New corporate tax credits explained
Bermuda’s new corporate income tax regime is coming with a set of incentives that could reshape how big companies operate on the island.
The Ministry of Finance has published draft legislation for three tax credits now open for public consultation: a substance-based tax credit for insurers, a community development tax credit and a utilities infrastructure tax credit.
The consultation paper states: “It is expedient to incentivise industries that are instrumental in the growth and development of the Bermuda economy to invest in their on-island operations … where it results in increased employment in Bermuda and increased job opportunities for Bermudians.”
Insurance and reinsurance groups registered with the Bermuda Monetary Authority that earn more than half of their revenue from insurance, qualify for this credit. It is tied to two main factors: jobs, with bigger benefits if companies employ Bermudians, offer training, or grow headcount; and local spending, including money spent on offices, tangible assets, professional services, utilities and training in Bermuda.
As the island’s economic engine, the insurance and reinsurance sectors are most exposed to the new 15 per cent corporate tax. According to the Government, this credit softens the blow while pushing companies to expand their on-island workforce and supplier base instead of outsourcing.
Any corporate group that donates at least $300,000 to Bermuda charities over three years qualifies.
Companies can claim a credit worth 25 per cent of their cash donations to eligible Bermuda charities. Contributions must be acknowledged by the charity and at least 75 per cent must be used for a Bermuda-based purpose.
This could funnel millions more into Bermuda’s non-profit sector at a time when many organisations are under strain, according to the ministry. It also encourages companies to treat philanthropy as part of their tax planning.
The ministry notes that it is also appropriate to recognise and encourage charitable contributions when they represent a meaningful benefit to the community.
Groups regulated in electricity, telecommunications or fuel distribution qualify.
Companies can claim credits linked to payroll and the value of physical infrastructure they invest in Bermuda. The benefit rates start at about 9.6 per cent for payroll and 7.6 per cent for assets in 2025, but decline gradually to 5 per cent by 2033.
Bermuda’s high cost of living is tied to utilities, the ministry said. By encouraging investment in local energy, telecoms and fuel infrastructure, the Government hopes to support upgrades and expansion in these critical services.
Last week, David Burt, the Premier, explained that the Government was introducing the new tax credit legislation as part of tax reform, intended to provide incentives for international companies to direct more capital into local projects. He identified affordable housing as one of the most pressing needs.
“The reforms which we're doing, the upcoming tax credit legislation as part of the global tax reform, will allow us to provide more incentives for that to happen,” Mr Burt said.
• For the complete Tax Credit Public Consultation, see Related Media
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