As published on: businessinsurance.com, Wednesday 9 August, 2023.
Bermuda on Tuesday took steps toward adopting a corporate income tax as part of a move alongside nearly 140 other countries to overhaul tax regimes to deter large multinational companies from booking profits in the lowest-tax nations.
The Bermudan government said in a statement the proposal would end the island nation's long-standing 0% corporate income tax and would apply to Bermudan units of multinational corporations with €750 million euros ($820 million) or more in annual revenue. The proposal, which is expected to take effect in 2025, is being published for public comment, with the government opening a series of consultation periods.
“Our approach is to use tax reform to bolster policy initiatives that will enhance Bermuda’s economic growth prospects,” Bermuda Premier and Finance Minister David Burt said in the statement.
The move to end Bermuda’s status as a no-corporate-tax haven comes roughly two years after a deal to adopt a global minimum tax rate of 15% was brokered by the Organization for Economic Cooperation and Development. The GMT deal is meant to mothball outdated tax regimes that had allowed companies, in particular high-tech outfits such as Alphabet Inc.’s Google or Amazon.com Inc., to avoid paying most taxes by booking their profits in countries with low or no corporate income taxes.
The 15% minimum tax on multinationals with €750 million euros or more in sales is one of two pillars in the deal and has faced less resistance than the first pillar. The first pillar, which aims to reallocate taxing rights on the 100 biggest, most profitable multinationals, has stumbled in the face of U.S. political issues.
“It would be difficult for me to speculate as to what may or may not happen in other jurisdictions,” Mr. Burt said in an interview when asked about the risk to the GMT framework posed by the lack of progress on U.S. ratification. “I can just speak to the fact that Bermuda prides itself on making sure that we are compliant.”
The proposal announced Tuesday will proceed through an initial public consultation period that concludes next month and a second round following that. The feedback provided will help form the enacting legislation ahead of the 2025 deadline, Mr. Burt said.
Through the process, the government will explore options for offsets from other taxes that may be reduced, such as payroll taxes or import duties, in order to keep Bermuda “economically competitive,” he said.
“If there’s an opportunity to reduce those taxes, to reduce the cost of living and the cost of doing business ... that would be certainly something that is welcomed, but I’m not going to prescribe that as premier or minister of finance,” he said.