect the latest status on law and may have changed in recent time. Please seek our professional opinion before applying the provision. Thanks.

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