Bermuda Issues Draft Corporate Income Tax Law

  1. Overview
  2. Example
  3. Jurisdictional Blending
  4. General Application
  5. Exclusion of Certain Partially-Owned Entities
  6. MNE Groups with a Limited International Footprint
  7. Economic Transition Adjustments
  8. Losses
  9. GloBE Elections
  10. Qualified-Refundable Tax Credits

On November 15, 2023, Bermuda issued draft corporate income tax legislation (the ‘draft law’) as part of a third consultation on enacting a new 15% corporate income tax (‘CIT’) from January 1, 2025.

The consultation period runs from November 15, 2023  to November 30, 2023.

The new CIT is to apply to Bermuda businesses that are part of a Multinational Enterprise Group (“MNE”) with annual revenue of €750M or more.

Whilst the draft law is modelled on the OECD GloBE rules, Bermuda is not enacting the GloBE rules. There is, therefore, no Income Inclusion Rule (IIR), Under-Taxed Profits Rule (UTPR) or even a Qualified Domestic Top-Up Tax (QDMTT).  Instead, Bermuda is designing its domestic tax regime based on the OECD GloBE rules.

The idea is that the CIT will leverage certain key scoping and definitional elements of the GloBE Rules, to expedite the development of the Bermuda CIT rules and support consistent global tax outcomes on profits earned in Bermuda.

The Bermuda CIT would be a covered tax for GloBE purposes. As such it would be taken into account when considering the jurisdictional GloBE ETR for Bermuda, and would  mitigate the amount of top-up tax payable to other jurisdictions on profits earned in Bermuda.

As it is not a QDMTT, the CIT payable would not be applied as a credit to directly reduce any GloBE top-up tax and it would also not qualify for the QDMTT Safe Harbour. Bermuda has specifically designed the CIT not to be a QDMTT as a QDMTT offers less flexibility.

This has a significant impact for GloBE purposes and means that there is no pound-for-pound reduction in the GloBE top-up tax. Whilst the draft law, bases the Bermuda CIT broadly on the GloBE rules, it does not completely replicate them, and a number of GloBE elections, for instance, are not provided for.

Therefore the tax payable under the domestic regime is unlikely to exactly equal a 15% GloBE effective tax rate, and MNEs will need to be aware of the differences in the calculation elements between the domestic CIT law and GloBE top-up tax.

In addition, the CIT would need to be set at an increased tax rate compared to if it was a QDMTT in order to fully eliminate any GloBE top-up tax after the substance-based income exclusion has been taken into account.


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