The Government of Bermuda has announced that it will issue a public consultation paper as part of its considerations on introducing a corporate income tax to apply to Bermuda businesses that are part of Multinational Enterprise Groups (MNEs) with annual revenue of €750M or more.
The proposed corporate tax would be expected to be effective in 2025, and as Reinsurance News understands, would impact a host of re/insurers.
David Burt, the Premier and Finance Minister of Bermuda, commented, “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.”
The consideration of a corporate income tax would be taken into account while calculating the effective tax rate of Bermuda businesses under the Organization for Economic Cooperation and Development’s (OECD) global minimum tax rules.
The Government of Bermuda’s move to end its status as a no-corporate-tax haven comes roughly two years after a deal to adopt a global minimum tax (GMT) rate of 15% brokered by the OECD.
The GMT deal meant to end the outdated tax regimes that had allowed companies, in particular high-tech companies, to avoid paying most taxes by booking their profits in countries with low or no corporate income taxes.
Rules require companies in scope to pay a minimum tax of 15% in every jurisdiction in which they operate. 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 global attractiveness.
Consequently, the Tax Reform Commission will examine the possibility of restructuring the island’s existing tax regimes as a means of lowering the cost of living and doing business in Bermuda.
Bermuda’s proposed new tax regime is a part of the country’s commitment to global compliance and transparency along with supporting the country’s economic goals. Bermuda has been considered by the EU to be a fully cooperative tax jurisdiction.
Currently, the country has 41 bilateral Tax Information Exchange Agreements (TIEAs) and more than 125 multilateral treaty partners.
The Government believes that the proposed tax regime is supportive of Bermuda’s status as a leading international financial centre. It also has vocalised the intentions to continue investing 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.
Burt concluded, “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.”
