In brief

What happened? 

The Government of Bermuda's Ministry of Finance recently released a public consultation paper on the administrative provisions of the Corporate Income Tax (CIT). This follows the enactment of the Corporate Income Tax Act 2023 and the Corporate Income Tax Agency Act 2024, which establishes the Bermuda Corporate Income Tax Agency (the Agency) responsible for administering CIT laws. The consultation period is open from August 8, 2024, to September 5, 2024, with a subsequent consultation paper expected to contain the draft legislation, based on feedback.  

Why is it relevant? 

The release of the public consultation paper on the administrative provisions of the CIT is designed to help affected Bermuda entities understand the registration requirements, the return filing process, the timing of payment obligations, and the applicability of the penalty and interest regimes. 

Action to consider 

Bermuda entities that are subject to the CIT should review the consultation paper and assess the impact of the proposed administrative provisions on their operations, prepare to register with the Agency by the stipulated deadlines, ensure systems are in place for accurate and timely CIT return filing and payment, and provide feedback to the Ministry of Finance during the consultation period to address any concerns or clarifications needed. 

Payment of taxes 

Installment payments 

Taxes are paid in installments. The first installment is due by the 15th day of the 8th month after the beginning of the fiscal year, amounting to 50% of the expected tax liability for the year or a safe harbor backstop based on projected annualized earnings. The second installment is due by the 15th day of the 12th month after the beginning of the fiscal year, bringing the total installments to 90% of the expected tax liability for the year or the safe harbor backstop. Further guidance will be provided on the information required to support the calculation of these estimates.  

Final payment 

Upon filing the CIT return, a "true-up" payment must be made no later than the due date of the return, regardless of when the return is filed. Payment can be made by the filing BCE on behalf of the underlying group entities.  

Interest and penalties  

Overpaid taxes will accrue interest at a published reference rate, beginning 90 days after the return is filed. Companies can elect to apply the overpayment to future amounts due. In contrast, underpayment of tax will accrue interest at the published reference rate plus 150 basis points, calculated from the date of the respective first, second, and true-up installments.  

Civil penalties will be prescribed for late returns, either as fixed penalties over time, tax-geared penalties, or a combination of both. Non-civil penalties also may be considered in appropriate circumstances.  

See also 

For prior coverage of the CIT, please refer to our other Tax Insights: “Proposed Bermuda corporate income tax is closely modeled after the GloBE rules, with key differences” (October 13, 2023); “Bermuda provides clarifying details regarding its proposed corporate income tax” (November 21, 2023); and “Bermuda enacts a corporate income tax, requiring businesses to begin preparing for compliance” (January 17, 2024).