Bermuda clarifies corporate-tax treatment of departing entities and permit companies

CITA issued the notes under section 4 of the Corporate Income Tax Agency Act 2024. They consolidate and revise FAQs first published in November 2024, remove material made obsolete by later legislation and add guidance on companies that discontinue, merge or amalgamate out of Bermuda. The notes explain CITA’s administration of the regime; they do not amend or replace the Corporate Income Tax Act 2023.^[1]

Departures do not end tax obligations immediately

CITA says its consent is generally unnecessary for a Bermuda constituent entity to discontinue or merge or amalgamate into another jurisdiction. The departing entity nevertheless remains within Bermuda corporate income tax until its departure date. Its proportionate taxable income must be included in its former Bermuda group’s return under section 15A of the Act. If the entity is the group’s designated Filing Bermuda Constituent Entity and other in-scope members remain, the filing designation should be transferred before departure.^[1][2]

Remaining group members continue to be liable for unpaid group tax. The applicable return should be filed and tax paid before deregistration, while a departing company that is the group’s only member remains its filing entity until deregistered. CITA also says declarations made to the Registrar for a restructuring should account for creditor protection, including the Crown’s position for unpaid tax. Groups should therefore coordinate company-law steps with return preparation, payment and deregistration.^[1][2]

Permit companies and elections

A non-Bermuda company does not become a Bermuda Tax Resident Entity merely because it holds a permit under the Companies Act 1981. It may still be a Bermuda constituent entity if it has a Bermuda permanent establishment, depending on matters such as premises, personnel and the business conducted in Bermuda. The revised notes also address election mechanics, including circumstances in which section 49A permits revocation and a new five-year election.^[1][2]

Insurance transition methods

For insurance contract liabilities held on 30 September 2023, the economic-transition adjustment may use actual run-off, a fair-value run-off pattern or a 15-year straight-line safe harbour beginning on 1 October 2023. The method is selected separately for each liability in the first return in which the contract is relevant and must then be applied consistently, including when calculating the opening loss carryforward. Insurers should document that first-return selection and retain the data needed to apply it in later fiscal periods.^[1][2]