Key Takeaways
- Bermuda operates a zero-rate withholding tax regime, so no tax is deducted at source on outbound interest, royalty, dividend or service payments.
- Foreign-owned companies and investors generally face no withholding obligation, meaning there is nothing to withhold, remit or file in most cases.
- Narrow exceptions may apply, and the article outlines the outlook for any future changes to the withholding position.
- Understanding the legal basis for the absence of withholding tax helps non-resident businesses assess how cross-border payments are treated.
Introduction to Withholding Tax in Bermuda
Bermuda levies no withholding tax. There is no deduction at source on dividends, interest, royalties, or service fees leaving the island, and the effective rate across every payment category is 0%, as confirmed by PwC Worldwide Tax Summaries. This position flows not from a specific exemption but from the absence of any general income tax statute; the Companies Act 1981 governs the incorporation and regulation of entities, while no income tax code has ever been enacted.
The rule matters most to foreign business owners, investors, and lenders who receive payments from a Bermuda entity and want certainty that the gross contractual amount arrives without reduction. This article explains why no withholding applies, what the legal basis is, how each payment type is treated, and what compliance obligations (if any) attach to outbound payments.
The audience here is the non-resident shareholder, financier, or licensor weighing a Bermuda structure, along with the advisers supporting that decision.
Does Bermuda Levy Withholding Tax? Confirming a Zero Rate Regime
No withholding tax is imposed on any payment made from Bermuda. The rate on dividends, interest, royalties, and payments for services is 0%, and that figure applies equally to resident and non-resident recipients.
This treatment is categorical rather than discretionary. There are no payment thresholds, no sectoral carve-outs, and no recipient jurisdictions that trigger a different result.
The corporate income tax introduced in late 2023 does not change any of this. That charge applies only to large multinational groups and operates at the entity level; it is not a source deduction, so the zero-withholding regime remains intact.
| Payment type | Rate to non-residents | Treaty relief available |
|---|---|---|
| Dividends | 0% | Not applicable |
| Interest | 0% | Not applicable |
| Royalties | 0% | Not applicable |
| Service fees | 0% | Not applicable |
One feature distinguishes this jurisdiction from most others: no double tax agreements have been concluded. Because the domestic rate is already nil, there are no treaty-reduced rates to consider, and the 0% applies universally.
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The Legal Basis for the Absence of Withholding Tax
The reason nothing is withheld is structural. No general income tax statute applicable to companies or individuals has ever been enacted, so there is no tax base from which a deduction at source could be carved.
A legal framework built on English common law and local statutes underpins this approach. Profits, income, dividends, and capital gains have never been taxed, and there is no limit on the accumulation of profit or any requirement to distribute it.
Eligible exempted entities can go a step further and apply to the Minister of Finance for a tax assurance under the Exempted Undertakings Tax Protection Act 1966. The certificate confirms that if legislation imposing tax on profits, income, capital gains, or estate or inheritance is later enacted, it will not apply to the undertaking, its operations, or its shares and debentures.
That assurance now runs until 31 March 2035 following amendments extending the protection period. For a foreign owner, it provides documentary comfort that the zero-tax position is contractually anchored, not merely a matter of administrative practice.
No Withholding on Outbound Interest Payments
Interest paid by a Bermuda borrower to a foreign lender is remitted gross. The rate is 0%, and no domestic provision obliges the payer to deduct or account for any amount.
Interest income is simply not within any tax charge, so the question of source taxation does not arise. A lender receives the full contractual coupon regardless of its country of residence.
Since no double tax agreements exist, there is no treaty mechanism that could raise or lower this result. The 0% domestic rate stands alone.
Exempted companies and permit partnerships are treated as non-resident for exchange control purposes. This allows them to hold and operate foreign-currency bank accounts and to make cross-border interest payments without governmental controls.
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No Withholding on Outbound Royalty Payments
Royalties for patents, trademarks, copyrights, or know-how leave the island gross. The applicable rate is 0%, confirmed independently across recognised country guides.
No separate intellectual property withholding regime exists. Because there is no underlying tax on income or royalty receipts, no statute imposing a deduction on licence payments has ever been required.
For licensors based abroad, the practical effect is straightforward: the full royalty stream is received, with no Bermuda-side reduction and no need for a refund or credit claim later.
No Withholding on Payments for Services
Service fees paid from Bermuda to a non-resident provider carry no withholding. The rate is 0%, and it does not depend on whether the provider is an individual, a partnership, or a company, nor on where the recipient is established.
There is no de minimis threshold and no sectoral exception. The zero rate is universal and does not vary with the size of the payment.
One point often causes confusion. A payroll tax is levied on income from employment and self-employment for work performed in Bermuda, but that charge sits within the employer and employee relationship; it is not a withholding tax on outbound service fees and does not attach to payments made to a foreign service provider.
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The Mechanism for Dividends: Why No Tax Is Withheld at Source
Dividends paid to shareholders, resident or non-resident, are subject to a 0% rate. No tax is withheld when profits are distributed.
The conceptual basis for taxing distributions at source is missing here. For entities outside the scope of the corporate income tax, there is no underlying charge on profits, so there is nothing for a source deduction to recover.
Because dividends, interest, and royalties leave Bermuda without deduction, financing and shareholder agreements involving a Bermuda payer generally do not require gross-up clauses to protect the recipient.
Two further features reinforce the position. There is no branch profits tax, which confirms that even deemed dividend equivalents are not caught, and capital gains on the disposal of shares are not taxed, so equity returns that substitute for dividends escape any secondary charge.
Exempted companies and permit partnerships, treated as non-resident for exchange control, may distribute dividends and return capital without tax or governmental controls.
What the Absence of Withholding Tax Means for Companies and Investors
For an investor or lender, the headline benefit is a full gross-up effect: you receive 100% of the contractual payment, with no Bermuda deduction to recover later. This removes a layer of negotiation from financing documents and simplifies cross-border cash flows.
The legal framework, grounded in English common law, gives investors recognisable protections. The island serves as a base for international investment funds, with more than 800 registered or authorised funds managing over USD 292 billion in assets.
A practical consequence of having no double tax agreements is that you cannot claim a Bermuda withholding credit in your home jurisdiction. Since the rate is 0%, no credit is ever needed, so this absence carries no cost.
One qualification applies at the top of the market. From 2025, only multinational groups with consolidated revenue of EUR 750 million or more in at least two of the four preceding fiscal years fall within the 15% corporate income tax; all other companies, local and smaller international firms alike, remain outside it. Even for in-scope groups, that charge is a profit tax, not a withholding on outbound payments.
Compliance and Remittance: Why There Is Nothing to Withhold or File
No withholding tax statute exists, so a payer has nothing to register, deduct, file, or remit. There is no withholding agent registration, no withholding return, and no remittance to any Bermuda authority.
It follows that no withholding compliance calendar and no associated penalty regime apply to outbound payments. The payer simply settles the gross contractual amount.
Information-reporting obligations are a separate matter and should not be confused with withholding. Bermuda committed to the OECD Common Reporting Standard in 2014, with reporting on financial accounts in existence from 1 January 2016, and these are exchange-of-information duties rather than any deduction at source.
- CRS, FATCA, and CbC reporting are information obligations, not withholding charges. They do not create any duty to deduct tax from a payment.
Under a Model 2 Intergovernmental Agreement with the United States, applicable Bermuda financial institutions file FATCA information directly with the IRS rather than through the local portal used for CRS and Country-by-Country purposes. Country-by-Country reporting applies to fiscal years beginning on or after 1 January 2016, with filing due 12 months after the fiscal year-end; again, this is reporting, not withholding.
Narrow Exceptions and the Outlook for Withholding Tax in Bermuda
No withholding exceptions or carve-outs appear in the authoritative sources reviewed. The zero position is categorical and extends to all payment types and all recipient countries.
The corporate income tax regime introduces a few interactions worth understanding, though none create a withholding obligation. The charge aligns with the OECD Global Anti-Base Erosion (GloBE) rules and qualifies as a Covered Tax, yet there are no proposals to adopt the Income Inclusion Rule or the Undertaxed Profits Rule.
Existing tax assurance certificates continue to operate for entities outside the corporate income tax and will keep being issued to them. For in-scope entities, the charging provisions apply notwithstanding any assurance under the 1966 Act, but that override is a profit tax effect, not a new withholding charge.
Certain bodies sit entirely outside the income tax charge, including governmental entities, international organisations, non-profits, pension funds, and investment funds or real estate investment vehicles that are ultimate parent entities. These exclusions concern the corporate income tax base, not source deductions.
On the outlook, no legislative proposal or public consultation to introduce withholding tax has been identified. The Tax Reform Commission is reviewing existing regimes with a view to reducing the cost of living and doing business, and that work is directed at rationalising current taxes rather than adding new source-based charges.
One caution applies to large groups. A tax assurance certificate does not shield against the OECD Pillar Two global minimum tax, which may reach multinational groups meeting the revenue threshold; even so, any top-up tax is collected at the entity level, not through a source-country deduction.
Conclusion
For a non-resident business owner, the withholding position in Bermuda is unusually straightforward: payments leave the jurisdiction untaxed at source, which removes an entire layer of compliance cost and cash-flow drag that most other locations impose. The decision-relevant question, then, is not whether Bermuda withholds, but whether the receiving jurisdiction taxes those clean inflows on arrival, because that home-country treatment, not anything Bermuda does, is where the real liability sits.
How Expanship Can Help Your Business in Bermuda
Although there is no withholding tax to manage, a foreign-owned entity still needs correct incorporation, a registered presence, and steady compliance to operate cleanly on the island. Expanship supports you on the withholding question by confirming the zero position for your specific payment flows and documenting it, then handles the wider obligations that genuinely apply to your business.
- Company formation and structuring tailored to a non-resident owner
- Registered agent and registered office services
- Tax registration and filing where obligations arise, including payroll tax
- Ongoing compliance and corporate secretarial management
- Accounting and bookkeeping aligned to local requirements
- Introductions to banking partners for account opening
To discuss your structure and confirm the position for your payments, contact Expanship Bermuda.
Frequently Asked Questions
No. Dividends paid to non-resident shareholders carry a 0% rate, the same as for resident shareholders, and no amount is deducted when profits are distributed. There is no branch profits tax either, so deemed dividend equivalents are not caught.
No. The 15% corporate income tax enacted in late 2023 applies only to multinational groups with annual revenue of EUR 750 million or more and is charged at the entity level on profits. It is not a deduction at source and does not affect the 0% withholding position on outbound payments.
No. Bermuda has not concluded any double tax agreements, but none is needed because the domestic withholding rate is already 0%. Interest and royalties are remitted gross to a foreign recipient regardless of its country of residence.
No withholding registration, return, or remittance applies, because no withholding statute exists. Separate information-reporting regimes such as CRS, FATCA, and Country-by-Country reporting may apply to financial institutions and large groups, but these are reporting duties, not a charge to deduct tax from payments.
Eligible exempted undertakings can obtain a tax assurance certificate that protects against future taxes on profits, income, and capital gains until 31 March 2035. That assurance does not extend to the OECD Pillar Two global minimum tax for in-scope multinational groups, but Pillar Two top-up tax is collected at the entity level rather than as a source-country withholding.
No. The payroll tax falls on the employer and employee relationship for work performed in Bermuda and is not a deduction on fees paid to a foreign service provider. Service fee payments to non-residents are remitted gross at a 0% withholding rate.
Legal Disclaimer
The information provided in this article is for general informational purposes only and does not constitute legal, tax, or professional advice. While we strive to ensure the accuracy and timeliness of the content, laws and regulations are subject to change, and the application of laws can vary widely based on specific facts and circumstances.
Readers should not act upon this information without seeking professional counsel tailored to their individual situation. Expanship and its authors disclaim any liability for actions taken or not taken based on the content of this article.
For specific advice regarding your business setup, compliance requirements, or any legal matters, please consult with qualified legal and tax professionals in the relevant jurisdiction.
