Proposed overhaul of employment taxes in BermudaLeave a Comment
Earlier in the month, in the Pre-Budget Report (“PBR”), the Bermudan Government announced a proposal that will represent significant changes to the current employment tax regime.
Changes proposed for Exempted Companies
It is a fair observation to say that some of the proposals were quite eye-catching.
Firstly, an increase is proposed to the employer portion of payroll tax for exempted companies. Here, the rate will increase from the current 10.25% to 10.75%.
The result of this is that it means that Bermuda’s exempted companies are now required to pay payroll tax at a higher rate than local companies.
Changes proposed for higher earners
In addition, the PBR proposes a change to the employee portion of payroll tax. The result here is that it means a greater proportion of the overall tax burden will fall on the shoulders of higher earners.
The Government had made election pledges in 2020 in this area. Firstly, it seeks to make good its promise to eliminate the employee portion of payroll tax for those earning below $48,000 a year. At present, this is 1.5%.
This is accompanied by an increase in the rates for all other income brackets. These are set out below.
|Income bracket||Current rates||Proposed Rates|
|$0 – $48,000||1.50%||0%|
|$48,001 – $96,000||9%||10%|
|$96,001 – $235,000||9%||11.50%|
Raising the cap on annual taxable remuneration?
The PBR also includes a proposal to increase the cap on annual taxable remuneration.
At the moment, the cap is set at $900,000. However, the proposal suggests raising this to $1,000,000.
The measures set out above would result in high-earners shouldering a greater proportion of the tax burden.
In addition, there is likely to be a sizeable increase in the payroll tax bill for exempt companies.
In terms of next steps, the PBR will be open for consultation until 13 January 2023. A Budget will follow this – perhaps as early as February.
So, watch this space!
If you have any queries about this article on the Bermuda PBR, Bermuda employment taxes or Bermudan tax matters in general then please do not hesitate to contact us.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.