Navigating the new Bermuda Corporate Income Tax (“BCIT”) requirements

The Corporate Income Tax Act was enacted in December 2023 and will come into effect January 2025, in response to the introduction of Pillar 2 in a number of overseas jurisdictions. The BCIT generally applies to entities that are part of a group with consolidated revenues of over €750m in at least two of the four proceeding years.

A recent statement from the Ministry of Finance has outlined the changes to the proposed registration requirements for BCIT.

The Ministry of Finance has decided to amend the annual filing of returns to be submitted to the Registrar of Companies, instead of a separate registration mechanism. The updated form will include two new questions:

1.     Confirmation of whether the company is a Bermuda Constituent Entity (‘BCE’) – certifying whether the entity falls within the scope of BCIT.

2.     Confirmation of the registration of entity – identifying which entity in the Bermuda group is the representative entity for BCIT purposes.

If an entity certifies that it is out of scope for BCIT, it will be required to select the reason why it is out of scope from a drop-down menu.

Information on other administrative changes will be provided early in the first quarter of 2025, but it is expected that there will be no significant changes. On this basis, we anticipate that the rules will be in line with the previous consultation, which includes:

1.     BCIT Filings –

a.     All filings, payment, and ongoing communications to be performed through the Bermuda tax portal

b.     Returns will be due on or before the 15^th day of the 10^th month following the end of the fiscal year

c.      Consideration of a requirement to make a reduced ‘nil’ return for entities that are not in scope

2.     Instalment payments – Due as follows:

a.     15^th day of the 8^th month from the start of the fiscal year. 50% of the expected tax liability or a safe harbour backstop amount

b.     15^th day of the 12^th month from the start of the fiscal year with the remaining amount to bring the total tax paid to 90% of expected tax liability

3.     Enquiries – The Agency will have the power to raise an enquiry into a return within three years of the later of the above filing date or the date the return was filed

4.     Penalties –

a.     Underpayment of tax will be subject to late payment interest accrued at the published rate plus 150 basis points calculated from the instalment dates

b.     Further civil penalties will be due for late submission of returns

While the direct compliance requirements commence from 2025, entities producing GAAP financial statements need to consider whether the economic transition adjustment, or the use of any elections within the regime, create temporary timing differences on which deferred tax needs to be assessed. This consideration accelerates the requirement for a company to understand and plan for its BCIT position and we expect clients will be looking to get more clarity on their positions through 2025.

We aim to support our clients in implementing new legislative changes smoothly and efficiently through adopting a highly tailored and collaborative approach. We combine our extensive experience and expertise with the individual needs of our clients to ensure the best possible outcomes.