Whilst only a limited number of companies will be in scope for CIT, in a public communication released on 27 November 2024, the Government announced that all Bermuda registered companies, limited liability companies, exempted and overseas partnerships will be required to declare whether they are in scope or not as part of the required annual return filing.
The Corporate Income Tax Act 2023 ("CITA") provides that 'Bermuda Constituent Entity Groups', comprised of one or more Bermuda Constituent Entities (“BCE”) of an in scope multinational enterprise ("MNE") group, will be subject to CIT with respect to fiscal years beginning on or after 1 January 2025.
An in-scope MNE group is any group that has with respect to any fiscal year beginning on, or after, the CIT's commencement date:
a) annual revenue of EUR 750 million or more in the consolidated financial statements of the ultimate parent entity;
b) for at least 2 of the 4 fiscal years immediately preceding the 2025 fiscal year.
The CITA provides for a number of elections and exemptions that are available to otherwise in scope entities. This includes section 13 of the CIT Act, which sets out circumstances in which an MNE group shall not be treated as an in scope MNE group (for 5 fiscal years) where it has a limited international footprint and it meets tangible asset value requirements.
In practice, for many entities with complex groups determining the impact of CIT requires time and care. Many entities have been assessing and obtaining legal advice on whether or not they are in scope for CIT and if so, what elections and exemptions are available and preferred.
As part of the consultation process around the introduction of the CIT regime and its administration, the Government received feedback that indicated a strong preference for simple administration. With this in mind, part of the registration process for CIT will be a requirement for entities to respond to two new questions to those currently contained in the annual returns, namely whether the entity is a BCE under the CIT Act and, if so, then the name of the Bermuda tax resident entity which is to be the 'representative entity' for the BCE, which will serve as the point of contact for the BCE for the purposes of CIT.
Such questions will necessarily cause Bermuda entities to have to assess their position under the CIT regime on a more expedited basis.
Walkers has been advising many clients on the incoming CIT, if you are unsure if the law applies to you, please reach out to our team.
