The Corporate Income Tax Agency: A New Era Begins

The Corporate Income Tax Agency: A New Era Begins

Effective for fiscal years beginning on or after on 1 January 2025, a corporate income tax at the statutory rate of 15% is chargeable to any Bermuda tax resident entity and Bermuda permanent establishment that is part of a Multinational Enterprise Group that has consolidated annual revenue of EUR 750 million or more for at least two of the four preceding fiscal years.

This new tax landscape necessitates a dedicated administrative body, and thus, the Bermuda Corporate Income Tax Agency (the “Agency“) was established pursuant to the Corporate Income Tax Agency Act 2024 (the “Agency Act”).

The Agency’s primary responsibility is to administer the Corporate Income Tax Act 2023 (the “Act”) and collect tax receipts (i.e. any monies collected or paid in respect of a tax liability including a prospective or estimated tax liability).  The responsibility of the Agency includes, without limitation:

Administering Processes

The Agency will administer the processes and procedures for the filing of tax returns and the calculation of taxes owed.  It will also review and where appropriate audit tax returns.

Providing Guidance and Support

The Agency will offer guidance and support to taxpayers. This includes issuing and updating any guidance or FAQs relating to the Agency Act, the Act or any regulations made under those Acts.   The Agency Act expressly prohibits the Agency from issuing oral determinations and from responding to any oral request for the same.

Issuing Determinations

The Agency will have the authority to issue determinations on the application of the Act or regulations made thereunder to a specific transaction or event where there is a demonstrable material uncertainty about the tax consequences of the proposed transaction or event.

A person who is aggrieved by a decision of the Agency (including any determination issued by the Agency) is permitted to appeal to the Bermuda Supreme Court against the decision.

Settling Disputes

The Agency, where it determines that it is proper and appropriate to do so, will have the power to settle disputes between the Agency and any taxpayer on a specific issue or liability under the Act or regulations made thereunder.  In determining whether it is proper and appropriate to settle a dispute, the Agency must take into account which outcome secures the right tax most efficiently.

Information Gathering

The Agency will have the power to require any person to furnish information relevant to the Agency’s discharge of its functions under the Agency Act or the Act, except that in considering the reasonableness of its request the Agency must act proportionately and with due regard to any matters of privilege or data protection.

Where any person fails to comply with such a request by the Agency without reasonable excuse, then that person is guilty of an offence and is liable (a) on summary conviction to a fine of $25,000 or to imprisonment for six months or both or (b) on conviction on indictment to a fine of $100,000 or to imprisonment for two years or both.

International Cooperation

The Agency may exercise its powers for purposes of assisting a foreign tax authority, provided that such request for assistance made been made in compliance with all relevant laws.

Conclusion

The establishment of the Agency is significant as it is essential to have a robust tax administration system in place not only to ensure compliance but also to facilitate a smooth transition to the new corporate income tax regime.  By effectively administering the Act and fostering a cooperative relationship with taxpayers, the Agency can contribute to Bermuda’s attractiveness as a leading international financial centre.

Please contact any member of MJM’s Corporate Team for further information or for assistance with Bermuda corporate income tax matters.