Payroll Tax Amendments for 2023
The budget statement delivered on Friday, February 17th, 2023 by the Premier and Finance Minister, the Hon. David Burt, JP, MP resulted in the following amendments to Payroll Tax with effect from April 1, 2023.
To see how this impacts the employee portion, this simple tool generates a payroll tax estimate for year 2022/23 versus 2023/24. It is an estimate for illustration purposes only: Payroll Tax Estimate
Employees on Maternity or Paternity Leave
Employers will be exempt from the Employer portion of Payroll Tax for remuneration paid to persons on Maternity or Paternity Leave as defined in sections 16 and 16A of the Employment Act 2000. Tax returns must continue to be filed with tax applicable on the Employee portion only.
Hotels/Bars/Restaurants
The payroll tax concession offered to Hotels, Bars & Restaurants ends on March 31, 2023. Tax returns due for periods after April 1, 2023 must be submitted reflecting payment using the revised Employer and Employer portions of tax outlined in the schedules below.
Tax Cap Increase
Taxable remuneration has increased from $900,000 to $1,000,000 per person. This means that additional remuneration earned beyond $1,000,000 is not subject to tax. See the below Employee portion schedule for the applicable tax rates.
Tax Rate Changes
Both the Employer and Employee rates have been amended. Changes are shown in the schedules below.
Tax Calculation - Employer Portion
The employer is required to pay tax on gross taxable remuneration as defined in the Payroll Tax Act 1995 based on the following rates:
|
CLASS OF TAX PAYER |
RATE 2023/24 |
|
The Government, Parish Councils, Government Boards, the Bermuda College, approved schools, registered charities, religious and cultural organizations and the Bermuda Festival Ltd., New Start-up businesses (4 quarters) and an employer in an Economic Empowerment Zone (9 quarters). |
0% |
|
New Hire remuneration and remuneration, (excluding dividend and bonus payments) paid to employees in Special Situations e.g. persons on jury duty or on duty with the Bermuda Regiment or Bermuda Volunteer Reserve, persons employed as farmers, fishermen or horticulturists, hotel and restaurant employees from November – March, retail employees from January – March, employees with permanent disabilities, employees on approved Training Schemes, persons or maternity or paternity leave, and persons hired as entertainers or musicians. |
0% |
|
Self Employed Farmers and Fishermen |
0% |
|
Taxpayers with an annual payroll less than $200,000 (or less than $50,000 p/qtr.), educational, sporting, or scientific institutions, associations or societies. |
1.00% |
|
Taxpayers with annual remuneration of not less than $200,000 and not more than $350,000 (or < $87,500 p/qtr.); the Bermuda Hospitals Board and the Corporations of Hamilton and St. George’s |
2.50% |
|
Taxpayers operating a restaurant or hotel with an annual payroll of $350,000 or greater (>$87,500 p/qtr.). |
5.00% |
|
Taxpayers with annual remuneration of more than $350,000 and not more than $500,000 (>$87,500 up to $125,000 p/qtr.). |
5.25% |
|
Retail Establishments with annual remuneration over $500,000 p/a (or >$125,000 p/qtr.) and whose primary business is the sale of fashion, shoes, jewelry and perfume. |
6.00% |
|
Taxpayers with an annual payroll greater than $500,000 and up to $1,000,000 (>$125,000 up to $250,000 p/qtr.). |
7.50% |
|
Taxpayers with an annual payroll greater than $1,000,000 p/a (>$250,000 p/qtr.) |
10.00% |
|
All Exempt Undertakings |
10.25% |
Tax Calculation - Employee Portion
The EMPLOYEE portion of payroll tax is a separate amount and must be calculated separately from the employer portion.
Employers have the option to deduct the employee portion of payroll tax from employees however the responsibility to pay the full amount of tax (i.e. employer plus employee portions) rests with the employer.
The EMPLOYEE portion is calculated across 5 tax bands using the marginal or progressive tax rate structure as follows:
|
ANNUAL REMUNERATION BANDS @ APRIL 1, 2023 |
MAXIMUM PORTION OF REMUNERATION TAXABLE |
EMPLOYEE PORTION TAX RATES @ APR 2023 – MAR 2024 |
|
0 - $48,000 |
$48,000 |
0.50% |
|
$48,0001 - $96,000 |
$48,000 |
9.25% |
|
$96,001 - $200,000 |
$104,000 |
10.00% |
|
$200,001 - $500,000 |
$300,000 |
11.50% |
|
$500,001 - $1,000,000 |
$500,000 |
12.50% |
|
MAXIMUM TAXABLE REMUNERATION |
$1,000,000 |
|
The marginal tax rate is the rate of tax that employees incur on each additional dollar of earnings. As earnings rise, each dollar of earnings above the previous level is taxed at a higher rate. For example, based on the rates for 2023-2024, a person who earns an annual rate of pay of $49,000 a year would be taxed at 0.50% on the first $48,000 and 9.25% on the balance of $1,000 which falls in Band 2. A person who earns $1m would be taxed across each of the 5 bands since a portion of his/her remuneration fits into each category.
It is important to note that the Progressive Tax rates are applied to each persons’ annual rate of pay. For employees that earn fluctuating amounts per pay period, the annual rate of pay must be recalculated each pay period so that the payroll tax can be adjusted accordingly. The pay period calculators found under Resources on this page can assist you when calculating the EMPLOYEE portion.
Note that the year must coincide with the fiscal year as defined in the Payroll Tax Act 1995 (1 April – 31 March)
Reminders
E-tax
All taxpayers with payrolls of $200,000 or more per annum are reminded of the requirement to e-file with effect from the quarter April – June 2021. Penalties will be levied where tax is not submitted in the required format. To register please visit www.etax.gov.bm. The Office of the Tax Commissioner encourages all taxpayers to e-file for fast and easy reporting. Register at taxenquiry@gov.bm to be invited to the next online tutorial.
Tax Filing Dates:
Payroll Tax is due quarterly with a 15 day grace period at the end of the quarter. Employers and Self-employed persons who file late will be subject to late penalties and assessments. Please take note of the quarters and filing dates below:
- Remuneration earned between January – March must be declared and filed anytime between April 1st to the deadline of April 15th.
- Remuneration earned between April – June must be filed between July 1st to the deadline of July 15th.
- Remuneration earned between July – September must be filed between October 1st to the deadline of October 15th, and
- Remuneration earned between October – December must be filed between January 1st to the deadline of January 15th.
Books and Records:
Employers must keep adequate books and records in accordance with the Tax (Accounts and Records) Regulations 1991 in order to verify the declarations made on each tax return. Any person who submits false returns, fails to keep adequate records or to present them to the Office of the Tax Commissioner when requested, or evades tax payment in any way commits an offense and is subject to fines up to $500,000. The Tax Commissioner reserves the right to assess a value for undeclared remuneration under section 16 of the Taxes Management Act for any person to which in his opinion such person is chargeable.