Premier tables historic corporate tax legislation
Legislation paving the way for the most significant change in taxation in Bermuda’s modern history was tabled yesterday in the House of Assembly.
David Burt, the Premier, tabled the Corporate Income Tax Act 2023 which will impose a 15 per cent tax on Bermuda businesses part of multinational groups with annual revenue of €750 million (about $808 million) or more.
“The tabling of this Bill presents an opportunity for Bermuda to chart a path towards meaningful tax reform that will significantly reduce the cost of living and the cost of doing business in this country, leading to further economic prosperity and economic stability,” said the Premier.
“This landmark legislation represents a major milestone in the most fundamental tax reform in Bermuda’s modern history.”
The explanatory notes in the legislation adds: “As well as the new tax, the legislation also includes the establishment of a tax agency for the purposes of collecting and administering such corporate income tax regime.”
The Premier said that since 2015 the Organisation for Economic Co-operation and Development, in collaboration with the G20 industrialised countries, had worked to address the issue of profit shifting.
He said that in October 2021, a global agreement was reached to make material changes to the global tax system that would impose a minimum tax rate of 15 per cent on the corporate profits of large multinational enterprise groups to be applied in every jurisdiction in which they had a corporate footprint.
To address the issue, the Government set up an international tax working group which “considered several options to address the challenges surrounding the global minimum tax”.
Based on its recommendations, the Premier said the Government “decided to introduce a corporate income tax regime as it provides the most flexibility and allows for the introduction of policy driven design features, which are common in many other countries, that will benefit Bermuda”.
The Premier added: “The Government plans to introduce a 15 per cent corporate income statutory tax that will be applicable to Bermuda businesses that are part of a multinational group with annual revenue of €750 million or more.
“The corporate income tax will also fulfil Bermuda's commitment to participate in the global minimum tax initiative being implemented around the world.”
Mr Burt said that as part of the new tax regime, which is expected to come into force in January 2025, the Government was developing a package of qualified refundable tax credits.
He said they were aimed at supporting “Bermuda's economic goals and maintain our global attractiveness as a jurisdiction”.
“Investments by corporations that meet the QRTC requirements will benefit Bermuda in key areas including infrastructure, education, healthcare, innovation, and housing,” the Premier added.
In response to questions from the One Bermuda Alliance at a recent sitting of the House, the Premier estimated that as many as 10 per cent of international businesses registered in Bermuda could be affected by the tax.
Asked by OBA MP Scott Pearman whether the Government had an estimate for how many entities might also leave Bermuda as a result of this tax, the Premier replied: “No”.
Mr Pearman also asked what the expected net revenue of the tax, after tax credits and after any possible entities that may leave, would be.
Mr Burt said: “That matter is undetermined at this time but the modelling continues with the Tax Reform Commission and when their report is done it will be shared with members of the House.”
Mr Pearman also asked how the tax would be administered and whether there was a cost estimate for the administration.
Mr Burt replied that the commission was looking at that issue, and when finalised it would be brought to the House.
The Tax Reform Commission, which was announced earlier this year, is also analysing Bermuda's existing tax regime and considering potential restructuring alternatives.
• To view the Premier’s statement and the Corporate Income Tax Act, see Related Media
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