General
Payroll Tax is charged under the authority of the Payroll Tax Act
l995 and the Payroll Tax Rates Act 1995. The tax is charged on every
employer and self-employed person at the standard rate.
Scope
The tax base consists of actual remuneration paid, given or assessed
by any employer or self-employed person to every employee or deemed
employee. Remuneration includes any benefits derived by the employee/deemed
employee or self-employed person as a result of his/her employment,
whether paid in cash or in kind. The remuneration of a self-employed
person or a deemed employee is the greater of his actual or notional
remuneration.
Exemption
Tax shall not be charged on an employer in respect of remuneration
paid to an employee who cares for a person with a physical or mental
disability, at that person’s home.
Registration
Every employer and self-employed person who is liable for tax, must
register with the Office of the Tax Commissioner within seven days
of the end of the first tax period in which the employer/self-employed
person commences business. It is a criminal offence to fail to register.
Foreign contractors/sub-contractors and professionals, who offer their
services on a contract or fee basis, are also required to register
and pay Payroll Tax on the value of those services performed in Bermuda.
Tax Period
Tax returns with full payment are due within fifteen days of the
end of every tax period. Tax period means each period of three months
commencing on the first day of April, July, October or January. Tax
returns are available from the Office of the Tax Commissioner.
Rates
14.00% applicable to:
Taxpayers with an annual
payroll greater than $1,000,000 and exempt undertakings.
12.75% applicable to:
Taxpayers with an annual
payroll greater than $500,000 and up to $1,000,000.
10.75% applicable to:
Taxpayers with an annual
payroll between $200,000 and $500,000.
9.75% applicable to:
Taxpayers operating an hotel or restaurant with
an annual payroll of $200,000 or greater.
7.75% applicable to:
Remuneration paid to employees in Special Situations,
e.g. persons on
jury duty or on duty with the Bermuda Regiment or Bermuda Volunteer
Reserve, persons employed as farmers, fishermen or horticulturists and hotel employees in December, January or February.
7.25% applicable to:
Employers and self-employed persons with an annual
payroll of less than $100,000. Educational, sporting, or scientific
institutions or societies. Taxi drivers, farmers, fishermen and horticulturists.
The Bermuda Hospitals Board and the Corporations of Hamilton and St.
George’s.
4.75% applicable to:
The Government, Parish Councils, Government Boards,
the Bermuda College, approved schools, registered charities, religious
and cultural organizations, the Bermuda Festival Ltd., and qualified
taxpayers in an Economic Empowerment Zone for the first nine periods
of establishing a business.
Special Relief
Taxpayers paying at the rates of 10.75%, 12.75% or 14.00% and those operating
an hotel or restaurant and paying at 9.75% are entitled to Special
Relief. Taxpayers in this category are entitled to a deduction from
total remuneration paid during the tax period. This deduction is equal
to $600.00 per employee per quarter. The qualifying criteria are that
the employee must be on the payroll at the end of the tax period and
must have worked for the employer for a minimum of 180 hours in that
quarter. However, the amount of Payroll Tax payable by any such employer
in respect of an employee whose remuneration is subject to the Special
Relief, cannot be less than 4.75% of gross remuneration.
Self-employed persons and deemed employees are not eligible for
Special Relief.
Payment
Payroll Tax is calculated as a percentage of total remuneration
which includes wages, salaries, benefits, notional, etc, reported
on the tax return. Remuneration paid to students on weekends or vacation
employment, as well as certain lay-off allowances, is excluded from
taxable remuneration. A person is not an employee if he is under 16
years of age or is employed by an employer for 16 hours or less in
any one calendar month. The 16 hour provision does not apply to self-employed
persons or deemed employees.
Payroll Tax must be paid at the time that the tax return is filed.
Returns are due on the 15th of January, April, July and October of
each year.
Assessments/Refunds
The Tax Commissioner may make an assessment of unpaid tax. Additional
tax may be charged up to 100% of the unpaid tax. Assessments are retrospective,
and may be for a period of five years. There is no time limit in cases
where the underpayment is due to fraud or willful default made by
or on behalf of the taxpayer. Discovery of a tax overpayment may result
in a refund for a maximum period of two years.
Penalties
Tax returns filed late or underpaid are subject to a penalty. If
tax, further tax or additional tax is not paid at or before the time
fixed by or under the legislation, a penalty for late payment will
be levied. The penalty is 5% of the Payroll Tax due, for each month
or part of a month that the tax is unpaid or underpaid, to a maximum
of 30%. An additional tax equivalent to the amount of tax may also
be levied.
Appeals
An appeals procedure exists for taxpayers who wish to object to a
particular assessment or to decisions made by the Tax Commissioner.
Other
Taxpayers are required to report remuneration up to a maximum of
$235,000 per annum per person. Self-employed persons carrying on
business as full-time taxi operators are liable for tax of $423.40 per
quarter and part-time taxi operators are liable for tax of $211.70 per
quarter. Effective April 1, 2005, self-employed persons and
deemed employees are required to adjust their notional remuneration by
at least 3.8% as a result of the annual increase in the Bermuda
Consumer Price Index at December 31, 2004.
Note
The information contained on this page is merely a guide for the
taxpayer and is not a comprehensive statement of the Legislative requirements.
These requirements are contained primarily in the Payroll Tax Act
1995, the Taxes Management Act 1976 and the Payroll Tax Rates Act
1995 as amended. Bermuda Laws Online can be accessed at
www.bermudalaws.bm.
Enquiries
Further enquiries may be made by contacting
us.
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