Payroll Tax is charged under the authority of the Payroll Tax Act 1995 and the Payroll Tax Rates Act 1995. The tax is charged on every employer and self-employed person at the standard rate.
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.
Tax is not charged on the remuneration earned by Bermudian employees on Training Schemes which are approved by the National Training Board. In order to have a scheme vetted a completed Application for Approval of a Training Scheme must be submitted to the Office of the Tax Commissioner along with a complete description of the Scheme.
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. In order to receive an exemption application must be made to the attention of the Tax Commissioner together with a letter from a physician certifying that the individual in question is incapacitated and in need of 'at home' care.
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 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.
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 $200,000. 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.
5.25% applicable to:
The Government, Parish Councils, Government Boards, the Bermuda College, approved schools, registered charities, religious and cultural organizations, the Bermuda Festival Ltd., qualified taxpayers in an Economic Empowerment Zone for the first nine periods of establishing a business, and remuneration earned by New Bermudian Hires employed between April 1, 2013 - March 31, 2015, inclusive.
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 5.25% of gross remuneration. Self-employed persons and deemed employees are not eligible for Special Relief.
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.
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.
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.
An appeals procedure exists for taxpayers who wish to object to a particular assessment or to decisions made by the Tax Commissioner.
Taxpayers are required to report remuneration up to a maximum of $750,000 per annum per person. Self-employed persons carrying on business as full-time taxi operators are liable for tax of $530.34 per quarter and part-time taxi operators are liable for tax of $265.35 per quarter. Effective April 1, 2013, self-employed persons and deemed employees are required to increase their notional remuneration by at least 1.9% as a result of the annual increase in the Bermuda Consumer Price Index at December 31, 2012.
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 .
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