Bermuda Tax Regime

Bermuda has historically operated as a no-tax jurisdiction for profits, income, dividends and capital gains, with no limit on the accumulation of retained earnings and no requirement that companies distribute dividends to shareholders. This long-standing framework made Bermuda a leading domicile for international (re)insurance, captive insurance, asset management and other cross-border structuring. That framework changed materially with the enactment of the Bermuda Corporate Income Tax Act 2023, which introduced a 15% corporate income tax applicable only to the largest multinational groups operating in or through Bermuda, effective for fiscal years beginning on or after 1 January 2025. Bermuda businesses that fall outside the scope of the new tax continue to be subject to no income tax on profits. The result is a bifurcated system: a narrow but significant new corporate income tax for in-scope large-group constituent entities, layered on top of an otherwise tax-neutral general environment that continues to rely on payroll tax, customs duties, and a range of fees, stamp duties and property-based charges for government revenue.

1.1 Sources

Primary legislation includes the Bermuda Corporate Income Tax Act 2023 (CITA 2023), the Economic Substance Act 2018, and the Companies Act 1981.

1.2 Recent developments

The Bermuda Corporate Income Tax Act 2023 became law on 27 December 2023, introducing for the first time a general corporate income tax in Bermuda, targeted narrowly at Bermuda businesses that form part of in-scope multinational enterprise (MNE) groups with annual revenue of EUR 750 million or more in at least two of the four fiscal years immediately preceding the tested fiscal year. The tax applies for fiscal years beginning on or after 1 January 2025, meaning the first full fiscal year of exposure for calendar-year taxpayers is the 2025 year, with returns and payments following in 2026 and beyond. CITA 2023 was designed and calibrated to operate as Bermuda's domestic response to the OECD/G20 Pillar Two initiative, intended to function as a qualified domestic minimum top-up tax (QDMTT) equivalent for in-scope Bermuda constituent entities, so that top-up tax that would otherwise be collected by other jurisdictions under an income inclusion rule or undertaxed profits rule is instead collected in Bermuda. Historic Tax Assurance Certificates issued to exempted undertakings — guaranteeing no future taxation, in many cases until 31 March 2035 — remain honoured for entities outside the scope of CITA 2023, but the Act expressly overrides any previously issued certificate for entities that fall within its scope, a point that has required careful review by groups holding such certificates.

Headline statutory corporate income tax rate for a resident company. Where sub-national (state, provincial, cantonal or municipal) corporate taxes apply, the combined rate reported by the OECD is shown. Projected 2026–2028 rates carry the current rate forward unless a change is already enacted or officially scheduled. As-of 2026.

Top marginal statutory personal income tax rate on employment income for a resident individual. Where sub-national (state, provincial, cantonal or municipal) income taxes are a standard part of the system, the combined top rate is shown. Projected 2026–2028 rates carry the current rate forward unless a change is already enacted or officially scheduled. As-of 2026.

2.1 Rates and residence

Bermuda has no general corporate income tax applicable to the ordinary Bermuda business. The default position for a Bermuda-incorporated or Bermuda-resident entity — including the exempted company structures used extensively by international insurers, reinsurers and investment vehicles — remains a 0% rate of tax on profits, income, dividends and capital gains, unless the entity is an 'in-scope' Bermuda business for the purposes of CITA 2023. Where an entity is in scope, corporate income tax applies at a flat rate of 15% on its adjusted net income, computed under the rules of CITA 2023. There is no concept of Bermuda tax residence driving general income taxation in the way seen in traditional-treaty jurisdictions, because the underlying default rate is zero; the relevant question under the new regime is instead whether the entity is a 'Bermuda business' that is a constituent entity of an in-scope MNE group.

An entity is generally treated as within scope where it is part of an MNE group with consolidated annual revenue of EUR 750 million or more in at least two of the four fiscal years immediately preceding the tested year — the same revenue threshold used under OECD Pillar Two. Bermuda businesses that are not part of such a group, including the large majority of locally owned businesses, exempted companies used for asset holding and smaller international structures, remain outside CITA 2023 and continue to pay no Bermuda income tax.

2.2 Dividends and participation-style relief

Because Bermuda has historically imposed no tax on dividends, income or capital gains, there has traditionally been no need for a participation exemption of the kind found in credit- or exemption-system jurisdictions — dividends received and paid by Bermuda companies simply fall outside the tax base. Under CITA 2023, similar policy outcomes are preserved for in-scope entities through targeted adjustments: dividends received from other Bermuda constituent entities of the same group are generally excluded from adjusted net income to prevent double counting within a single Bermuda sub-group, and gains on qualifying equity interests are subject to specific exclusion and anti-abuse rules modelled on GloBE (Pillar Two) concepts rather than a traditional domestic participation exemption regime.

2.3 Income determination

For in-scope Bermuda businesses, taxable income under CITA 2023 is computed on a book-income basis, starting from financial accounting net income or loss determined under an acceptable accounting standard (typically the standard used in the group's consolidated financial statements) and then applying a defined set of adjustments broadly aligned with the OECD GloBE rules used for Pillar Two purposes. Adjustments include the exclusion of certain dividends and equity gains described in section 2.2, adjustments for tax-exempt income, disallowance of certain expenses, and recognition of a credit for foreign income taxes paid on the same income to avoid double taxation. A central feature unique to Bermuda's transition from a no-tax to a taxed regime is the Economic Transition Adjustment (ETA): a step-up mechanism that allows an in-scope entity to recognise, for Bermuda tax purposes, the fair market value of certain assets (and corresponding amortisation or depreciation) and liabilities as of the transition date, so that gains economically accrued before Bermuda had any income tax are not inappropriately taxed going forward. The ETA is a transition relief, not a permanent exclusion, and its calculation and phase-in are prescribed in detail under CITA 2023 and related guidance.

2.4 Interest limitation

CITA 2023 includes interest deductibility rules intended to prevent excessive erosion of the Bermuda tax base through related-party or group financing arrangements, broadly consistent with the direction of the OECD's base erosion and profit shifting (BEPS) recommendations that inform Pillar Two implementation generally. In-scope groups with material intra-group debt into Bermuda constituent entities should expect scrutiny of interest deductions and should model the impact of any fixed-ratio or arm's-length style limitation alongside the broader GloBE-aligned adjustments described above. Entities outside the scope of CITA 2023 are unaffected, since they remain outside the Bermuda income tax base altogether.

2.5 Losses

For in-scope Bermuda businesses, tax losses computed under CITA 2023 are generally available to be carried forward to offset adjusted net income of later fiscal years, consistent with the loss-carryforward philosophy embedded in GloBE-aligned minimum tax regimes, which seek to tax cumulative economic profit over time rather than isolated single-year book income spikes. There is no loss carryback mechanism. Because entities outside the scope of CITA 2023 have no Bermuda income tax base, the concept of a tax loss carryforward is simply not relevant to the large majority of Bermuda businesses.

2.6 Groups

CITA 2023 operates on a group-aware basis: whether an entity is in scope depends on the consolidated revenue of its ultimate MNE group, and adjustments such as the exclusion of intra-group Bermuda dividends in section 2.2 are designed to prevent double taxation within a Bermuda sub-group. Multiple Bermuda constituent entities of the same in-scope group may, depending on the detailed rules, be permitted to aggregate or allocate adjusted net income and tax liability on a group basis for administrative simplicity, mirroring approaches used elsewhere for GloBE reporting. Groups with several Bermuda entities should map their full Bermuda footprint before assuming any single entity's position is representative of the group's overall CITA 2023 exposure.

2.7 Controlled foreign companies

Bermuda does not operate a controlled foreign company (CFC) regime of its own, since Bermuda has traditionally not taxed the worldwide income of Bermuda entities in the first place and therefore has no policy need to attribute low-taxed foreign income back to a Bermuda parent. Bermuda entities that are themselves majority-owned foreign subsidiaries of groups headquartered in CFC-regime jurisdictions (such as the United States, the United Kingdom or various EU member states) may instead be subject to those foreign jurisdictions' own CFC attribution rules looking into Bermuda, a matter of foreign law rather than Bermuda domestic law.

2.8 Transfer pricing

CITA 2023 requires that transactions between a Bermuda constituent entity and other members of its MNE group be conducted, and priced, on an arm's-length basis for the purposes of computing adjusted net income, drawing on OECD transfer pricing principles as adapted for the Bermuda regime. In-scope groups should expect to maintain contemporaneous documentation supporting the pricing of intra-group services, financing, licensing and cost-sharing arrangements involving Bermuda entities, consistent with the level of rigour expected under OECD-aligned regimes elsewhere. Entities outside the scope of CITA 2023 are not subject to a Bermuda transfer pricing regime, though they may still need to satisfy documentation requirements imposed by counterparties or foreign tax authorities.

2.9 Incentives

Because the general Bermuda tax base has historically been zero, Bermuda's traditional 'incentive' has simply been the absence of tax itself, rather than a system of credits or allowances layered on top of a taxed base. CITA 2023 nonetheless contains its own set of adjustments that function similarly to incentives for in-scope taxpayers, most notably the Economic Transition Adjustment described in section 2.3, the foreign tax credit for taxes paid on the same income elsewhere, and targeted exclusions for certain categories of income. Outside CITA 2023, the government continues to support the international business sector through a stable regulatory environment, a deep insurance-linked securities and reinsurance capital markets infrastructure, and predictable company-law and immigration settings for skilled personnel, rather than through tax credits.

2.10 Pillar Two

CITA 2023 is Bermuda's direct and purpose-built response to the OECD/G20 Pillar Two initiative. Rather than adopting a separate, free-standing qualified domestic minimum top-up tax (QDMTT) layered on top of a pre-existing corporate income tax — the pattern followed in many onshore jurisdictions that already had a corporate tax system — Bermuda's approach was to design CITA 2023 itself, from the outset, to operate as a QDMTT-equivalent for in-scope Bermuda constituent entities of MNE groups with consolidated revenue of EUR 750 million or more. The 15% rate matches the Pillar Two global minimum rate, and the book-income starting point, the Economic Transition Adjustment, and the foreign tax credit mechanism are all calibrated so that Bermuda, rather than a foreign jurisdiction applying an income inclusion rule (IIR) or undertaxed profits rule (UTPR), collects the top-up tax attributable to low-taxed Bermuda profits of in-scope groups. Groups should not expect a separate Bermuda 'QDMTT' return distinct from the CITA 2023 return: compliance is achieved through the single CITA 2023 regime, which is intended by design to satisfy the qualified status tests applied under the OECD GloBE rules.

2.11 Branch income and reorganisations

A branch or permanent establishment of a foreign company operating in Bermuda is treated, for CITA 2023 purposes, in a manner consistent with the treatment of a Bermuda constituent entity, meaning that a branch forming part of an in-scope MNE group's Bermuda operations can itself be brought within the 15% corporate income tax, while a branch outside the scope of an in-scope group remains untaxed in the same way as a locally incorporated company. Bermuda's Companies Act 1981 permits amalgamations, continuations (redomiciliations into and out of Bermuda), and other reorganisations without triggering a Bermuda income tax charge for out-of-scope entities, since there is no general gains tax to trigger. For in-scope entities, reorganisations should be modelled carefully against the Economic Transition Adjustment and loss carryforward rules in CITA 2023 to confirm that a reorganisation does not inadvertently reset or forfeit transition relief.

3.1 No personal income tax

Bermuda imposes no personal income tax on employment income, business income, investment income or any other category of individual income, whether earned by Bermuda residents or by non-residents working in Bermuda. This is a foundational and unchanged feature of the Bermuda tax system — CITA 2023 is a corporate income tax only, applicable exclusively to Bermuda businesses that are constituent entities of large in-scope MNE groups, and it has no analogue at the level of the individual taxpayer. Individuals resident in or working from Bermuda are not required to file an annual personal income tax return of the kind familiar in most onshore jurisdictions.

3.2 Capital gains and wealth

There is no capital gains tax in Bermuda for individuals, and no net wealth tax. Investment income — dividends, interest and gains on securities and other property — is untaxed at the individual level. Real property held by individuals is instead subject to an annual land tax (see section 6), which functions as Bermuda's principal recurring tax on individually held real estate rather than a tax on income or gains from that property.

3.3 Payroll tax

Although there is no personal income tax, employment income in Bermuda is subject to payroll tax, which is Bermuda's functional equivalent of a wage tax and, together with customs duties, is one of the two largest sources of government revenue. Payroll tax is imposed on employers, who are required to withhold a portion from employee remuneration and remit the tax, together with an employer-borne portion, to the Bermuda government on a periodic basis. The structure has historically been progressive by reference to the size of the employer's payroll and the remuneration of individual employees, with a portion of the liability recoverable from the employee up to a capped percentage of payroll and the balance borne directly by the employer, subject to an overall salary cap above which no further payroll tax is charged on the excess. Because rates, caps, and the split between employer and employee shares are revised from time to time in the annual Budget, employers should confirm current-year rates, thresholds and the remuneration cap directly with the Office of the Tax Commissioner rather than relying on a fixed figure carried over from a prior year.

3.4 Inbound individuals and estates

There is no separate expatriate tax regime because there is no personal income tax to relieve. Work permit and residency requirements, rather than tax considerations, are typically the primary compliance point for inbound individuals relocating to Bermuda for employment. Bermuda does not impose a comprehensive estate or inheritance tax of the kind found in many onshore jurisdictions; the principal transfer-related charge on death is a modest stamp-duty-style charge applied in connection with the grant of probate or letters of administration and the transfer of Bermuda property comprised in an estate, calculated by reference to the value of the property passing, rather than a freestanding inheritance tax on the beneficiary. Individuals with significant Bermuda real property or business interests should nonetheless plan for this estate-related stamp duty as part of succession planning.

Bermuda imposes no withholding tax on dividends, interest or royalties paid by Bermuda companies, whether to resident or non-resident recipients, reflecting the underlying absence of a general income tax base from which to withhold. This applies equally to payments made by in-scope Bermuda businesses subject to CITA 2023: the 15% corporate income tax is charged on the paying entity's own adjusted net income, not on outbound dividend, interest or royalty flows, and CITA 2023 does not introduce a withholding tax layer. Bermuda does not maintain a broad bilateral double tax treaty network of the kind found in onshore jurisdictions; historically, the absence of Bermuda income tax made double-taxation relief largely unnecessary from Bermuda's own perspective. Instead, Bermuda has built an extensive network of Tax Information Exchange Agreements (TIEAs) with onshore jurisdictions, participates fully in the OECD Common Reporting Standard (CRS) and the US FATCA regime, and maintains a small number of narrow-scope arrangements — including an agreement with the United States addressing insurance excise tax matters and understandings with the United Kingdom — rather than a comprehensive network of general double tax treaties. Groups planning cross-border structures involving Bermuda should not assume treaty-based withholding relief is available in the way it would be from a jurisdiction with an extensive treaty network, and should instead confirm relief (if needed at all, given the absence of Bermuda withholding) under the domestic law of the counterparty jurisdiction.

Because there is no Bermuda withholding tax to relieve, the practical cross-border tax question for groups with Bermuda operations is usually the reverse: whether payments received in Bermuda from onshore counterparties have suffered withholding at source under the counterparty jurisdiction's own domestic law, and whether that foreign withholding can be credited against the counterparty's own tax liability or, for in-scope Bermuda entities, against Bermuda corporate income tax liability under the CITA 2023 foreign tax credit mechanism. TIEA information exchange, together with CRS and FATCA reporting, means that Bermuda entities and their beneficial owners are nonetheless fully visible to onshore tax authorities notwithstanding the absence of a Bermuda-side treaty network.

5.1 Economic substance

The Economic Substance Act 2018 requires Bermuda entities that carry on one or more prescribed 'relevant activities' — including banking, insurance, fund management, financing and leasing, headquarters activities, shipping, distribution and service centre business, intellectual property holding, and holding-entity business — to satisfy an economic substance test in Bermuda. This generally requires the entity to be directed and managed in Bermuda, to conduct core income-generating activities in Bermuda, and to maintain adequate physical presence, employees and expenditure in Bermuda proportionate to the activity conducted, with enhanced requirements for high-risk intellectual property holding entities. Non-compliance can lead to financial penalties, compulsory information exchange with the relevant foreign competent authority, and, for persistent non-compliance, potential striking-off. Economic substance obligations apply irrespective of whether an entity is in scope of CITA 2023, since the two regimes address different policy concerns — substance addresses profit-shifting into low-tax jurisdictions generally, while CITA 2023 addresses the specific Pillar Two minimum tax question for the largest groups.

5.2 CRS, FATCA and beneficial ownership

Bermuda is a signatory to the OECD Common Reporting Standard and has entered into a FATCA intergovernmental agreement with the United States, requiring Bermuda financial institutions to identify and report account holders and controlling persons who are tax resident in reportable jurisdictions. Bermuda also maintains a beneficial ownership register regime for companies and other legal entities administered by the Bermuda Monetary Authority and the Registrar of Companies, with information available to competent authorities on request consistent with international transparency standards. Together with the TIEA network described in section 4, these measures mean that Bermuda's absence of domestic income tax and treaty withholding relief is not matched by an absence of transparency: onshore tax authorities generally have access to the information needed to test whether their own residents are using Bermuda structures appropriately.

6.1 No VAT or general sales tax

Bermuda does not levy a value added tax, goods and services tax, or general sales tax on the supply of goods or services. Government revenue from consumption-related sources is instead generated principally through customs duties charged on imported goods at the border, which remain one of the largest single categories of government revenue notwithstanding the introduction of CITA 2023, together with a general services tax applied in specific sectors and various licence fees payable by businesses operating in Bermuda.

6.2 Property, stamp and other charges

Real property in Bermuda is subject to an annual land tax, assessed by reference to the annual rental value (ARV) of the property, with progressive rates that increase at higher ARV bands and generally higher effective charges on higher-value residential and commercial property; commercial and investment property is typically taxed more heavily than modest owner-occupied residential property. Stamp duties apply to a range of legal instruments and transactions, including conveyances of real property, leases, mortgages and certain other instruments, with rates and thresholds varying by instrument type and transaction value. A modest stamp-duty-based charge also applies on death in connection with the administration of a Bermuda estate, as described in section 3.4. There is no capital gains tax, no death duty in the classic sense, and no net wealth tax layered on top of these transaction- and property-based charges.

7.1 Administration

The Bermuda Government administers payroll tax, land tax, customs duties, stamp duties and other domestic levies through the Office of the Tax Commissioner and the Department of Customs, with payroll tax returns and payments made on a periodic (generally quarterly) basis by employers. CITA 2023 introduces, for the first time, a dedicated corporate income tax administration function responsible for registration of in-scope Bermuda businesses, processing of CITA 2023 returns, assessment, and enforcement, operating alongside — but separately from — the long-standing payroll tax and land tax administration. In-scope groups should expect a formal registration obligation with the Bermuda tax authorities in advance of their first CITA 2023 filing, and should not assume that historical familiarity with Bermuda's light-touch, largely tax-free administrative environment will carry over unchanged to the new corporate income tax function.

7.2 Rulings, appeals and enforcement

CITA 2023 contemplates a formal assessment, objection and appeal process for in-scope taxpayers broadly consistent with international norms for a modern corporate income tax, including the ability to seek guidance from the tax authority on the application of the Act to specific facts, particularly in relation to the Economic Transition Adjustment and the treatment of complex group structures. Given the international, GloBE-aligned design of CITA 2023, disputes are likely in practice to be informed by, and to require consistency with, the OECD's own GloBE administrative guidance, since a divergence between Bermuda's interpretation and the OECD consensus could jeopardise the 'qualified' status of CITA 2023 as a QDMTT-equivalent for the affected group. Outside CITA 2023, disputes over payroll tax, land tax, customs duties and stamp duty follow established Bermuda administrative and court processes, with recourse ultimately to the Supreme Court of Bermuda.

Because CITA 2023 is newly effective for fiscal years beginning on or after 1 January 2025, calendar-year in-scope groups will generally encounter their first CITA 2023 filing and payment obligations in respect of the 2025 fiscal year, falling due in 2026, with the exact filing window, instalment mechanics and any transitional filing relief to be confirmed against the detailed regulations and administrative guidance issued under the Act. Businesses outside the scope of CITA 2023 continue to follow only the long-standing payroll tax, land tax, economic substance and company fee calendar, unaffected by the new corporate income tax filing timeline.

9.1 Entity choice

The exempted company remains the standard vehicle for international business in Bermuda, permitting foreign ownership without the local ownership restrictions applicable to companies conducting business substantially within Bermuda, and widely used for reinsurance, asset management, special purpose vehicles and holding structures. Permit companies (foreign companies registered to do business in Bermuda), exempted partnerships and exempted unit trust schemes serve related purposes for specific fund, partnership and trust structures. A local company, subject to Bermudian ownership requirements, is typically used only where the business is intended to operate substantially within the domestic Bermuda market. None of these entity choices affects whether CITA 2023 applies — that question turns on MNE group revenue and group membership, not on the Bermuda entity type — but entity choice remains central to economic substance classification, regulatory licensing (particularly for insurers) and general corporate law flexibility.

9.2 Structuring and incentives

For groups below the EUR 750 million MNE revenue threshold, Bermuda continues to offer a genuinely tax-neutral base for holding, financing, reinsurance and fund structures, subject to economic substance compliance and the payment of ordinary government and licence fees. For groups above the threshold, structuring attention should shift to correctly identifying which Bermuda entities are Bermuda businesses within the meaning of CITA 2023, quantifying the Economic Transition Adjustment available on transition, and ensuring interaction between CITA 2023, home-country CFC rules, and the broader Pillar Two IIR/UTPR network is modelled so that Bermuda tax paid is properly creditable and does not result in double taxation. Insurance-heavy groups in particular should model CITA 2023 alongside existing US and UK anti-deferral and base-erosion regimes that may already apply to their Bermuda operations.

9.3 Worked effective-rate illustration

In-scope entity. A Bermuda reinsurance subsidiary of a global MNE group with consolidated revenue well above the EUR 750 million threshold reports book income of USD 40,000,000 for its first fiscal year within the scope of CITA 2023. An Economic Transition Adjustment of USD 6,000,000 is available, reflecting the step-up in basis of certain long-held investment assets recognised on transition from the pre-2025 no-tax regime. Adjusted net income for CITA 2023 purposes is therefore 40,000,000 − 6,000,000 = USD 34,000,000. Corporate income tax at 15% is 34,000,000 × 0.15 = USD 5,100,000. The entity also paid USD 400,000 of foreign withholding tax on cross-border investment income included in book income, which is creditable against the CITA 2023 liability, reducing the net Bermuda tax payable to 5,100,000 − 400,000 = USD 4,700,000. Cross-check: 4,700,000 + 400,000 = 5,100,000 = 34,000,000 × 0.15, confirming the arithmetic. The effective rate on book income before the ETA is 4,700,000 / 40,000,000 = 11.75%, while the effective rate on the adjusted (post-ETA) tax base is 4,700,000 / 34,000,000 ≈ 13.8%, both below the headline 15% rate because of the transition relief and foreign tax credit — illustrating why the ETA and credit mechanism matter to a group's real-world effective rate in the years immediately following the 2025 transition.

Out-of-scope entity, for contrast. A Bermuda exempted company used as a private investment holding vehicle for a family office, with no MNE group affiliation and well below the EUR 750 million threshold, earns USD 5,000,000 of investment income and realised gains during the same fiscal year. Because the entity is not part of an in-scope MNE group, none of this income is subject to Bermuda income tax: Bermuda corporate income tax payable is USD 0. The entity's only Bermuda-level charge is its annual government company fee, a fixed fee payable to the Registrar of Companies based on the company's assessed share capital, typically in the range of a few thousand US dollars per year for a standard exempted company, plus any applicable economic substance filing where a relevant activity is carried on. The contrast illustrates the bifurcation described in section 1: an effective tax rate of roughly 11.75%–13.8% for a large in-scope reinsurer against an effective rate of 0% (aside from a fixed annual fee of a few thousand dollars) for an out-of-scope investment holding company, both operating under Bermuda law side by side.

9.4 Compliance

Groups with any Bermuda presence should first determine, and then annually re-test, whether they are part of an in-scope MNE group for CITA 2023 purposes, since group revenue can cross the EUR 750 million threshold in either direction over time. In-scope groups should budget for CITA 2023 registration, return preparation on a book-income-plus-adjustments basis, Economic Transition Adjustment calculation and support, transfer pricing documentation for intra-group Bermuda transactions, and foreign tax credit tracking. All Bermuda entities, whether or not in scope of CITA 2023, should maintain economic substance compliance where a relevant activity is carried on, keep beneficial ownership register filings current, meet CRS and FATCA reporting obligations, pay the annual government company fee, and — for employers — remit payroll tax on a timely quarterly basis.