Proposed Bermuda corporate income tax is closely modeled after the GloBE rules, with key differences

In brief

The Government of Bermuda issued its second public consultation paper (PCP) on October 5, proposing a 15% corporate income tax (CIT) applicable to Bermuda businesses that are part of multinational enterprise (MNE) groups with annual revenue of €750M. The tax would be effective beginning in 2025.

Consistent with the first public consultation, one of the primary policy underpinnings associated with the CIT, as described in the second PCP, is alignment with the Global Anti-Base Erosion (GloBE) rules and qualification as a Covered Tax. However, Bermuda currently has no proposals to introduce the Income Inclusion Rule or the Undertaxed Profits Rule.

Action items: The second PCP provides details with respect to the scope of the proposed CIT, as well as the computation of taxable income and the tax itself. Insurance MNEs that may become subject to the CIT should be aware of Bermuda’s tight deadline to enact it. In light of the deadline, they should analyze the second PCP to assess how the proposed tax could affect their Bermuda Constituent Entities and assess whether to provide comments to the Bermuda Government. Comments with respect to the second PCP have been requested by October 30, 2023. 

The third and last PCP is expected to be released on or about November 10, 2023, with the consultation period to run until November 24, 2023. The Bermuda Government intends to table the CIT bill for debate, with a view to enactment prior to December 31, 2023.

Observation: In anticipation of the enactment, affected MNE groups should analyze the potential tax accounting implications of the proposed CIT. The impact of the proposed CIT regime on Bermuda insurance companies’ regulatory capital requirements also should be considered, along with the impact on any M&A or other transactions. Additionally, insurance MNEs should monitor the CIT rules as they develop to determine if certain elections are available to them. Such elections may need to be made by December 31, 2023.