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OFFICE OF THE TAX COMMISSIONER PAYROLL TAX SEMINAR ENTREPRENEURSHIP COMMUNITY EDUCATION

Ministry of Finance. Office of the Tax Commissioner. OFFICE OF THE TAX COMMISSIONER PAYROLL TAX SEMINAR ENTREPRENEURSHIP COMMUNITY EDUCATION. DEPARTMENTAL RESPONSIBILITY.

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OFFICE OF THE TAX COMMISSIONER PAYROLL TAX SEMINAR ENTREPRENEURSHIP COMMUNITY EDUCATION

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  1. Ministry of Finance Office of the Tax Commissioner • OFFICE OF THE TAX COMMISSIONER • PAYROLL TAX SEMINAR • ENTREPRENEURSHIP COMMUNITY EDUCATION

  2. DEPARTMENTAL RESPONSIBILITY The primary responsibility of the Office of the Tax Commissioner is to administer the collection of the following taxes and duties in accordance with the applicable legislation: • Payroll Tax • Corporate Services Tax • Betting Duty – Turf • Betting Duty – Pools • Land Tax • Foreign Currency Purchase Tax • Hotel Occupancy Tax • Cruise Ship Departure Tax • Airport Departure Tax • Yacht Arrivals Tax • Passenger Cabin Tax • Stamp Duties • Timesharing Services Tax • Timesharing Occupancy Tax

  3. WHAT IS PAYROLL TAX? • Payroll Tax which is governed by the Payroll Tax Act 1995 is a tax levied on employers on the total remuneration paid or assessed. • Remuneration includes wages and benefits paid to employees as well as remuneration paid or deemed paid to deemed employees and self – employed persons.

  4. WHO IS AN EMPLOYEE? An employee is an individual who renders services to another under a contract of service. • WHO IS NOT AN EMPLOYEE? - A person who is under 16 years of age - A person who works 16 hours or less in any one calendar month - A person who is ordinarily employed outside Bermuda and does not work in Bermuda for more than 4 consecutive weeks. WHO ARE DEEMED EMPLOYEES? • Deemed employees include partners in a partnership; shareholders in a limited liability company; and members of the governing body of an association who provide direct services to the business.

  5. WHO IS A SELF-EMPLOYED PERSON? A self-employed person is someone who carries on business otherwise than as an employee and benefits from the income or profits of that business otherwise than by way of, or in addition to being paid actual remuneration. E.g. Consultants, Hairdressers, Painters, and web designers.

  6. REGISTRATION Employers must register within 7 days of the end of the quarter in which business commences. Taxpayers may register for Payroll Tax by: • Filling out a registration form with the assistance of a Tax Inspector in the Office of the Tax Commissioner. • Emailing or mailing a completed (signed) registration form to one of the following Tax Inspectors. • Karen Ball (kball@gov.bm) (297-7750) • Kendaree Fray (kfray@gov.bm) (297-7807) • Doreen Morrison (dmorrison@gov.bm) (297-7751) A hardcopy of the registration form can be collected from the OTC or downloaded from www.taxbermuda.gov.bm. 3. Faxing a completed registration form to the attention of one of the aforementioned Tax Inspectors at 296-5406. Note: A meeting may be set up subsequent to a mailed, emailed, or faxed registration form in order to verify the identity of the Tax payer.

  7. HOW MUCH REMUNERATION DO I HAVE TO REPORT? • Taxpayers must report the sum total of employee remuneration up to a maximum of $350,000 per employee per the Government fiscal year (i.e. April 1 – March 31). • Deemed employees and self-employed persons must report the higher of their actual or notional remuneration.

  8. HOW IS NOTIONAL REMUNERATION DETERMINED? • The nature of the business. • The nature of the services provided by the deemed employee. • Remuneration earned by other people doing similar work. • The financial records of the business which show the revenue generated by the deemed employee. • The financial records which show the benefits allocated to the deemed employee.

  9. WHAT TAX RATE DO I PAY? • The tax bands and corresponding tax rates @ April 1, 2008 are as follows: • 4.75% - Government Departments, Schools, Churches, Charities, and Taxpayers in the Economic Empowerment Zone. • 7.25% - where remuneration is under $200,000 p/a or $50,000 p/qtr. • 9.75% - Hotels/ Restaurants where remuneration is ≥ $200,000 p/a. • 10.75% - Where remuneration is between $50,000 - $125,000 p/qtr (or $200,000 - $500,000 p/a). • 12.75% - Where remuneration is between $125,001 - $250,000 p/qtr (or $500,001 - $1,000,000 p/a). • 14% - Where remuneration is ≥ $250,000 p/qtr (or > $1,000,000 p/a)

  10. WITHHOLDING TAX FROM EMPLOYEES • - Employers/ Taxpayers may withhold up to 4.75% of employee remuneration to contribute toward the payment of his/her payroll tax obligation. • - Tax may be deducted from employee remuneration and held by the employer until such time as payroll tax is due. • - Employers may not retroactively take payroll tax from employee remuneration. Ref: Sections 7 & 19 of the Payroll Tax Rates Act 1995

  11. WHAT IS THE MINIMUM AMOUNT OF TAX WHICH I CAN PAY? Full payment is expected with all tax returns. However, if full payment cannot be made and the employer is withholding 4.75% from the employees’ salary than the minimum payment must be at least 4.75%.

  12. WHEN DO I PAY PAYROLL TAX? Payroll tax is due on a quarterly basis as follows: • Remuneration earned between January – March (payable by Apr 15) • April - June (payable by July 15) • July – September (payable by Oct 15) • October – December (payable by Jan 15)

  13. HOW DO I PAY PAYROLL TAX? Payment must accompany a completed tax return with one of the following methods: • Via cheque, cash, debit card, or credit card at the Cashiers window located on the 1st floor of the Government Administration Building on Parliament Street. • Via cheque at the Office of the Tax Commissioner located on the 1st floor of the Perry Building, 40 Church Street. • Via our E-tax payment facility at www.etax.gov.bm .

  14. DOES A PERSON HAVE TO PAY TAX WHEN OUT OF WORK FOR 4 MONTHS OR MORE? Nil returns must be filed when there has been no service provided to the business. A Taxpayer must provide proof that there is inactivity (e.g. a doctors certificate). After 2 quarters of filing nil returns a taxpayer must visit the OTC to make the file inactive.

  15. WHAT HAPPENS IF I DON’T PAY PAYROLL TAX? • TAX RETURNS WHICH ARE FILED LATE ARE SUBJECT TO A LATE PENALTY OF 5% A MONTH UP TO A MAXIMUM OF 30%. • ADDITIONAL TAXES MAY BE CHARGED UP TO 100% ON THE VALUE OF UNPAID TAXES. Refer: Sections 16 & 22 of the Taxes Management Act 1976

  16. ARE THERE SPECIFIC PROVISIONS/ EXEMPTIONS RELATING TO SMALL BUSINESSES? Economic Empowerment Zone (EEZ) The EEZ is a geographical zone located in the north of Hamilton. An employer who established a business located in an EEZ and is registered with the Bermuda Small Business Development Corporation is entitled to the Payroll Tax rate of 4.75% during the first 5 quarters of the commencement of his/her business. Ref: The Payroll Tax Rates Amendment Act 2007

  17. PAYROLL TAX AMNESTY • THE TAX AMNESTY IS AN OPPORTUNITY TO CLEAR UP ANY OUTSTANDING PAYROLL TAX OBLIGATIONS THUS AVOIDING ANY PENALTIES OR ADDITIONAL TAXES. • AMNESTY WILL BE GRANTED TO: • TAXPAYERS WHO HAVE FAILED TO FILE RETURNS. • TAXPAYERS WHO UNDERSTATED THEIR TAXES ON PREVIOUSLY FILED RETURNS. • INDIVIDUALS WHO HAVE FAILED TO REGISTER FOR PAYROLL TAX. • TAXPAYERS WHO CURRENTLY HAVE A PAYMENT PLAN WITH THE OFFICE OF THE TAX COMMISSIONER.

  18. AMNESTY WILL NOT BE GRANTED TO: • TAXPAYERS WHOSE ACCOUNTS HAVE BEEN TRANSFERRED TO THE ATTORNEY GENERAL – DEBT ENFORCEMENT UNIT. • TAXPAYERS WHO ARE IN THE PROCESS OF BEING AUDITED AND HAVE BEEN SO NOTIFIED. • TAXPAYERS WHO ARE APPEALING A DECISION OF THE TAX COMMISSIONER.

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