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New Start-Ups Payroll Tax Relief

New Start-Ups Payroll Tax Relief

About the New Start-ups Payroll Tax Relief Programme

The Government of Bermuda has pledged to provide new tax relief for entrepreneurs of new startups to assist them in creating new jobs. Therefore, entrepreneurs who register and meet the criteria established by the BEDC in the creation of a new business will be exempt from the employer portion of payroll tax for themselves (if owner-managed or self-employed) and any employees for the first year of business (first four quarters in operation).

A Few Details

Once the business is established:

1. The business registers with the BEDC as required under section 4(1)(c) of the Bermuda Economic Development Corporation Act 1980.

2. Those businesses who register must meet BEDC’s definition of a small business as follows:

  • BEDC defines a small business as Bermudian – owned and managed; operating locally;
    • having an annual gross payroll not exceeding $500,000; or
    • having annual sales revenues of less than $1,000,000.

3. The business applies to BEDC for a New Entrepreneurs Payroll Tax Relief Letter. To obtain it, the business must provide:

  • A fully completed application form with required documents must be received by BEDC two (2) weeks prior the end of the payroll tax period the applicant is applying for to allow BEDC adequate time for review and processing. Application due dates are as follows:
    • For tax period January to March, applications must be received by March 16th;
    • For tax period April to June, applications must be received by June 16th;
    • For tax period July to September, applications must be received by September 16th; and
    • For tax period September to December, the application must be received by December 16th.
  • A copy of a valid ID – Bermuda passport is preferred;
  • A copy of the signed lease agreement that certifies the business’ operating location and lease commencement date;
  • A copy of a utility bill (or similar document) showing the name and address of the business on it since opening;
  • The list of all employees (and associated posts) employed with the business within its first year of operation;
  • The Employer Social Insurance ID Letter from the Department of Social Insurance with the associated Social Insurance numbers for each employee;
  • A copy of the Payroll Tax ID Letter from the Office of the Tax Commissioner (OTC). If the business has not yet registered with the OTC, then it will have to do so through this process. If the business is not operating yet, then no letter from the OTC is needed at this point;
  • If an incorporated company, a copy of the Certificate of Incorporation must be submitted;
  • If an LLC, a copy of the LLC Agreement must be submitted;
  • If an online business or e-commerce business only (e.g. no physical location), the business must provide the website address, NIC registration documentation, and verification of its first transaction;
  • A copy of the first month of the business bank account statement showing the account opening date for the new business; and
  • Any other documents as required that BEDC deems necessary to make an informed decision about the application.

4. BEDC’s Officers may conduct site visits to the physical business to confirm the business is legitimately operating.

5. BEDC’s Officers will check with the Office of Tax Commissioner; the Department of Social Insurance; the Registrar of Companies to ensure the business is legally registered and meeting its obligations.

6. BEDC’s Officers, once satisfied with the information provided, make a recommendation for approval or refusal to BEDC’s Executive Director.

7. BEDC’s Executive Director, once satisfied with the information provided, will approve or refuse the application.

8. Upon approval BEDC’s Executive Director issues a Payroll Tax Relief Letter to the attention of the Tax Commissioner for the business and the specified employees of the business. BEDC will provide the approval letter to the applicant and email a copy of the letter to the OTC.

9. Once BEDC receives all required information in the completed application, the approval letter can be issued within 8 business days. The letter will only give the tax relief on the employer portion of payroll tax on the remuneration paid to themselves (if owner-managed or self-employed) and any employees for up to 4 tax periods from the commencement of the business.

10. Please note that BEDC does not back date relief, so any tax periods, if missed, from when the business officially opened would be excluded.

11. Any business that started prior to the commencement date of this programme of April 1st, 2018 will be excluded from obtaining the relief. Any tax periods prior to April 1st, 2018 will also be excluded.

12. For the first tax period in which the business receives the relief letter, the applicant must file manually taking the letter to the OTC office.

13. Ultimately, it is at the discretion of the BEDC and the OTC, based on the information provided and its own investigations, to determine if the business is eligible to be approved for this relief.

Who Can Apply?

This programme applies to all new startup businesses established in Bermuda after April 1st, 2018. This relief only applies to small businesses as per the definition in the BEDC Act 1980.

New Start-Ups Payroll Tax Relief Checklist

Click here to view checklist as a guide please complete the following:

  • Application
    • Submit a complete application form
    • Must be filled out completely, accurately and signed by all owners of the business if more than one owner
  • Valid Identification
    • Demonstrates that the applicant is Bermudian.
    • If non-Bermudian is a partner, the Bermudian must hold the controlling interest and a copy of the partnership agreement must be submitted.
  • Signed Commercial Lease
    • This can highlight the commencement of business and physical location.
    • If home business some documentaiton tying business to location.
  • Utility Bill or Other Mailing showing Business Address
    • This can verify the business is operating from the utility bill address
  • List of Employees
    • This highlights how many employees the business has at the time applying for the payroll tax relief
  • Dept of Social Insurance Employer ID Letter
    • This verifies the business is registered with DOSI and any employees
  • Office of the Tax Commissioner’s Payroll Tax ID Letter
    • This verifies the business is registered with OTC
  • Registrar of Company Certificates
    • This verifies the business is either registered as a LTD/Limited of LLC
  • Website Address and NIC Documentation
    • If an online or e-commerce business only this verifies the business is operating
  • Bank Statement
    • Client to supply 1 month’s business bank account statement from the commencement of the account
    • This can verify the business is operating