The corporate income tax rate will be set at 15 per cent, according to the second public consultation on the introduction of the tax for large companies.

“Taking into account all feedback received during the first public consultation, the Government intends to adopt a CIT rate of 15 per cent,” the text of the document reads.

The rate is at the high end of the 9-to-15 per cent range discussed in the initial consultation document, which was open for comment from August 8 through September 8.

Friday’s disclosure all but ends the possibility that Bermuda might choose a lower rate.

Bermuda is set to start taxing multinational corporations with more than €750 million of global annual revenue from 2025 – ending its historic status as a zero-rate jurisdiction – as a plan for a minimum global tax kicks in, led by the Organisation for Economic Co-operation and Development.

In 2021, some 135 countries and territories agreed to the initiative, although implementation of a global tax is facing political resistance in the United States.

Countries are not required to start taxing corporations, but should they fail to do so, another jurisdiction is eligible to collect the difference as a top-up tax.

In the second consultation document (see related media), for which submissions are now accepted through October 30, the government explained that respondents to the first consultation asked that the rate be set in a way to keep the administrative burden to a minimum and to maintain tax transparency – especially with respect to the undertaxed profits rule.

“Respondents (particularly those from multinational groups headquartered in Bermuda) expressed a strong preference for a rate which would not likely result in the application of UTPR in affiliate jurisdictions as this would lead to potentially significant additional administrative cost,” the document said.

“A statutory rate of 15 per cent would in principle prevent material amounts of top-up tax arising, and would preserve the ability of certain investment entities and insurance investment entities to elect to be tax transparent.”

The document envisions an effective date for the new legislation of January 1, 2025. A third public consultation document, which will include draft legislation, will be published on or about November 10.

According to the government’s timeline, a bill will be presented to legislators before the end of the year.

In the second consultation, the Government explained that the imposition of a corporate income tax would be good for Bermuda.

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Second Public Consultation

“There are additional advantages that may flow from collecting the tax in Bermuda rather than allowing it to be paid to foreign jurisdictions.

“Restructuring the existing tax regime in Bermuda, potentially reducing consumption and payroll taxes, would reduce the cost of living and doing business in Bermuda,” according to the document.

“Furthermore, the introduction of meaningful qualified refundable tax credits in the proposed corporate income tax regime presents an opportunity for groups that have Bermuda entities to invest in the jurisdiction in a manner consistent with the Government’s policy objectives.”

“In this context, Government believes it is reasonable and proportionate for any new Bermuda corporate income tax regime to supersede any existing tax assurance held by entities within the scope of the new Bermuda corporate income tax.”

The second consultation document does not discuss the possibility of maintaining the status quo, which was mentioned and quickly dismissed in the early document.

It is heavy on detail, with a particular focus on how income will be calculated and what deductions will be available.

It says that insurance companies in Bermuda may be able to exclude taxes that accrue when paying policyholders and suggests that tax-loss carry forwards will be unlimited in terms of years valid.

A long list of deductions are in the document, including federal, state, local and withholding taxes, while significant guidance is provided about how these will be calculated.

The consultation document outlines investment and spending that could generate tax credits, such as funds spent towards the creation of jobs, training and career development, local infrastructure investment and investment in support of the Bermudian environment.

Details of the Qualified Refundable Tax Credit will be made available in 2024 for implementation in 2025.

“I look forward to continuing to partner with our key stakeholders in the further refinement of this proposal, and the positive impact the new CIT regime will have on Bermuda’s future,” David Burt, the Premier, was quoted as saying in a statement released by the government.