Bermuda Client Advisory

Corporate Income Tax Act

Bermuda is a leading offshore financial centre when it comes to addressing global regulatory trends and shifts. In one of its latest moves, Bermuda’s legislature enacted the Corporate Income Tax Act 2023 (the CIT), addressing pillar 2 of the OECD-led inclusive framework for implementing a global minimum income tax.

In essence, the CIT will impose a 15% income tax on Bermuda constituent entities belonging to multinational enterprises (MNEs) that have an annual consolidated revenue of €750 million or more. Many MNEs now need to consider Bermuda specific tax planning steps and form views on critical issues. These areas will continue to be ripe for evaluation and planning over the coming year as the first annual Bermuda tax returns begin to be filed in 2026.

Valuation Adjustments

Of particular interest is the CIT Act’s economic transition adjustment (ETA), similar to fresh start accounting, which allows for an increase or decrease in the tax basis of certain assets and liabilities to their fair value as of 30 September 2023. This gives rise to a unique opportunity to take advantage of deferred tax assets and/or carry forward losses. For example, certain intangible assets held by companies such as existing relationships (e.g., brokers, distributions, affiliates), trade names, technology, licenses and workforces may be able to be capitalized to their fair value and amortized over their remaining useful lives. This amortization may create significant benefits through reduction of future tax burdens and recognition of deferred tax assets and revenue.

Footprint Exemptions

The CIT Act also provides for a number of technical exemptions that MNEs should consider in their planning process. For instance, the CIT Act’s “limited international presence” exemption provides potential benefits to MNEs that have a reduced jurisdictional footprint.

How Kroll Can Help

Independent valuations

Kroll has one of the largest dedicated valuation practices in the world. We are regularly trusted by our clients to independently value their intangible assets, giving comfort to management, auditors and other third parties.

Corporate restructuring and simplification

Kroll’s corporate restructuring teams actively work alongside our clients to maximize value for shareholder by re-organizing and/or simplifying their legal structures.