The proposed tax would be applicable to Bermuda tax-resident entities and permanent establishments that are part of multinational enterprise groups (MNEs) with an annual revenue of at least EUR750mn ($793mn).
Under the proposal, the tax would be effective from 2025.
The legislation is the result of multiple public consultations and direct engagement with key industry participants by the Bermuda government and its international tax advisers.
Over 140 Organisation for Economic Co-operation and Development (OECD) member countries have agreed to make material changes to their tax regimes in accordance with the OECD’s Pillar II rules to incorporate a 15% minimum tax rate for in-scope MNEs wherever they operate, regardless of where they are domiciled.
Bermuda’s corporate income tax (CIT) allows for flexibility in balancing international tax compliance with sound economic policy, while maintaining the island’s standing as a mid-shore home for a wide variety of MNEs, including insurance and reinsurance companies, trusts, maritime enterprises and companies in other industries.
The CIT will include qualified refundable tax credits (QRTCs) to be developed in 2024, incentivizing companies to support Bermuda residents through investments in key areas such as education, healthcare, housing and other projects to help develop Bermuda’s workforce.
One of the primary policy underpinnings of the tax was alignment with the OECD’s Global Anti-Base Erosion (GLoBE) rules.
The GLoBE rules are a key pillar of the OECD’s plans to ensure large multinational companies pay a minimum level of tax in each of the jurisdictions where they operate.
Bermuda has no plans to introduce an income inclusion rule or the undertaxed profits rule.
“Bermuda government has worked collaboratively with industry and tax experts through consultation to develop this technical framework, and closing it out in 2023 with the legislation is an important and essential first phase,” said John Huff, CEO of the Association of Bermuda Insurers & Reinsurers.
“Likewise, the next two phases of the CIT in 2024 will be critical to success, including reducing the cost of doing business by reviewing existing taxes and building ‘Qualified Refundable Tax Credits,’ along with establishing a Tax Administration framework to codify the Government’s commitment to fiscal responsibility.”
Bermuda is advancing its CIT for implementation on January 1, 2025, and will continue to monitor further developments around the world as other jurisdictions address the OECD’s standards.
The Bermudian government signed on to global efforts to create a new international tax framework for multinational companies in summer 2021, with a global minimum tax of 15%.
