Bermuda for Business: No Income Tax, But Here's What It Actually Costs

In This Guide

• Zero Tax Is Real — But the Government Still Gets Paid
• Company Types and Formation
• The Real Cost: Payroll Tax, Customs Duty, Land Tax
• The Economic Substance Act
• Insurance and Reinsurance: Bermuda's Specialty
• Residency and Work Permits
• Who This Works For
• Frequently Asked Questions
• Sources Used in This Guide

Zero Tax Is Real — But the Government Still Gets Paid

The Bermuda government states it plainly: "Individuals in Bermuda don't pay personal income tax." There is no corporate income tax (for most companies), no capital gains tax, no withholding tax on dividends or interest, no VAT, and no sales tax.

That changed partially in 2023. The Corporate Income Tax Act 2023 (CIT Act) introduced a 15% corporate tax for Bermuda constituent entities that are part of multinational groups with annual revenues of EUR 750 million or more. This is Bermuda's direct response to OECD Pillar Two — the tax is designed to capture revenue locally rather than letting other jurisdictions collect top-up tax on Bermuda profits.

For everyone else — companies below the threshold, exempt undertakings, and individuals — Bermuda remains a zero direct tax jurisdiction. The government funds itself through indirect mechanisms that, when you add them up, are not cheap.

Company Types and Formation

Bermuda's corporate vehicles under the Companies Act 1981:

The exempted company is the most common vehicle for international business. It can be incorporated within 24-48 hours through a Bermuda law firm. Government fees for an exempted company start at approximately BMD 2,000-4,000 annually, depending on the authorized share capital. A registered office in Bermuda and a local company secretary are required.

The Real Cost: Payroll Tax, Customs Duty, Land Tax

Bermuda's alternative revenue model replaces income tax with payroll tax, customs duties, and land tax. For businesses with employees on the island, these add up quickly.

Payroll tax

This is Bermuda's largest revenue source. Employers and employees share the burden. For fiscal years 2025-2026, the top rates per Chambers Corporate Tax 2026:

• Employer rate: up to 10% on remuneration between BMD 500,001 and BMD 1 million
• Employee rate: up to 12.5% on remuneration in the same band
• Tax cap: BMD 1 million per person

The government notes that employers may deduct a 6% withholding from employee salaries to contribute toward the total payroll tax obligation. Self-employed individuals pay their own payroll tax. As of 2018, dividends and other profit distributions to deemed employees (owner-managers) are included in the payroll tax base — closing a long-standing loophole where owner-managers took low salaries and high dividends to minimize payroll tax.

Land tax

All homeowners and long-term tenants pay land tax, calculated on the annual rental value (ARV) of the property. The rates are progressive and steep at the top:

Source: Government of Bermuda

A luxury property with an ARV of $150,000 faces marginal land tax of 50% on the amount above $120,000. These aren't trivial numbers for high-end properties, which is most of what exists in Bermuda.

Customs duty

Bermuda imports nearly everything. Customs duty of 22-33% applies to most goods, similar to the Cayman Islands model. This is baked into every price on the island and is the main reason groceries, vehicles, and building materials cost 2-3x what they would in the US.

The Economic Substance Act

Bermuda's Economic Substance Act 2018 and Economic Substance Regulations 2018 mirror the BVI's approach. The same nine relevant activities apply: banking, insurance, fund management, financing and leasing, headquarters, shipping, intellectual property, distribution and service centres, and pure equity holding.

Entities carrying on a relevant activity must maintain a substantial economic presence in Bermuda: managed and directed in Bermuda, core income-generating activities conducted locally, adequate physical presence, qualified employees, and adequate operating expenditure.

Pure equity holding entities face minimum requirements only — the same carve-out as BVI. Entities tax-resident outside Bermuda (in a non-blacklisted jurisdiction) need only file evidence of their foreign tax residence.

Annual filing is mandatory: an Economic Substance Declaration (ESD) must be filed with the Registrar of Companies within six months of the financial year end. Entities earning no revenue from relevant activities file a shorter "nil" declaration. Conyers warns that the Registrar is increasing scrutiny, especially for entities that misfile as pure equity holding entities when they're actually doing intragroup financing.

Insurance and Reinsurance: Bermuda's Specialty

Bermuda is the world's third-largest reinsurance center and the leading domicile for captive insurance companies. Over $400 billion in insured risk is managed from the island.

The CIT Act provides an international shipping income exclusion for qualifying activities with strategic or commercial management in Bermuda. Investment fund subsidiaries are also excluded from the CIT Act when they are UPEs (ultimate parent entities) that wouldn't form part of a consolidated group for accounting purposes.

For insurance-linked securities (ILS) — catastrophe bonds, collateralized reinsurance, sidecars — Bermuda's regulatory framework, deep talent pool, and zero-tax treatment for non-CIT entities make it the default jurisdiction. Segregated Accounts Companies are specifically designed for this market, providing statutory ring-fencing between cells.

Residency and Work Permits

Bermuda has strict immigration controls. Foreigners cannot simply move there — they need either a work permit (sponsored by a Bermuda employer) or a specific residency certificate.

The Economic Investment Certificate (EIC) provides a path for high-net-worth individuals. The minimum investment is approximately BMD 2.5 million in qualifying real estate or approved business investment. Holders receive a residency certificate but cannot work in Bermuda without a separate work permit.

Work permits are issued by the Department of Immigration and tied to a specific employer. Bermudian hiring preference applies — employers must demonstrate they could not fill the position with a Bermudian. Standard work permit fees run several thousand dollars annually.

Cost of living is among the highest in the Western Hemisphere. A one-bedroom apartment in Hamilton runs BMD 2,500-4,000 per month. Groceries, utilities, and transportation all carry the import duty premium. Healthcare is employer-mandated and private.

Who This Works For

Insurance and reinsurance companies. This is Bermuda's core competency. The regulatory framework, BMA oversight, talent pool, and institutional infrastructure are built for this sector. No other jurisdiction matches Bermuda's depth in captive insurance, ILS, and reinsurance.

Holding structures for sub-€750M groups. Exempt companies face zero corporate tax (below the CIT threshold), no withholding on dividends, and a jurisdiction with AAA-grade regulatory reputation. The Bermuda-Cayman comparison often comes down to specific industry fit — Bermuda for insurance-adjacent, Cayman for funds.

It works less well for: Businesses that need employees on the ground (payroll tax adds 10-22.5% on labor costs). Small businesses that can't absorb Bermuda's operating costs. Anyone whose MNE group exceeds €750 million revenue (the 15% CIT now applies). Remote workers without a sponsoring employer (Bermuda's immigration system is employer-driven).

Frequently Asked Questions

Does Bermuda now have corporate tax?

For most companies, no. The CIT Act 2023 introduced a 15% corporate income tax only for entities that are part of multinational groups with €750 million+ in annual revenue. This applies from fiscal years beginning on or after January 1, 2025. Exempted companies below that threshold, local companies, and most fund vehicles continue at 0%. The CIT also includes de minimis and limited international footprint exemptions for smaller in-scope entities.

How does Bermuda compare to Cayman Islands?

Both are zero direct tax jurisdictions (for non-CIT entities) with similar economic substance requirements. Key differences: Bermuda dominates insurance and reinsurance; Cayman dominates investment funds. Bermuda's LLC (based on Delaware) and SAC structures are preferred for certain PE and insurance transactions. Cayman has a slightly lower cost of living. Bermuda's CIT applies to large MNEs; Cayman hasn't introduced equivalent legislation yet. For an insurance captive, Bermuda wins. For a hedge fund, Cayman wins. For a holding company below €750M, both work — choose based on professional service network and specific industry needs.

What does the Economic Transition Adjustment mean?

The CIT Act's ETA allows entities entering the new 15% tax regime to revalue assets and liabilities to fair market value as of September 30, 2023, and amortize the resulting adjustment over ten years. This prevents entities from being taxed on gains that accrued during the zero-tax era. It also allows tax loss carry-forward of losses from the prior five years, subject to an 80% utilization limit.

Can I live in Bermuda without working?

Yes, through the Economic Investment Certificate (minimum ~BMD 2.5M investment). You receive a residency certificate but cannot engage in employment without a separate work permit. Some retirees and independently wealthy individuals use this path. The 30-day minimum physical presence for Cayman doesn't have a direct equivalent in Bermuda — the EIC grants the right to reside but doesn't mandate minimum presence.

Is payroll tax really that expensive?

For high earners, yes. The combined employer and employee payroll tax rate can reach 22.5% on remuneration between BMD 500,001 and BMD 1 million. Below that, rates are lower but still material. For a company employing 10 people at BMD 100,000 average salary, the employer payroll tax alone runs approximately BMD 100,000-150,000 per year. This is the trade-off for zero corporate and personal income tax.

Sources Used in This Guide

• Government of Bermuda — Types of Taxes in Bermuda
• Government of Bermuda — Payroll Tax Guidance Notes (April 2018)
• Conyers — The Bermuda Economic Substance Regime: Are You in Compliance? (October 2024)
• Chambers Corporate Tax 2026 — Bermuda (Walkers, March 2026)