BERMUDA Law and Practice Contributed by: E. Scott Swainson, Andrew Morgan and Erik Gotfredsen, Wakefield Quin Limited
partial shares in the same land as part of a series of transactions). Where a transaction is covered by two heads of duty, the higher head of duty will apply. Evasion Tax evasion is a criminal offence, namely conspiracy to defraud the public purse. Penalties may be applied Corporation tax is payable for businesses located within the City of Hamilton boundaries, and is lev - ied on the annual rental value of the subject property. There are owner and occupier portions of such tax, which are both generally passed on to the tenant. Land taxes are levied at 9.5% of the ARV for com - mercial properties. Other Levies The tenant also commonly bears any levies for piped water and private sewers. 8.4 Income Tax Withholding for Foreign Investors No Direct Taxation The government of Bermuda does not directly tax income or capital gains. US Taxpayers for late or non-payment. 8.3 Municipal Taxes Property Taxes – Commercial Properties Local banks may levy a withholding tax on interest paid to US customers. They may also levy a deemed withholding tax on interest charged on a mortgage granted by them to a US customer (this is seemingly to reflect tax deemed denied on loans that would oth - erwise be made by a US bank). Local banks are often reluctant to loan funds to US individuals due to such complications. Rents or Licence Fees Rental income is not currently taxed. However, a for - eign land owner seeking approval to rent licensed land will pay a licence fee equal to hotel occupancy tax on the rental income over the term (ensuring that the
hotel industry may compete on a level footing with such persons). Payroll Taxes Employers and employees of Bermuda entities pay payroll tax on salary, bonuses and benefits in kind. Where the shareholders of a local company play an active management role in a company (eg, as a direc - tor or acting as a de facto director), dividends or dis - tributions to them are deemed to be the proceeds of their employment and subject to payroll taxes. This does not apply to non-managerial shareholders (sim - ple equity investors) nor to the profits generated by exempted companies doing business overseas. 8.5 Tax Benefits Benefits and Deductions As the government of Bermuda does not (directly) tax income or capital gains, there are no typical tax ben - efits (in the form of depreciation, etc) to holding real estate. Land Tax as a Wealth Tax Property taxes form an important source of govern - ment revenue and are charged in bands at very differ - ent rates, so that lower value properties pay almost no land tax and high-value properties pay very high tax - es. Taxes are levied based on the ARV of the property, which is determined by square footage and location. Tax Reductions A tax band of 50% currently applies to any part of the ARV that exceeds USD120,000. The only way to reduce tax is to divide the property into units that are each capable of peaceable occupation. This option may not be available to overseas buyers who need Ministerial approval to create a new assessment. Appeals When an ARV is revised, a provisional assessment is issued and the owner may challenge the assessment for a short period. The challenge would be referred to a tribunal unless settled by negotiation. There is no right to challenge an ARV once the assessment is no longer provisional.
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