Corporate Income Tax Amendment Act 2026

Bermuda's House of Assembly has tabled the Corporate Income Tax Amendment Act 2026 (the 'Amendment Bill'), which amends the Corporate Income Tax Act 2023 (the 'CIT Act') to provide various updates that enhance Bermuda's corporate income tax regime and better facilitate the filing of tax returns. 

The Amendment Bill makes a consequential amendment to the Corporate Income Tax Agency Act 2024 (the 'Agency Act'). The Government has explained that the purpose of the changes is to clarify and refine the CIT Act's existing provisions so that the Corporate Income Tax Agency (the 'Agency') has the necessary administrative and operational mechanisms to effectively oversee and administer the regime.

We have listed the more substantive changes below:

• Bermuda Constituent Entities filing corporate income tax returns on behalf of a Bermuda Constituent Entity Group ('Filing Bermuda Constituent Entity') will gain greater flexibility around five-year elections. An election may now be revoked at the end of its initial five-year period, with a new election permitted during the following four years, and the Agency is given discretion to permit revocation of, or a new, five-year election outside the ordinary rules in certain circumstances. 

• The Amendment Bill refines how the opening tax loss carry forward is adjusted where a Filing Bermuda Constituent Entity revokes, or changes, its election to compute net income or loss under an approved financial accounting standard. 

• The revenue test in section 7 is narrowed to exclude Bermuda Constituent Entity Groups made up entirely of stateless constituent entities or investment entities. 

• Segregated accounts companies gain greater clarity as while they could previously elect to  treat their segregated accounts as a separate entity, they can now also elect to treat the company as a separate entity from its segregated account.

• A new section 21(8) addresses how financial accounting net income or loss is determined where a Bermuda Constituent Entity's own financial reporting period does not align with the fiscal year used to prepare its ultimate parent's consolidated financial statements.

• Penalties under sections 46B, 46D and 46F will continue to accrue at the specified rate for as long as a default remains uncured, regardless of when the decision notice is issued, and will be automatically recalculated where the underlying tax amount is later adjusted. The civil penalty regime for late filing is refined: for a late return, the existing $3,000-per-month floor (or, if greater, 5% of the tax due, capped at 25% in aggregate) now applies only for the first five months of default, after which the penalty reverts to a flat $3,000 per month, for as long as the failure continues; and for a failure to file other required information or documentation, the flat monthly penalty is increased from $1,000 to $3,000 and now has a clear start and end point, ending on the earliest of the date the information is filed, the date the group's return is filed, or the original due date for that return. 

• The amendments to the Agency Act clarifiy the Agency's mandate with respect to enforcement of civil penalties and removes a restriction on the Agency's ability to settle for less than a litigated outcome might reasonably be expected to yield. 
  
  

We are following the Bill's progress and are available to advise on how these changes may affect Bermuda Constituent Entities and In Scope MNE Groups under Bermuda's corporate income tax regime.