Taxation in Brunei Darussalam

TAX EXEMPTIONS AT A GLANCE No Personal Income Tax No Sales Tax No Payroll Tax No Export Tax No Manufacturing Tax No Capital Gains Tax

TAX INCENTIVES AT A GLANCE Pioneer Status Companies Exempt from Corporate Income Tax Exempt from import duties on machinery Exempt from import duties on raw materials Tax exemption for up to 11 years Expansion of Established Enterprise Exempt from Corporate Income Tax Minimum capital expenditure of US$650,000.00 Tax exemption up to 20 years Foreign Loans for Productive Equipment Exemption from withholding tax for interest paid Minimum amount US$130,000.00

Scope Of Income Tax

A company resident in Brunei Darussalam is liable to income tax on its income derived from or accrued in Brunei Darussalam or received from overseas. A non-resident company is only taxed on its income arising in Brunei Darussalam.

Companies are subject to 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
•	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.

Tax Rates A new tax threshold has been introduced to reduce tax liabilities of SMEs. The Chargable Income of resident and non-resident companies are subject to tax at the following rates:

Threshold
	Financial period from 01.01.2009 to 31.12.2009		Financial period from 01.01.2010 to 31.12.2010
	Threshold	Tax Rate	Threshold	Tax Rate
25% of Chargeable Income	For the first B$50,000	23.5%	For the first B$100,000	22%
50% of Chargeable Income	For the next B$50,000	23.5%	For the next B$150,000	22%
100% of Chargeable Income	For amount above B$100,000	23.5%	For amount above B$250,000	22%

 

For newly incorporated companies in Brunei Darussalam, exemption will be granted for the first B$100,000 of the Chargeable Income of the company during the first 3 consecutive Years of Assessment falling within or after Year of Assessment 2008. The Chargeable Income above B$100,000 shall be charged with tax at the above applicable rate.

Taxable Income

The taxable 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.

Concept of Residence

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 vested in its directors and a company is normally regarded as resident in Brunei Darussalam if, among other things, its Directors’ meetings are held in Brunei Darussalam.

Treatment of Dividends

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 is claimed against the Brunei Darussalam tax liability for tax suffered either under the double tax treaty with the United Kingdom or the provision for Commonwealth tax relief. Any other dividends are included net in the tax computation and no foreign tax is available.

Brunei Darussalam does not impose any withholding tax on dividends.

Allowable Deductions

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 buildings used in the trade or business;
•	Costs or repair or premises, plant and machinery;
•	Bad debts and specific doubtful debts, with any subsequent recovery being treated as income when received; and
•	Employer’s contributions to approved pension or provident funds.

 

 

 

 

 

 

Disallowable Deductions

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 any sun 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;
•	Payments to any unapproved pension or provident fund.

 

 

 

 

 

 

 

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

Allowances For Capital Expenditure Depreciation is not an allowable expense. However,capital allowances can be claimed for qualifying capital expenditure. The tax payer is entitled to claim capital allowances as described for particular categories of assets:

•	(a) Motor Vehicles
	Qualifying expenditure is restricted to a maximum limit of B$50,000 on all motor vehicles bought on or after 1 January 2008, with a capacity of not more than 7 passengers (exclusive of the driver) and weighing not more than 3000kg.
	The amount of expenses deductible for tax purposes on motor vehicles costing more than B$50,000 is limited to the proportion that B$50,000 bears to the actual costs of the motor vehicle.
•	(b) Industrial Buildings (including Hotel-Keeping)
	With effect from 1 January 2008, in order to promote investment into the manufacturing sector, the initial allowance given in the year of expenditure has been increased to 20% and the annual allowance to 4% of the qualifying expenditure provided on a straight line basis until the total expenditure is written off.
	Any such building which is in operation prior to 1 January 2008 shall only be eligible to claim annual allowance at the rate of 4% per annum. Claims for initial allowance will only be available to the capital expenditure incurred for buildings or structures completed on or after 1 January 2008.
•	(c) Machinery and Plant
	An initial allowance of 20% of the cost is given in the year of expenditure together with annual allowances calculated on the reducing value of the assets. The rates prescribed by the Collector of Income Tax range from 3% to 25%, depending on the nature of the asset.

 

•	15% on interest, commission, fees and other payments relating to loans
•	10% on royalties or other lump sum payments for the use of movable property
•	10% on know-how payments for the use of scientific, technical, industrial or commercial knowledge or information
•	20% on management fees
•	20% on technical assistance or service fees
•	15% on rent or other payments for the use of movable property
•	20% on a non-resident Director’s remuneration.

 

 

 

 

  

 

 

 

 

Full details on withholding taxes can be obtained from the Ministry of Finance’s website.

 

Foreign Tax Relief

Brunei Darussalam has Double Tax Treaty Agreements with: 

•	United Kingdom
•	Republic of Indonesia
•	Republic of Singapore
•	People’s Republic of China

 

 

 

 

 

The following withholding tax rates apply to the recipient countries:

Country of Recipient	Dividends %	Interest %	Royalties %
China, PR	5	10	10
Indonesia	15	15	15
Singapore	10	5/10*	10
United Kingdom	15	Exemption	Exemption

* 5% applies to a recipient that is a bank or financial institution and 10% applies for any other interest payment.

 

These DTAs provide proportionate relief from Brunei Darussalam income tax upon any part of the income that has been or is liable to be charged with United Kingdom, Indonesia or Singapore income tax. Tax credits are only available for resident companies.

Brunei also provides unilateral relief on income arising from Commonwealth countries that provide reciprocal relief. However, the maximum relief cannot exceed half the Brunei Darussalam rate. This relief applies to both resident and non-resident companies.

Stamp Duty

Stamp duties are levied on a variety of documents. Certain types of documents attract an ad-valorem duty, whereas with other documents the duty varies with the nature of the documents.

Income (Petroleum) Tax

Profit of companies engaged in the exploration and production of oil and gas, will be taxed at the rate of 55%.

Property Tax

Properties Under commercial use are subjected to property tax based on the estimated value of the property. The quantum is decided by the local municipal board.

Import Duty

With the intention of promoting local entrepreneurship, Brunei has not imposed duties on exported goods since 1973. In general, basic foodstuffs and goods for industrial use are exempted from import duties. However, based on the Customs Import Duties Order 2007, the Royal Customs and Excise Department places the following import duties on the respective items: 

•	200% for cigarettes and manufactured tobacco
•	20% for motor vehicles
•	5% for electrical equipment and appliances, photographic materials and equipment, furniture, cosmetics and perfumes.