BERMUDA Law and Practice Contributed by: Natalie Neto, Rachel Nightingale and Tyson Oladokun, Walkers
3. Corporations and Non-Corporate Businesses 3.1 Form of Closely Held Local Businesses Most closely held local operating businesses in Ber - muda typically use corporate forms or owner-man - aged structures (including partnerships), depending on the sector and ownership requirements. The CIT Act is targeted at In-Scope MNE Groups and is not intended to apply to typical local small or medium businesses due to the revenue and international pres - ence requirements. 3.2 Individual and Corporate Rates Bermuda does not have a general personal income tax, and the CIT Act is limited to In-Scope MNE Groups. There is therefore little risk of individual pro - fessionals being inadvertently charged at corporate rates. Individuals and owner-managed businesses are generally taxed through payroll tax (on remuneration) and other indirect taxes or fees, rather than through a broad income tax system. 3.3 Restrictions on Retention of Earnings by Closely Held Corporations There are no rules that prevent closely held corpo - rations from accumulating earnings for investment purposes. 3.4 Taxation of Individuals on Shares in Closely Held Corporations Bermuda does not impose personal income tax on dividends or capital gains for individuals. Remunera - tion paid by a company to an individual, as an employ - ee, is subject to Bermuda payroll tax. 3.5 Taxation of Individuals on Shares in Public Corporations Bermuda does not generally impose personal income tax on dividends or capital gains realised by individu - als from publicly traded shares. Bermuda payroll tax applies to remuneration for services in Bermuda, rather than to investment returns from shareholdings.
4. Taxation of Inbound Investments 4.1 Application of Withholding Taxes In Bermuda, there are no withholding taxes, and the CIT Act is the first piece of legislation providing for any form of corporate income tax payable by enti - ties domiciled and/or registered in Bermuda. In the absence of income tax treaties, no withholding taxes apply to interest, dividends and/or royalties. 4.2 Key Treaty Jurisdictions for Inbound Investment Bermuda itself is a primary tax treaty country used by foreign investors to make investments in local corporate shares or debt. As Bermuda charges no corporate taxes other than those recently imposed by the enactment of the CIT Act and payroll tax, for which employers are partly liable, many investors use Bermuda as the base/hub for holding companies both within Bermuda and outside of Bermuda. In addition to this, Bermuda holds several bilateral tax information exchange agreements with various nations globally, including the United States, the Unit - ed Kingdom, Canada, Denmark, France and Japan. However, Bermuda is an open market and encourages investment from all countries with no specific prefer - ence, except for any entity or persons who have been identified as being subject to international sanctions. 4.3 Tax Authority Scrutiny of “Treaty Shopping” Practices The tax authority in Bermuda in relation to corporate tax is the Bermuda Corporate Income Tax Agency (CITA). Whether the CITA challenges the use of treaty countries by non-treaty residents remains untested as the CIT Act has only been in force for one year as of January 2026, and MNE groups that are within scope and subject to the CIT Act are yet to make their tax filings for the 2025 financial year. However, Bermuda has always been aware of its posi - tion in the global market as a jurisdiction in which enti - ties incorporate owing to certain tax benefits. To com - bat this, Bermuda enacted the Economic Substance Regime in 2017, which introduced thresholds an entity carrying out a relevant activity (banking, insurance,
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