Bermuda, a self-governing British overseas territory, is celebrated as a blue-chip jurisdiction, renowned for its effective fiscal environment and robust yet pragmatic regulatory regime. The island’s financial services-based economy, best exemplified by its world-class reinsurance sector, thrives on geographic and political independence and is fortified by a history of successful internationally influenced regulatory implementations, including economic substance, FATCA, the OECD’s common reporting standard, and the OECD’s country-by-country information sharing.
In keeping with its commitment to remain at the forefront of global initiatives surrounding tax transparency and fairness, the Bermuda government is considering the introduction of a corporate income tax applicable to Multinational Enterprise Groups with annual revenue of €750 million or more (MNEs) by 2025. This initiative aligns with the OECD global minimum tax rules, stipulating a 15% minimum tax on MNEs in every jurisdiction where their affiliates operate from 2025, with additional taxation or levies if this threshold is unmet. It will only affect Bermuda entities that are part of large multinational corporations that qualify as MNEs, reflecting international efforts and pressures to ensure that these entities pay a minimum level of tax in each jurisdiction where they operate.
Bermuda’s alignment with the OECD/G20 Inclusive Framework on BEPS, particularly the global anti-base erosion model rules (Pillar Two), forms part of a broader initiative to tackle tax challenges arising from the digitalization of the economy. This commitment underscores Bermuda’s dedication to international standards and its forward-thinking approach to social, economic, and environmental challenges.
Bermuda’s proposed tax regime transcends compliance with international pressure against tax evasion and profit shifting. It is a strategic initiative, reinforcing global compliance while nurturing the island’s economic aspirations. Premier and Finance Minister David Burt has articulated the government’s ambition to enhance Bermuda’s economic growth prospects, emphasizing the importance of preserving international attractiveness and exploring mechanisms like tax credits, offsets, and deductions to sustain Bermuda’s economic competitiveness.
The proposal is open for public consultation until 8 September 2023, with the gathered feedback instrumental in shaping the 2025 legislation. With its unparalleled expertise in Bermuda’s legal landscape, Appleby will actively engage in the consultation process. We encourage existing and potential clients to reach out with questions, concerns, or feedback to ensure that diverse perspectives are considered and that the final legislation is commercially viable and aligned with the broader goals of international tax compliance and transparency.
Bermuda’s proposed corporate income tax on MNEs signifies a transformative moment in its tax policy. This deliberate alignment with Pillar Two and introduction of corporate income tax are calculated steps to maintain Bermuda’s prominence as an international financial center while adapting to the evolving global tax environment. The initiative, reflecting a judicious balance between international compliance and economic competitiveness, is enriched by the inclusive public consultation process and contributions from experts like Appleby. This policy change underscores Bermuda’s adaptability and proactive role in sculpting a transparent global tax system, setting a precedent for other jurisdictions, and offering a glimpse into the future of international tax cooperation.