The following information is for April 2018 – March 2019. For information on calculating your tax for April 2017 please click here.
Payroll Tax Amendments for 2018
The budget statement read by the Premier and Minister of Finance Mr. David Burt, JP, MP on Friday, February 23, 2018 resulted in the following changes to the application of Payroll Tax:
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Notional Remuneration: From April 1st 2018, the concept of Notional Remuneration will no longer be a consideration for calculating a Deemed Employee and Self-Employed persons tax obligation. Going forward these persons must pay tax on the actual remuneration which he/she deducts from the business up to a maximum of $900,000 per year.
Taxable remuneration is governed by section 7 of the Payroll Tax Act 1995 and includes such things as salary and benefits plus personal expenses paid out of your business. For further clarity on taxable remuneration refer to the Guidance Notes for the Payroll Tax Act Amendment Act 2018.
Employers must keep adequate books and records in accordance with the Tax (Accounts and Records) Regulations 1991 to verify the declarations made on each tax return. Any person who submits false returns, fails to keep adequate records or to present them to the Office of the Tax Commissioner when requested, or evades tax payment in any way commits an offense and is subject to fines up to $500,000. The Tax Commissioner reserves the right to assess a value for undeclared remuneration under section 16 of the Taxes Management Act for any person to which in his opinion such person is chargeable.
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Dividends: With effect from April 1, 2018 dividends paid to persons providing services to local companies (i.e. companies not trading on any stock exchange) are now taxable as part of gross remuneration. There is a $10,000 deductible per person on dividends received meaning that each dividend dollar over $10,000 per person is taxed as part of gross remuneration up to the tax ceiling of $900,000. Taxpayers must report in section C of the tax return each time dividends are paid and or declared.
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Disabled Persons: The Employer portion of payroll tax will be exempt on the remuneration paid to an employee who is a disabled person. To qualify for the tax relief an Employer must submit an Employer Application for Disabled Person Exemption to the Office of the Tax Commissioner which certifies that the employee is permanently disabled and that the disability would affect that persons chance of finding and retaining employment.
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New Start-ups: An employer who establishes a small business (within the meaning of the Bermuda Economic Development Corporation Act 1980) and registers it under section 4(1)(c) of that Act will be exempt from the Employer portion of tax for the first four quarters in operation.
New start-ups must submit a letter from the BEDC when registering in the Office of the Tax Commissioner verifying that they qualify for the above exemption.
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Taxi Operators: Taxi Owners will be required to pay an annual Payroll Tax payment at the time of vehicle licensing at the Transport Control Department. Taxi operators will no longer be required to submit quarterly tax returns but are required to satisfy all outstanding obligations in the Office of the Tax Commissioner.
Full details of the new requirements for Taxi Owners can be found under resources on this page.
To read the Payroll Tax Amendments for 2018 in entirety please see the Payroll Tax Amendment Act 2018 and the consolidated Payroll Tax Act 1995 which can be found on www.bermudalaws.bm.
Employer Portion
The employer is required to pay tax on gross taxable remuneration as defined in the Payroll Tax Act 1995 based on the following rates:
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CLASS OF TAX PAYER |
RATE 18/19 |
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The Government, Parish Councils, Government Boards, the Bermuda College, approved schools, registered charities, religious and cultural organizations and the Bermuda Festival Ltd., New Start-up businesses (4 quarters) and an employer in an Economic Empowerment Zone.(9 quarters) |
0.00% |
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Remuneration, not including bonus payments, 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, hotel and restaurant employees from November – March, retail establishments from January – March and employees with permanent disabilities. |
0.00% |
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Taxpayers with an annual payroll less than $200,000, educational, sporting, or scientific institutions, associations or societies, farmers, fishermen or horticulturists. |
1.75% |
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The Bermuda Hospitals Board and the Corporations of Hamilton and St. George’s. |
3.50% |
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Taxpayers operating a restaurant or hotel with an annual payroll of $200,000 or greater. |
6.00% |
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Taxpayers with an annual payroll between $200,000-$500,000. |
7.00% |
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Taxpayers with an annual payroll greater than $500,000 and up to $1,000,000. |
9.00% |
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Taxpayers with an annual payroll greater than $1,000,000 and exempt undertakings. |
10.25% |
Employee Portion
The EMPLOYEE portion of payroll tax is a separate amount and must be calculated separately from the employer portion.
Employers have the option to deduct the employee portion of payroll tax from their employees however the responsibility to pay the full amount of tax (employer and employee portion) to the Office of the Tax Commissioner still rests with the employer.
Effective 1 April 2018, the EMPLOYEE portion will be calculated using the marginal or progressive tax rate structure as follows:
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ANNUAL REMUNERATION BANDS |
EMPLOYEE PORTION TAX RATES JULY 1, 2017 – MARCH 31, 2018 |
EMPLOYEE PORTION TAX RATES APRIL 1, 2018 – MARCH 31, 2019 |
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0 - $48,000 |
4.75% |
4.00% |
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$48,0001 - $96,000 |
5.75% |
6.50% |
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$96,001 - $235,000 |
7.75% |
7.75% |
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$235,001 - $900,000 |
8.75% |
8.75% |
Employee portion calculators can be found under ‘Resources’ on this page. Full details on how to calculate your payroll tax obligation for the period April 1, 2018 – March 31, 2019 can be found under Payroll Tax FAQ’s.
The marginal tax rate is the rate of tax that employees incur on each additional dollar of earnings. As earnings rise, each dollar of earnings above the previous level is taxed at a higher rate.
It is important to note that the marginal tax is applied to each employee’s annual rate of pay. For employees that earn fluctuating amounts per pay period, the annual rate of pay must be recalculated each pay period so that the payroll tax can be adjusted accordingly. The pay period calculators found under Resources on this page can assist you when calculating the EMPLOYEE portion.
Note that the year must coincide with the financial year as defined in the Payroll Tax Act 1995 (1 April – 31 March)