The corporate income tax has had an uneven impact on local business sectors including banking and insurance, with winners and losers evident after the first year of the new tax.

Corporate reports and filings show how the CIT’s impact is going beyond exempt companies and creating varying outcomes for businesses providing local services.

In banking, HSBC Bermuda paid CIT on its profits, while its three retail bank competitors were not in scope.

HSBC booked pretax profits of $295 million in 2025 and recorded a tax expense of $44.3 million, its financial statements show. The bank’s accompanying cashflow statement reveals a tax payment of $40.5 million last year.

CIT is levied on the Bermuda profits of multinational businesses with global revenues exceeding 750 million euros (approximately $857 million).

Clarien Bank and Bermuda Commercial Bank do not fall in scope since they are not part of international groups.

Both HSBC and Butterfield do operate internationally. HSBC is part of a huge global enterprise that operates in 56 countries. Its 2025 group-wide revenue totalled $68.3 billion, bringing it comfortably in scope.

Butterfield Bank, which has operations in ten countries — the largest of which are in Bermuda and the Cayman Islands — fell short of the CIT revenue threshold, generating just under $607 million in 2025.

However, Butterfield’s revenue is expected to surge well above the threshold as a result of the bank’s $1.8 billion acquisition of CIBC Caribbean Bank, a deal announced in May and expected to close in the first half of 2027.

A Butterfield investor presentation on the acquisition highlighted “accelerated impact of OECD Pillar 2 Global Minimum Tax” as a likely consequence of the deal. Bermuda’s CIT was introduced to align the island with global minimum tax guidelines.

The combined Butterfield-CIBC Caribbean entity would have generated $1.38 billion in 2025 revenue, the presentation showed. However, the impact on tax liability is likely to be delayed by a further year after the combination. Only if a group’s consolidated revenue meets or exceeds the threshold in at least two of the previous four fiscal years is it considered in scope for CIT.

HSBC had initially prepared to offset its tax payments through a deferred tax asset allowed under the economic transition adjustment provision of the CIT legislation, designed to create a fair transition for companies entering the CIT regime.

However, a note in its financial statements makes clear the DTA no longer applies.

“In 2023, the bank recognised a net deferred tax asset of $83.055 million in relation to the economic transition adjustment, which was expected to be amortised over ten years starting from 2025.

“During 2024, the bank reassessed its DTA position and elected to opt out of the ETA provisions of the Bermuda CIT and as a result has reversed the DTA in 2024.”

None of the banks are eligible to claim substance-based tax credits under the Tax Credits Act 2025 — designed to reward companies for on-island headcount, employment of locals and local spending — since these are aimed at groups that derive more than half of their Bermuda revenue from insurance operations.

Local insurer Allshores, which is part of an international group, has booked substance-based tax credits totalling $20.8 million for 2025 as a reduction in its operating expenses, as previously reported, and has said it does not expect to pay CIT in the near term.

Rival insurer Coralisle Group, which is privately held and whose 2025 financial statements are not yet publicly available on the Bermuda Monetary Authority website, is also likely to be eligible for credits.

However, Coralisle also anticipates paying some CIT. In a note in its 2024 financial statements, the insurer said: “Management expects the company to incur and pay increased taxes in Bermuda beginning in 2025.”

Other local entities that could incur CIT, and be eligible for utility infrastructure tax credits include Belco, Digicel and One Communications.