Bermuda payroll and tax overview.

Bermuda is an island nation in the North Atlantic Ocean situated over 1000 kilometres east of the United States southeast coast. Officially a territory of the United Kingdom since 1707, Bermuda has always been a historic global trading destination. In the 20th century, Bermuda established itself as an offshore financial centre, offering international businesses a low taxation, low regulation environment in which to operate. Bermuda’s economy is based primarily on its financial services industry which serves thousands of international businesses. Tourism also plays an important financial role, accounting for 28% of Bermudian GDP and attracting the vast majority of its patronage from North America. With Bermuda’s government currently making efforts to further promote its business potential on the world stage, the territory represents a flexible, streamlined environment in which to set up and incorporate a company.

Why Invest in Bermuda?

With thousands of organisations operating in Bermuda, there are plenty of reasons for investors to target the territory:

• Tax environment: Bermuda imposes no income, profit or capital gains taxes, making it a very attractive tax environment for its businesses. Bermuda also applies no VAT to its goods and services.
• Stable government: Bermuda’s legal system is grounded in UK law, and offers its businesses a robust and stable environment in which to operate. The political landscape of Bermuda favours international business interests, while its government is focused on attracting investment.
• Strategic location: Bermuda is located off the eastern seaboard of the United States, a position with offers excellent links to locations across North America, the United Kingdom, and the European Union. 75% of the Fortune 500 maintain a presence on Bermuda.
• Low regulation: Bermuda’s light regulatory framework is designed to attract foreign investment. Regulations on foreign business ownership have been relaxed recently, making it easier for investors to own businesses in Bermuda.
• International reputation: Businesses located in Bermuda tend to find it easier to deal with partner organisations across the United States (and other locations) who are familiar with, and confident in, its financial and legal system. Bermudan companies are listed on stock exchanges across the world.

Foreign Direct Investment in Bermuda

The government of Bermuda (GOB) welcomes foreign direct investment (FDI). Bermuda’s economy is almost wholly dependent on FDI which derives primarily from the influx of international businesses – principally insurance, reinsurance, and financial services – with a small contribution from the tourism sector.

Registrations and Establishing an Entity in Bermuda

A foreign company is required to have a legal entity in Bermuda in order to process a Bermuda payroll.

Business Banking in Bermuda

It is not mandatory to make payments to employees and authorities from an in-country bank account.

Working Days and Working Hours in Bermuda

The working week in Bermuda is Monday to Friday. The majority of businesses operate from 9 am to 5 pm, with one hour for lunch.

Basic Facts about Bermuda

General Information

The island of Bermuda is actually an archipelago of volcanic rock in the North Atlantic Ocean. Bermuda was first discovered in 1503 by the Spanish but was not settled until the early 17th century by representatives of the Virginia Company. The island eventually became a British colony in 1707, and remains an Overseas Territory of the United Kingdom, recognising Queen Elizabeth II as head of state but maintaining a governor and a cabinet to exercise authority on her behalf. Bermuda is represented by the United Kingdom in all international affairs, but has ‘representative offices’ in cities in countries all over the world. Bermuda’s climate is hot and humid, and island weather remains warm throughout the year. With a spectrum of beautiful landscapes and natural attractions, including 103 kilometres of coastline, Bermuda has a reputation as a luxury holiday destination, drawing visitors from all over the world.

Full name: Bermuda

Population: 63,918 (World Bank, 2019)

Capital: Hamilton

Major Languages: English

Monetary Unit: Bermudian dollar

Main Exports: Planes, helicopters, petroleum gas, packaged medicaments, liquor and fruit juice

GNI per Capita: US $86,600 (World Bank, 2019)

Internet Domain: .bm

International Dialing Code: +1

The tax year runs from 1st April to 31st March.

It is not necessary to be licensed to make any tax and/or social security filing on behalf of a customer.

Companies looking to process payroll in the country must:

• State the nature of the business
• Open a local debit bank account
• Complete registration with the Register of Companies
• Obtain a license from the Bermuda Monetary Authority

Payroll Tax

Payroll tax is paid quarterly on form PR1EX and must be paid within 15 days of the end of each quarter (Jan-Mar, Apr-Jun, Jul-Sept, and Oct-Dec). The employer pays payroll tax based on a sliding scale of total annual remuneration. The employer may withhold up to 6% from employee wages to offset their payroll tax liability. The employer can get relief of $600 per employee per quarter if they pay 11.25% or higher in payroll taxes, providing that tax paid does not fall under 6% of gross wages paid for the quarter. The applicability of the employer receiving the special relief deduction per employee is that the employee must be employed at the end of the quarter and the employee must have worked 3 months for permanent employees and 172 hours for temporary employees.

E-tax

It is mandatory for all taxpayers with payrolls of $350,000 or more per annum to e-file, starting from the returns for the quarter April - June 2020 which must be filed on or before July 15, 2020. Penalties will be levied where tax is not submitted in the required format. To register please click here. The Office of the Tax Commissioner encourages all taxpayers to e-file for fast and easy reporting.

New Hire Relief 2020

The New Hire Relief has been extended to all employers whose remuneration is $500,000 to no more than $1 million per annum. Qualifying employers are those who engage New Hires between April 1, 2020 thru March 31, 2022 and who increase the number of full-time equivalents from those reported in the baseline period of January thru March 2020. Employers who were not in operation prior to March 31, 2020 will receive the relief if they hire one or more full time persons after April 1, 2020 and have total remuneration of at least $500,000 per annum or $125,000 p/qtr. Full time persons refer to employees who work for more than 15 hours a week.

Employers benefiting from the relief will pay an Employer portion of 0% on the remuneration paid to qualifying employees up to and including the tax period January thru March 2022. The Employee portion will be payable at the progressive tax rates.

The 2020 New Hire Relief is in addition to the New Hire Relief 2018 which was extended to all Exempted Companies and Employers with gross annual remuneration of $1 million or more. Employers who qualify for the 2018 Relief are those whose number of full-time employees increased from that in the baseline period of January thru March 2018.

Employers must keep adequate books and records in accordance with the Tax (Accounts and Records) Regulations 1991 to verify the declarations made on each tax return. Any person who submits false returns, fails to keep adequate records or to present them to the Office of the Tax Commissioner when requested, or evades tax payment in any way commits an offense and is subject to fines up to $500,000. The Tax Commissioner reserves the right to assess a value for undeclared remuneration under section 16 of the Taxes Management Act for any person to which in his opinion such person is chargeable.

Social Security

This tax is a fixed amount of US$71.84 (2018) per employee per week. The employer pays 50% and employee pays 50% for employees between the ages of 16 to 64. For employees 65 and over, only the employer payment is due.

The employer is billed monthly based on the number of employees registered and this bill must be paid by the last Friday of that month.

Pension

Employers must hire a pension plan provider. Employer and employee pay the same rate – 5% of pensionable earnings.

New Employees in Bermuda

The employee must have a Social Insurance Number that has to be obtained before working at and after the age of 18.

Leavers in Bermuda

There are no legislative specifications regarding the time-scale for an employee’s final payment, however the employer must ensure all records are up to date with payment to social insurance payment/pension. The employer must also produce a termination statement.

There are no restrictions in the law or further procedures required in order to provide online payslips in Bermuda.

For the implementation of the payroll, the following are required:

• Full company data
• Employee HR data
• All employee payments and deductions
• Chart of accounts

After the information above has been received, it should take a week to set up the program to run the payroll.

Payroll reports must be kept for at least ten years.