S&P Global Ratings improved its outlook on Bermuda’s government debt rating to positive from stable — highlighting that corporate income tax revenues improving the island’s public finances.

The rating agency affirmed Bermuda’s A+ long-term sovereign credit and senior unsecured debt ratings, as well as its A-1 short-term rating. The AA+ transfer and convertibility assessment on Bermuda remains unchanged.

“The positive outlook reflects our expectations that, in the next two years, corporate income tax collections will improve Bermuda’s fiscal performance,” S&P analysts said in a report.

“The tax will allow the government to fully repay an upcoming debt maturity in January 2027, leading to a return to a net general government creditor position.

“At the same time, we expect continuity in the government's policies despite a planned leadership change in the ruling Progressive Labour Party (PLP).

“We also believe that the domestic economy will remain healthy with steady performance of key industries, supporting the territory’s very high income levels.”

David Burt, the Premier and Minister of Finance, described S&P’s improved outlook as “an important signal of growing confidence in Bermuda’s fiscal management”.

Mr Burt added: “Together with last week’s confirmation from KBRA, Bermuda now holds A+ ratings with positive outlooks from two independent ratings agencies. This reflects the tangible impact of stronger revenues, disciplined debt reduction, and an economy that continues to perform well in a challenging global environment.

“Independent assessments like this matter because they confirm that Bermuda continues to move in the right direction and demonstrate that the Government’s disciplined financial management and a clear long-term strategy are delivering results.”

S&P said the early indications were that the new revenue stream derived from the CIT “will surpass previous estimates”.

The 15 per cent tax applies to multinational companies with consolidated global revenue of €750 million (about $877 million) or more.

Mr Burt said in his Budget statement in February that the Government estimated CIT revenues of $279 million for the fiscal year 2025-26 and $753.2 million for 2026-27.

“While early indications are positive, we believe there is still some uncertainty regarding the impact of the regime,” the S&P report stated.

“Final information on the first year of collection, including information related to the use of tax credits, will not come until after the first returns are due in October.

“We expect the Government's strengthening fiscal performance will also contribute to a decreasing debt burden and lower interest payments.

“In addition, we believe that policymaking is effective and predictable, and we expect the territory's GDP per capita will remain among the highest in the world.”

The main downside risk to Bermuda’s outlook comes from any future deterioration of international financial services, as the driving force of the island’s economy.

“Although the impact of the changes to the domestic tax system, mainly the introduction of the CIT and corresponding tax credit regime, is still unfolding, we believe the tax regime will be managed in a way that ensures the economy and the international business sector remain competitive,” S&P’s analysts said.

“Although the sector's performance has supported the economy, the high reliance on, and concentration in, the industry makes GDP and government revenues more vulnerable to any shifts in the sector. This concentration is more acute with the new tax regime.”

The analysts added that they expected real GDP growth to average 1.6 per cent over the next four years, and inflation to average around 2.4 per cent.