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In Bermuda
there are no taxes on profits, dividends or income;
there is no capital gains tax, no withholding
tax and no sales tax. The main tax impinging on
companies is payroll tax. See Types
of Company for details of annual fees
payable depending on status.
When
the European Savings Tax Directive came into effect
in 2005, most offshore dependent territories of
the UK and other EU member states rolled over
and accepted the necessity of implementing a withholding
tax on savings interest payments to EU residents.
Bermuda, however, appears to have escaped the
worst.
Payroll Taxes
Employers
have also been able to recover 4.5% of the payroll
tax from employees (on their actual salary, not
the notional amount).
In
the 2004/2005 financial year, the 12.75% rate
was raised to 13.5% for firms with payrolls amounting
to more than $200,000 per year. In addition, the
payroll tax salary cap was raised from $225,000
to $235,000.
In
the February budget for 2005/2006, Bermuda’s
Minister of Finance Paula Cox announced a restructuring
of the payroll tax system in an attempt to assist
small and medium-sized enterprises and attract
new business to the jurisdiction.
Under
the change, firms will face new tiered rates as
follows:
- 13.50%
applicable to: Taxpayers with an annual payroll
greater than $1,000,000 and exempt undertakings.
- 12.75%
applicable to: Taxpayers with an annual payroll
greater than $500,000 and up to $1,000,000.
- 10.75%
applicable to: Taxpayers with an annual payroll
between $200,000 and $500,000.
- 9.75%
applicable to: Taxpayers operating an hotel
or restaurant with an annual payroll of $200,000
or greater.
- 7.75%
applicable to: Remuneration paid to employees
in Special Situations, e.g. persons on jury
duty or on duty with the Bermuda Regiment or
Bermuda Volunteer Reserve, persons employed
as farmers, fishermen or horticulturists and
hotel employees in December, January or February.
- 7.25%
applicable to: Employers and self-employed persons
with an annual payroll of less than $100,000.
Educational, sporting, or scientific institutions
or societies. Taxi drivers, farmers, fishermen
and horticulturists. The Bermuda Hospitals Board
and the Corporations of Hamilton and St. George’s.
- 4.75%
applicable to: The Government, Parish Councils,
Government Boards, the Bermuda College, approved
schools, registered charities, religious and
cultural organizations and the Bermuda Festival
Ltd.
Under
the Acts, taxable remuneration is defined to include
various benefits, including pension contributions,
rental value, profit-sharing, stock option gains,
etc.
Taxpayers
paying at the rates of 10.75%, 12.75% or 13.50%
and those operating an hotel or restaurant and
paying at 9.75% are entitled to Special Relief.
Taxpayers in this category are entitled to a deduction
from total remuneration paid during the tax period.
This deduction is equal to $600.00 per employee
per quarter.
The
qualifying criteria are that the employee must
be on the payroll at the end of the tax period
and must have worked for the employer for a minimum
of 180 hours in that quarter. However, the amount
of Payroll Tax payable by any such employer in
respect of an employee whose remuneration is subject
to the Special Relief, cannot be less than 4.75%
of gross remuneration. Self-employed persons and
deemed employees are not eligible for Special
Relief.
'Employer'
means anyone, company or individual, who employs
another person; however, there are reduced rates
for employers with a payroll below $100,000 annually.
Just about enough to have a part-time gardener
in Bermuda.
Other
tax measures included a 4.75% increase in social
security contributions from August 2005, and customs
duty concessions for the agricultural sector.
Meanwhile,
the estate tax and stamp duty system is being
reviewed and the government has put forward a
proposal to establish protection from estate tax
on family homes. In addition, land tax for over-65s
occupying their own homes is to be abolished.
With
regard to the financial services industry, Cox
was mindful of the important role played by international
business to the island’s economy, and described
Bermuda as “a premier international business
jurisdiction of choice”.
“As
a result, we must guard against anything that
erodes our competitiveness or diminishes our reputation,”
Cox went on to state, although she added that
the government remains committed to introducing
international standards of financial supervision
and regulation.
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Social Insurance
Bermudan
employers must pay social insurance contributions
in respect of every employee over 16 years old,
and who works more than 4 hours per week; half
of the amount paid may be deducted from the employee's
pay.
Foreign
(non-Bermudian) employees are covered by the tax,
retrospectively if necessary, if they work for
six months or more in the country.
Employers
must provide the Social Insurance Department at
the Government Administration Building with a
list of their employees and their social insurance
numbers; the Department bills employers monthly.
Previously,
the social insurance contribution is $42.68 per
week, $21.34 due from each of the employer and
employee.
These
amounts were increased by 4.75% in the 2005/2006
budget.
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Filing Requirements and Payment
of Tax
An
employer must register with the Tax Commissioner's
office as soon as he becomes liable to pay tax.
There is a quarterly return which must be accompanied
by payment. The payment process must be completed
by the 15th of the month following the quarter
in question.
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Health Insurance
Under
the Hospital Insurance Act 1970, Bermudan employers
must take out health insurance for each employee
under a contract with a licensed health insurer,
or through the Government's Hospital Insurance
Premium Scheme. It is possible to have a new
insurer approved as a licensed health insurer
on application to the Government.
Half
of the cost of health insurance may be deducted
from the wages of employees. Employees working
fewer than 45 hours per month can be exempted
from the scheme; employees working in Bermuda
for less than six months are not included.
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