Bermuda’s Ministry of Finance has released draft legislation outlining a series of tax credits intended to accompany the island’s new corporate income tax regime.
The proposed credits are currently open for public consultation and include a substance-based tax credit for re/insurers, a community development tax credit, and a utilities infrastructure tax credit.
The consultation paper notes that the goal is to encourage industries that play a key role in Bermuda’s economy to invest more in their local operations, particularly when such investment leads to increased employment and job opportunities for Bermudians.
The substance-based tax credit is aimed at insurance and reinsurance groups registered with the Bermuda Monetary Authority that generate more than half of their revenue from insurance activities.
Eligibility for the substance-based tax credit depends on two primary factors: employment and local expenditure. Companies can receive greater benefits if they employ Bermudians, provide training, or increase their workforce. Additional credit is available for spending on offices, tangible assets, professional services, utilities, and training within Bermuda.
The insurance and reinsurance sectors, which are central to Bermuda’s economy, are expected to be most affected by the new 15% corporate tax. Government officials say the substance-based tax credit is designed to offset some of the impact of the tax, while also encouraging companies to expand their local workforce and supplier relationships rather than relying on outsourcing.
Premier David Burt said that the new tax credit legislation is part of broader tax reform efforts.
“The reforms which we're doing, the upcoming tax credit legislation as part of the global tax reform, will allow us to provide more incentives for that to happen,” Burt said.
Bermuda’s re/insurance market has continued to see growth this year, registering three new companies in August and bringing the year-to-date total to 41 new insurers. This pace puts the sector on track to surpass the 63 new registrations recorded in all of 2024. Much of the recent growth has come from the insurance-linked securities sector, as well as new captives and life reinsurers.
The island’s reputation for effective regulation has also made it a major player in the global run-off sector. According to PwC, global non-life insurance run-off reserves have reached a record US$1.129 trillion, with Bermuda continuing to play a significant role in legacy sector deals and attracting new capital.
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