Bermuda Entity Setup: Key Features and Best Practices
Bermuda is renowned for no corporate income tax, but structuring an entity there still involves navigating new global standards, compliance responsibilities, and local payroll/tax obligations.
Why Bermuda Remains Attractive
- Zero corporate income tax on profits of companies—no tax on retained or distributed earnings for most businesses. (gov.bm)
- Recently enacted Corporate Income Tax (CIT) starting January 1, 2025, applies to certain large non-resident entities or those that fall under new global minimum tax rules. (gov.bm)
- Strong regulatory reputation—Bermuda is aligning its laws with OECD’s Pillar Two and related rules. (gov.bm)
Entity Types and Localization (“Substance”) Requirements
| Entity Type | Common Uses | Key Considerations |
|---|---|---|
| Exempted Companies | International finance, reinsurance, investment entities | Must maintain substance—local director, meetings in Bermuda, local employees, physical office per CIT/substance rules. |
| Local Businesses / Charities | Retail, services, non-profits | Generally treated as resident and may be exempt from certain reliefs offered to exempted companies. |
Compliance: Payroll, Employer Costs, and Tax Credits
- Bermuda levies a payroll tax instead of income tax for employees. Employers and employees both have obligations. (gov.bm)
- As part of recent budget measures (2026/27), employer payroll tax rates have been reduced for many categories (large employers, hospitality, retail, etc.) and even eliminated for certain employers. (gov.bm)
- The Tax Credit Act 2025 introduces substance-based tax credits, incentives for local hiring, capital expenditure, infrastructure, and community benefit. These are structured as refundable credits under the updated CIT regime. (gov.bm)
Actionable Steps for Entity Setup
- Choose the correct entity type—if you expect cross-border revenues or fall under global rules, plan for an exempted company maintaining substance.
- Maintain physical presence—hire local staff, book board meetings in Bermuda, have local directors.
- Leverage fiscal incentives—ensure your business qualifies for tax credits like local hiring or community benefit when planning CapEx and staffing.
- Understand payroll commitments—even with entity structure, you’ll manage payroll tax both employer and employee portions; new reliefs reduce some burdens. (gov.bm)
- Plan for CIT / global minimum tax compliance—stay updated with Bermuda’s evolving law to ensure your entity is compliant under OECD/BEPS rules. (gov.bm)
Example Scenario
A reinsurance company (exempted) sets up its entity in Bermuda. To meet substance: hires two Bermudian directors who meet monthly, establishes an office, and employs 3 local staff. Under the Tax Credit Act, because it spent on local hiring and infrastructure, it claims a refundable credit reducing CIT liability. Payroll tax savings under the 2026/27 budget help reduce employer’s payroll tax rate from 5% to 4% in hospitality classification. firstname Lastname, Employee, pays lower employee payroll tax in the first income bands due to cuts effective April 1, 2026. (gov.bm)
Takeaway: Setting up in Bermuda offers significant tax efficiency—but only with robust planning for substance, payroll tax compliance, and staying ahead in a changing international tax landscape.