Bermuda Can Offer Tax Free Living for Some
Many are aware of Bermuda’s historic zero tax policies, but is Bermuda a tax haven nowadays?
Bermuda is a small island in the Atlantic Ocean that has been an independent British overseas territory since 1620. It is situated around 1,000 miles off the coast of Florida and is often considered to be one of the most attractive tourist destinations in the world.
Bermuda Benefits from a Mild Climate Year Round
The weather is warm year-round with average temperatures ranging between 70° and 85° Fahrenheit (21° to 29° Celsius) during the summer months. Bermuda has a population of approximately 64,000 people. Many inhabitants are spread throughout smaller towns across the island. They live comfortably on incomes generated through tourism or employment within its financial services sector.
No Income Tax, Corporation Tax or Inheritance Tax
Bermuda has no Income Tax, inheritance tax or corporation tax. However, when we ask the question is Bermuda a tax haven we must look at all the taxes imposed on individuals and corporate entities in Bermuda. Unfortunately Bermuda has diluted its tax haven credentials in recent years. Bermuda has a payroll tax for employees in Bermuda. The levels of the tax are low, but all taxes start off low and increase incrementally over time.
Employees Pay Tax, Corporations Pay High Annual Fees – Is Bermuda a tax haven? – Not for everybody!
In Bermuda tax rates on employees range from 1.5% of income up to $48,000 up to a rate of 9.5% for those earning $900,000 per year. There are no taxes on incomes over $900,000 per year.
Bermuda has no corporation tax. It does impose a tax on the assets of banks and on certain insurance companies. They also have a 7% tax on corporate service providers on the island. This is a tax on gross revenue.
Annual fees for companies incorporated in Bermuda are high compared to other offshore jurisdictions. The annual fees depend on the assessable capital of the company.
|Assessable Capital||Annual Fee|
|0 – 12,000||$2,095|
|12,000 – 120,000||$4,275|
|120,000 – 1,200,000||$6,590|
|1,200,000 – 12,000,000||$8,780|
|12,000,000 – 100,000,000||$10,980|
|100,000,000 – 500,000,000||$19,605|
So, as we can see the question of is Bermuda a tax haven or not is not completely straightforward.
More than 18,000 companies have a registered office in Bermuda, including hundreds of the world’s top companies. The high annual fees do not discourage them. That’s because of the strong legal protections in Bermuda. Bermuda, being a British protectorate, uses English law. That’s a strong attraction for the international companies that choose to take advantage of what Bermuda has to offer.
Other Taxes in Bermuda – Is Bermuda a Tax Haven for you?
Bermuda’s principal source of revenue is import duty on everything imported into Bermuda. The normal tax is 25% on imported items. Recently Bermuda has attempted using import duties as social engineering. They reduced the tax on healthy foods and increased the import duty on unhealthy sugary foods to 75%. This kind of development where governments try to nanny the population is always a bad idea. It’s likely only a matter of time before further attempts are made to control the population with taxation.
There is a land tax in Bermuda. This applies to all land in Bermuda and is based on annual rental value. This can be anywhere from 0.8% up to 50%. On commercial properties the rate is 9.5%. On tourist properties the tax rate is 8% of the annual rental value. There is also a vacation rental tax which is currently 4.5%.
Stamp duty is a tax levied on the transfer of property. This includes deeds and rental agreements. Stamp duty is imposed on all transfers of real estate in Bermuda.
Foreign Currency Purchases
Bermuda has a tax on all foreign currency purchases from local banks. The rate is currently set at 1.25%.
British Law Prevails
The island’s laws are also based on precedent so they’re easy to understand. The British Parliament has always had the final say over Bermuda’s affairs. In practice it left most of its governance in local hands as long as it remained loyal to Britain. It has always done so even during wartime or other conflicts. (such as when American ships blockaded ports during the War of 1812).
Other Industries in Bermuda
Bermuda is an ideal location for tourism because it has many beautiful beaches, as well as historical sites such as Fort St. Catherine (a UNESCO World Heritage Site) and the Bermuda Aquarium Museum & Zoo. Visitors can also explore caves or enjoy snorkeling or scuba diving at locations like Tobacco Bay Reef Park, Horseshoe Bay Beach Park and Warwick Long Bay Beach Park.
For most high net worth individuals looking for a sunny tax haven as a base Bermuda will be tax free. It has many advantages including a strong legal system and safe banks to keep your funds. The recent moves to impose payroll taxes and the anti-freedom moves to impose high import taxes to discourage certain behaviours are worrying developments. In considering whether Bermuda is a tax haven I’d say it is for most people but freedom seekers may prefer The Cayman Islands or The Bahamas.