MAJOR DEVELOPMENTS
The proposed tax on professional registration in Section 25 has now been rescinded.
INCOME TAXES ON CORPORATIONS
None.
INCOME TAXES ON INDIVIDUALS
None.
INCOME TAXES ON NONRESIDENTS
15.Liability to Tax
None.
19.Tax Treaties
On July 11, 1986, Bermuda and the United States executed a Convention, which came into effect on December 2, 1988. From Bermuda perspective, the Convention provides that:
q A Bermuda insurance enterprise is not subject to U.S. federal
income taxes on its business profits, except to the extent that they are attributable to a permanent establishment in the United States through which the business of the enterprise is wholly or partly carried on.
q Premiums paid or credited on or after January 1, 1986, by a
U.S. policyholder to a Bermuda insurance enterprise, which are
allocable to insurance coverage for periods beginning before January 1, 1990, are not subject to U.S. federal excise taxes, if the enterprise is a controlled foreign corporation as defined by the U.S. Internal Revenue Code of 1986 and its income, or its related-person insurance income, is taxed to its U.S. shareholders, except (to prevent treaty shopping? to the extent that the risks covered by such premiums are reinsured with a person not entitled to the benefits of this or any
other convention that applies to these taxes. Premiums paid or credited after December 31, 1989, are subject to U.S. federal excise taxes.
q Also to prevent treaty shopping,?an insurance enterprise is
not entitled to relief from taxation if it is owned 50% or less by Bermuda residents and U.S. citizens and residents, or if its income is used in substantial part to make certain distributions or payments to persons who are neither Bermuda residents nor U.S. citizens or residents. Such distributions?are those that are made with respect to beneficial ownership interests but which are substantially disproportionate to such interests. Such payments?include reinsurance premiums, but do not include payments of insurance claims. If an insurance company principal class of shares is substantially and regularly traded on a recognized stock exchange or on the NASDAQ System, it is not subject to these limitations.
q The United States and Bermuda will provide assistance to each
other in carrying out their respective domestic
laws concerning taxes.
There are provisions protecting confidentiality of information for persons not resident in the United States or Bermuda, protecting existing obligations to maintain confidentiality of information, and excluding assistance with respect to tax years barred by a statute of limitations or beginning prior to January 1, 1977.
Except for the United States, Bermuda has no tax treaties or other arrangements with other countries, including the United Kingdom, and its courts will not enforce actions brought by the taxing authorities of those other countries.
20.Other Matters
There are no taxes on income, dividends, capital gains, sales, or gifts. The Minister of Finance is empowered to give an exempted company or exempted partnership (see selection of Business Entity by Nonresidents? a formal assurance that no tax computed on profits, income, or any capital asset, gain, or appreciation will apply prior to the year 2016 to it or to any of its operations, shares, debentures, or other obligations.
OTHER SIGNIFICANT TAXES
21.Sales (Value-Added) Taxes
None.
22.Inheritance and Gift Taxes
Stamp duty is payable on an affidavit of the value of Bermuda property in a deceased estate at the following rates:
First $50,000 0%
Next $150,000 5
Next $800,000 10
Thereafter 15
Foreign currency assets situated in Bermuda, including interests in exempted companies and partnerships, are not Bermuda property.
23.Taxes on Payrolls (Social Security)
Payroll tax is charged at a rate of 12% on an employer total payroll including the value of fringe benefits. The employer may recover up to 4.5% of the tax from employees.
Registered charities and public bodies are not subject to the tax, and reduced rates apply to hotels and restaurants, small business payrolls, cultural societies, and employees in special situations.
Exempted companies and exempted partnerships may base their tax payable on total actual payrolls or be assessed on a notional payroll of $67,720 per annum per employee at the rate of 12%.
Social insurance rates for contributory pensions are $41.44 per week for employed and self-employed persons
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