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Company Taxes in Brunei Darussalam

Introduction

Brunei Darussalam has the least taxes compared to other countries in the region. In Brunei Darussalam, there are:

No personal income tax
No export, sales, payroll or manufacturing taxes.
Sole-proprietorship and partnership businesses are not subject to income tax.

SUMMARY OF TAXES PERTINENT TO FOREIGN INVESTMENT

a. 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.

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

Companies are subject to 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.

Tax concession may be available. 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.

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 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 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 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.

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 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.

Loss Carryovers

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.

Foreign Tax Relief

Double taxation agreements exist with the United Kingdom and Indonesia. Tax credits are only available for resident companies.

Unilateral relief may be obtained on income arising from Commonwealth countries that provide reciprocal relief.

b. Stamp Duty

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

c. Withholding Taxes

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.

d. Import Duty

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

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Source: Brunei Economic Development Board Website - www.bedb.com.bn