Brunei direct corporate taxation

Special rules apply to International Business Companies, International Limited Partnerships and Trusts, in the International Financial Centre

In Brunei there is no personal income tax, and there are no export, sales, payroll or manufacturing taxes. Sole-proprietorship and partnership businesses are not subject to income tax. The main tax for resident ('domestic') companies is corporate tax.

In general, import duties are waived for all goods except non-development and luxury items. Basic foodstuff and goods for industrial use are exempted from import duties.

Brunei Scope Of Corporate Tax

A company, whether incorporated locally or overseas, is considered as resident in Brunei Darussalam for tax purposes if the control and management of its business is exercised in Brunei Darussalam. The control and management of a company is normally regarded as resident in Brunei Darussalam if, among other things, its Directors' meetings are held in Brunei Darussalam.

From 2009, companies are subject to 27.5% (previously 30%) tax on the following types of income:

Gains of profits from any trade, business or vocation;
Dividends received from companies not previously assessed for tax in Brunei Darussalam;
Interest and discounts; and
Rents, royalties, premiums, and any other profits arising from properties.

There is no capital gains tax. However, where the Collector of Income Tax can establish that the gains form part of the normal trading activities, they become taxable as revenue gains.

A non-resident company is only taxed on its income arising in Brunei Darussalam.

Brunei Calculation Of Taxable Base

The profit or loss of a company as per its accounts is adjusted for income tax purposes to take into account certain allowable expenses, certain expenses prohibited from deduction, wear and tear allowances and any losses brought forward from previous years, in order to arrive at taxable profits.

Dividends accruing in, derived from, or received in Brunei Darussalam by a corporation are included in taxable income, apart from dividends received from a corporation taxable in Brunei Darussalam which are excluded. No tax is deducted at source on dividends paid by a Brunei Darussalam corporation.

Dividends received in Brunei Darussalam from United Kingdom or Commonwealth countries are grossed up in the tax computation and credit can be claimed against the Brunei Darussalam tax liability for tax suffered either under the double tax treaty with the United Kingdom and Indonesia or the provision for Commonwealth tax relief. Any other dividends are included net in the tax computation and no foreign tax credit is available. However, unilateral relief may be obtained on income arising from Commonwealth countries that provide reciprocal relief.

All expenses wholly or exclusively incurred in the production of taxable income are allowable as deductions for tax purposes. These deductions include:

Interest on borrowed money used in acquiring income;
Rent on land and building used in the trade or business;
The cost of repairs to premises, plant and machinery;
Bad debts and specific doubtful debts, with any subsequent recovery being treated as income when received; and
Employers' contributions to approved pension or provident funds.

Expenses not allowed as deductions for tax purposes include:

Expenses not wholly or exclusively incurred in acquiring income;
Domestic private expenses;
Any capital withdrawal or sum used as capital;
Any capital used in improvements apart from replanting of plantations;
Any sum recoverable under an insurance or indemnity contract;
Rent or repair expenses not incurred in the earning of income;
Any income tax paid in Brunei Darussalam or in other countries; and
Payments to any unapproved pension or provident funds.

Donations are not allowable but claimable if they are made to an approved institution.

Losses incurred by a company can be carried forward for six years to be offset against future income, and can be carried back one year. There is no requirement regarding continuity of ownership of the company, and also the loss set-off is not restricted to the same trade.

Brunei Withholding Tax

Brunei Darussalam does not impose any withholding tax on dividends. Interest paid to non-resident companies under a charge, debenture or in the respect of a loan, is subject to withholding tax of 20%. There are no other withholding taxes.

Brunei Stamp Duty

Stamp duties are levied on a variety of documents. The duties are either ad valorem or fixed, depending on the nature of the documents.

Ad Valorem Duties apply to:

Instruments of transfer of property including marketable securities, shares of other companies and of non tangible property, benefits to legal rights and goodwill;
Instruments creating interests in property, for example Tenancies and Leases;
Instrument of security for monies including instruments creating contracts for payment or monies of binding (generally described as "bond");
Certain capital market instrument, for example, Contract Notes, Share Certificates, etc.

Instruments which attract ad valorem duty include: mortgages; leases/tenancy agreements; and transfer of shares.

Fixed Duties apply to:

A number of other legal, commercial, mercantile or capital market instruments, for example, instrument of Articles of Association of a company, Promissory Notes, Policies of Insurance, etc; and
A duplicate or a subsidiary or a collateral instrument when it can be shown that the original or principal or primary duly stamped.

In general an application for determining the amount of duty chargeable on any executed instrument can be made to the Collector. For this purpose the Collector may require that the instruments be furnished together with an affidavits or other evidence. The Collector may refuse such application until the required instrument and evidence have furnished accordingly.

The purpose of adjudication is to protect the parties to the contract in respect of the admissibility of the instrument in court during a civil proceeding. This is because an instrument which is not duly stamped is not admissible in court as evidence.

BRUNEI: DIRECT CORPORATE TAXATION

On this Page:

Brunei Scope Of Corporate Tax

Brunei Calculation Of Taxable Base

Brunei Withholding Tax

Brunei Stamp Duty