Brunei: Domestic Corporate Taxation
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.