Bermuda, known for its thriving offshore finance industry, has taken a significant step in modernizing its tax infrastructure with the proposed establishment of a Corporate Income Tax Agency (the "Agency") to support the Corporate Income Tax Act 2023 (the "Act") that was enacted in December 2023 and which is scheduled to come into effect in January 2025. This initiative marks a pivotal moment in Bermuda's economic history, reflecting its commitment to greater transparency and alignment with global tax standards.
The purpose of the Agency will be to administer the corporate income tax laws and to exercise the powers that are conferred under Section 3 of the Act. To be called the Corporate Income Tax Agency Act, 2024 (the "Agency Act") this new piece of legislation will see the formation of the Agency as a body corporate with perpetual succession, financed in part by grants provided by the government. The Agency will act as an agent of the Crown and will be subject to directions from the Minister of Finance (the "Minister"). It will have wide-ranging powers including the power to acquire, hold and dispose of property, to enter into contracts, and to undertake other acts as may be necessary to further its purposes.
Similar to other quasi-governmental agencies such as the Bermuda Monetary Authority, the Agency will be governed by a board of directors (the "Board") and a number of officers including a chief executive officer (CEO). The Board will consist of a chairman appointed by the Minister, together with six additional directors also appointed by the Minister.
The CEO will be appointed by the Board after consultation with the Minister and will be an employee of the Agency but not a director. The CEO will be responsible for the day-to-day management of the Agency but their powers may be delegated to employees of, and service providers appointed by, the Agency. The Agency Act will also include term limits for the office of CEO and the ability to appoint interim or temporary personnel should circumstances require to ensure the efficient functioning of the Agency.
The Agency will be an agent for the Crown for purposes of stamp duty. Tax revenues collected by it will be deposited in a tax reserve fund (the "Fund") and will not be the property of the Agency. Details of the structure, operation and management of the Fund will be provided in separate regulations such that the Fund will be administered by the Accountant General pursuant to the Public Treasury (Administration and Payments) Act, 1969, but in general, its functions will include administration of the processes and procedures for the filing of tax returns and the calculation of taxes owed under the Act, review and, where appropriate, audit of tax returns, ensuring compliance with the legislation and any concomitant regulations, prosecution and enforcement of breaches of the Act and its regulations, supervision, collection and/or refund of tax revenues and provision of aid and support to taxpayers.
In terms of its proposed powers, the Agency will be granted the authority to issue determinations on questions of interpretation under the Act in the event of any material uncertainties. The Agency may also determine any disputes related to tax liabilities using the criteria set out in the Act.
With limited exceptions, both the Agency and its staff will be subject to confidentiality requirements and will have information-gathering powers in the discharge of their obligations. The Agency is also expressly authorized to provide assistance to foreign tax authorities exercising similar functions to it under relevant foreign law.
The Agency's formation is presently under review and consultation with stakeholders, including local businesses, international corporations, and tax experts as the government aims to create a tax framework that balances competitiveness with the need for regulatory compliance.
The passage of the Act and now the proposed Agency Act represent a significant evolution in Bermuda's tax policy. By adopting corporate income taxes and enhancing regulatory compliance, Bermuda continues to position itself as a responsible member of the global financial community and underscores the country's adaptability and commitment to maintaining its status as a premier destination for international business.
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