Bermuda consults on corporate tax enforcement powers
Monday, 12 August 2024
Bermuda's government has begun consultation on its enforcement framework for the new 15 per cent corporate tax to be introduced in January 2025.
The Corporate Income Tax Act 2023, enacted in December 2023, requires subsidiaries of a multinational enterprise (MNE) operating in the country to complete a corporate income tax return and pay corporate tax on their profits. Three consultations on the legislation have already been held, with the government easing certain concerns by the addition of foreign tax credit reliefs to the original legislation.
The jurisdiction has not previously operated a corporate tax regime and so there are no provisions for enforcing the new tax. The administrative provisions now being introduced to collect the tax ‘aim to balance effective tax collection with minimizing administration and taxpayer compliance costs’, says the government.
Entities in scope of the tax will be required to register with the newly established Bermuda Corporate Income Tax Agency via an online portal, so that they can be assigned a taxpayer identification number (TIN). This portal will be used for filing of the income tax return; processing of instalment payments; periodic communications related to assessment, compliance or enforcement activities undertaken by the agency; and access to technical guidance and other compliance aids.
Failure to file a return in good time will generally result in the assessment of civil penalties, in addition to any sanctions for specific offences summarised in the Corporate Income Tax Agency Act 2024. Entities will have to pay the tax liability in instalments before the return filing date. Companies will also have to include information relevant to the determination of their corporate income tax status in their normal Bermuda Companies Act 1981 declarations.
It is likely that existing entities in scope will have to register by 31 March 2025. New entities will have to register within 60 to 90 days of the date of formation, incorporation, organisation, acquisition or other key event. Supporting records will need to be retained for seven years following the filing of returns.
The consultation runs until 4 September 2024 and a draft Bill will be published later in the year.
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