The Budget Statement delivered by the Minister of Finance, the Hon. Eugene Cox, introduced a number of changes that have an impact on businesses and residents of Bermuda.

Today, I will summarise the most significant changes.

Copies of the Bills containing the changes in respect of payroll tax and stamp duty are not yet available. This column, therefore, is based on the Budget Statement.

The rate of payroll tax, which increased last year to 12.75 percent, was not increased further but there was an adjustment to the salary cap.

Exempted companies will now calculate their payroll tax based on the actual value of compensation and benefits paid to employees, except where the salary declaration cap of $225,000 applies. That figure has been reduced from the $250,000 threshold introduced a year ago.

Where an employee's compensation and benefits exceed $225,000, only up to $225,000 must be declared and is subject to tax.

This cap, introduced in February, 2000, provides some relief against the payroll tax liability, and has the additional benefit of reducing the impact of double taxation for those employees who are subject to worldwide taxation on their income (e.g. US citizens).

Moreover, in an effort to ensure that Bermuda is not identified as a `harmful preferential tax regime' -- the term used by the Organisation for Economic Co-operation and Development (OECD) - the Budget has sought to remove a further distinction between local and exempted undertakings.

The salary declaration cap of $225,000, therefore, is now extended to local companies.

The Minister noted the significant contributions made by the international business community to the general prosperity of the Island, and did not introduce any increase in company fees.

Stamp duty exemptions for Bermuda trusts that hold non-Bermuda dollar assets remain in effect, provided that at least one of the trustees is a Bermuda resident.

In particular, no stamp duty is payable where non-Bermuda dollar assets are transferred to a Bermuda trust.

However, the rates of stamp duty payable on the transfer of Bermuda dollar assets to Bermuda trusts have been amended.

The rate is nil where the value of Bermuda dollar assets is $50,000 or less; five percent on the next $150,000; ten percent on the next $500,000; and 15 percent on assets in excess of $700,000.

The new duty rates may also apply where there is a change of trustees.

However, structuring using underlying companies has not been affected by the Budget.

Stamp duty rates on estates remain unchanged, and no longer mirror the rates applicable to settlements of Bermuda dollar assets into a Bermuda trust.

In the area of Estates, gifts on death to spouses, gifts to Bermuda charities and gifts of foreign real and personal property remain exempt from stamp duty.

It is important to note that the definition of 'Bermuda property' includes items such as valuable antiques, art collections, and jewellery, as well as private homes and other contents.

Consequently, non-Bermudians who work or live in Bermuda, whether part-time or on a permanent basis, may unwittingly find some of their Bermuda based property subject to stamp duty in Bermuda on death. Proper estate planning can help to minimise or avoid the imposition of this duty.

Rates payable on lifetime gifts, including transfers of houses and condominiums, have been increased.

The transfer of Bermuda-dollar assets now attracts stamp duty as follows: first $100,000 (2.5%), next $400,000 (three percent), next $500,000 (four percent), next $500,000 (five percent), and over $1.5 million (six percent).

The rate of one percent of the value of the asset, charged on non-Bermuda dollar assets, remains unchanged subject to a maximum duty of $7,500.

The rates of stamp duty payable on the sale and purchase of assets, including houses and condominiums have also been increased.

They now attract tax as follows: first $100,000 (2.5%), next $400,000 (three percent), next $500,000 (four percent), next $500,000 (five percent), and over $1.5 million (six percent).

The Budget did not contain across-the-board increases in land tax, but notice was given that a new band is to be introduced that will affect properties that have an annual rental value of $90,000 or higher. The new band is expected to affect two percent of the properties on the Island.

While this column was written to provide an update with regard to Bermuda fiscal changes, your personal situation can affect your tax liability.

If you (or your family members) have dual nationality or foreign assets, spend a significant amount of time in a foreign country or have a business which operates in another country, it is vital that you seek appropriate personal or corporate tax advice as in many instances foreign tax legislation may affect you.

Attorney Vanessa Lovell is a member of the Trusts and Financial Structures Team of Appleby Spurling & Kempe. This column was prepared with the assistance of Martin Mitchell, K. Renee Benjamin and Tammy Richardson. Copies of Ms Lovell's columns can be obtained on the Appleby Spurling & Kempe website at www.ask.bm.

This column should not be used as a substitute for professional legal advice.

Before proceeding with any matters discussed here, persons are advised to consult with a lawyer.