Tax Credits Act 2025

Introduction

The Tax Credits Act 2025 (“Act”), which came into force on 11 December 2025, establishes a comprehensive tax incentive framework designed to encourage tangible and sustained economic activity in Bermuda by qualifying businesses, particularly within the insurance and infrastructure sectors. The Act introduces three categories of tax credits:

1. the substance-based tax credit;
2. the utilities infrastructure tax credit; and
3. the community development tax credit.

Together, these measures aim to reward employment growth, on-island investment, workforce training, infrastructure development and charitable giving.

Substance-Based tax credit

Eligibility

The substance-based tax credit is the principal incentive of the Act. It is available to a “Qualifying Bermuda Group,” which must include at least one entity registered as an insurer with the Bermuda Monetary Authority and must derive more than 50% of its group revenues from Bermuda insurance activities. The credit is not available to insurance intermediaries unless they form part of a “Qualifying Bermuda Group”.

The credit is calculated annually and is composed of two components:

1. a job-based benefit; and
2. an expense-based benefit.

Job-Based Benefit

The job-based benefit component rewards employment and workforce development in Bermuda and is calculated by applying a “job-based benefit factor” to the group’s eligible payroll expenses. That factor is determined by reference to four elements: (i) headcount; (ii) the proportion of Bermudian or work-permit-exempt employees and training activity; (iii) year-on-year employment growth; and (iv) a transition factor. The structure of this calculation strongly incentivises growth in Bermuda-based employment, particularly of Bermudians and newly trained entrants to the workforce.

Expense-Based Benefit

The expense-based benefit component rewards operational expenditure incurred in Bermuda. Eligible expenses include Bermuda business premises costs, tangible asset-related expenses, qualifying Bermuda service expenses, and training expenses, but explicitly exclude payroll and charitable expenses. This component ensures that companies are incentivised not only to employ staff in Bermuda but also to maintain a genuine physical and operational footprint on the island.

Utilities Infrastructure Tax Credit

Eligibility

The utilities infrastructure tax credit is available to a “Qualifying Bermuda Group” that includes at least one Bermuda Entity licensed or permitted under one of the following acts:

1. Electronic Communications Act 2011
2. Electricity Act 2016
3. Submarine Communications Cables Act 2020
4. Fuels Act 2022

This means that a Bermuda Entity in the following sectors would not currently be eligible:

1. Water infrastructure (eg pipelines, desalination plants)
2. Social infrastructure (eg housing, healthcare, education)
3. Transportation (eg buses, aviation, etc)

The credit is calculated annually and is composed of two components:

1. payroll-based benefit – calculated by applying a factor to the group’s eligible payroll expenses; and
2. tangible asset-based benefit – calculated by applying a factor to the group’s eligible carrying value of tangible assets.  

No carryforward provision exists for unused credits (in contrast to substance-based tax credits in the insurance sector), so advance planning is important to utilise benefits.

Examples of qualifying investments might include:

1. Telecommunications: Fiber-optic network deployment, telecom towers, broadband capacity
2. Electricity: Smart meters, distribution network upgrades, renewable energy infrastructure
3. Fuel: Construction or upgrading of fuel storage terminals and pipelines

Effect of Tax Credits

Tax credits are claimed by a single “Filing Qualifying Bermuda Group Entity” on behalf of all qualifying Bermuda entities within a group. Where the relevant entity is a Bermuda Constituent Entity under the Corporate Income Tax Act 2023, the distributable tax credit benefit is applied as a reduction against corporate income tax payable (or may generate a cash refund where corporate income tax has been overpaid). Where the entity is not subject to corporate income tax, the credit would apply to payroll tax and be paid out in cash, ensuring the economic value of the incentive is preserved in all cases. However, the substance-based tax credit is subject to a multi-year phase-in period, during which the amount of credit that can be taken in the initial years is restricted.

Next Steps

1. The Act applies to fiscal years beginning on or after 1 January 2025
2. Bermuda Entities should assess eligibility, prepare documentation, identify investments and model impact
3. Once the form is prescribed, Bermuda Entities should complete their filings with the Corporate Income Tax Agency. Late filing adjustments apply

Conclusion

• Overall, the Act represents a significant shift in Bermuda’s tax policy architecture. It aligns fiscal relief directly with demonstrable economic substance by rewarding job creation, skills development, physical investment, and community contribution. The Act is clearly intended to complement the corporate income tax regime by ensuring that businesses which materially invest in Bermuda’s economy benefit from reduced tax burdens or direct financial support, thereby reinforcing Bermuda’s position as a jurisdiction that promotes high-quality, sustainable economic activity.

This note has been prepared for information purposes only. Please contact us should you wish to discuss in more detail.

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