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Bermuda Introduces Corporate Income Tax: Key Insights and Considerations

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HAMILTON, BERMUDA - The Government of Bermuda has introduced a new corporate income tax (CIT) regime, effective January 1, 2025. This article provides an overview of the key aspects of the CIT and its implications for businesses operating in Bermuda.

Assets to be Amortized Over 10 Years

  • The CIT allows assets such as brand and trade names, software, customer relationships, and the value of in-force insurance business to be amortized over a period of 10 years.
  • This is a significant change from the previous regime, which did not provide for amortization.

Fair Value Adjustments and Run-off Determinations

  • The CIT requires fair value determinations for insurance contract liabilities, including a 15-year straight-line safe harbor method.
  • The run-off of fair value adjustments must be determined using one of several alternative methods provided in the FAQ.

Tax Loss Carryforwards and Opening Tax-Loss Carryforward Basis

  • The CIT allows for tax loss carryforwards to be carried forward to offset against future profits.
  • The opening tax-loss carryforward basis will be adjusted to reflect the changes introduced by the CIT regime.

Entity Classification Elections

  • Businesses operating in Bermuda may need to make entity classification elections to determine their tax status and liability under the CIT regime.

Tax Accounting Implications

  • The introduction of the CIT regime has significant implications for financial reporting, including the recognition of deferred tax assets or liabilities.
  • Companies will need to consider the principles of income tax accounting for “dual resident” taxpayers and make an accounting policy election regarding valuation allowances.

Interplay with Foreign Tax Credits

  • The CIT regime may result in interplay between temporary differences established in Bermuda and foreign tax credits generated on the same item in other jurisdictions.
  • This interplay will require careful consideration to ensure compliance with tax laws and regulations.

Key Contacts

For further information or guidance on the CIT regime, please contact:

  • Matthew Lodes, US Insurance Practice: +1 314-724-7117
  • Surjya Mitra, US Insurance Practice: +1 703-855-9357
  • Benjamin Tausig, US Insurance Practice: +1 213-544-1481
  • Scott Slater, Bermuda Insurance Practice: +1 441-537-7178
  • Damien Boudreau, Tax Accounting Services: +1 646-709-5662

About PwC

PwC is a global network of firms that provides assurance, tax, and consulting services to businesses. For more information, please visit our website at www.pwc.com.

Disclaimer

This article is for general information purposes only and should not be used as a substitute for consultation with professional advisors.