New corporate tax rules for large multinational groups

Introduction

Bermuda has introduced a 15% Corporate Income Tax (CIT), effective from 1 January 2025. The new rules apply to Bermuda entities that are part of multinational enterprise (MNE) groups with global revenues of €750 million or more. This shift marks a move away from Bermuda’s long-standing tax-neutral regime and aligns the jurisdiction with OECD-led global tax reforms such as Pillar Two.

Who is affected by the new tax?

In-scope entities include those operating in Bermuda as part of a qualifying MNE group. These businesses will need to assess their exposure, establish reporting processes, and plan for compliance with new filing requirements and estimated tax payments. US parent companies may also face additional US tax considerations.

Key issues for tax and finance teams

The new regime introduces several technical challenges that require immediate attention, including transitional elections, tax provisioning and international reporting. Early planning will help minimise risk and improve readiness ahead of the 2025 implementation.

Tax reporting and financial disclosures

The new legislation triggers tax accounting obligations under ASC 740. Businesses must assess current and deferred tax positions, support deferred tax assets, and prepare financial disclosures, including effective tax rate, tax payable and compliance with FIN 48.

Considerations for US parent companies

Where a Bermuda entity is owned by a US parent, taxable earnings may also be subject to US tax under Subpart F or Section 953(d). This may require analysis of branch accounting and filing implications, including Form 1120-PC/L.

Transition options for establishing a tax base

Entities must choose between two transition approaches: using the Economic Transition Adjustment (ETA) to set fair market value as of 30 September 2023, or applying Opening Loss Carryforwards (OLCF) from the prior five years. Each option carries implications for the tax base and should be evaluated carefully.

Next steps for multinational groups

With less than six months to go, MNE groups should begin assessing their position, exploring transitional elections and coordinating with tax advisers in Bermuda and parent jurisdictions. Early action will reduce complexity and support compliance readiness.

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