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Brunei

Country Name: Brunei Darussalam
Currency: Brunei Dollar (BND) (pegged to the Singapore Dollar at 1:1)
Primary Tax Authority: Revenue Division of the Ministry of Finance and Economy
Key Legislation:

  • Income Tax Act
  • Corporate Tax Act
  • Stamp Act
  • Customs Import Duties Order

Fiscal Authority Allocation

Centralized Fiscal System:
Brunei operates a centralized tax system, with the Revenue Division of the Ministry of Finance and Economy responsible for collecting taxes, including corporate income tax (CIT) and customs duties. There is no personal income tax in Brunei, and the government generates revenue primarily through the petroleum industry and foreign investments.

Corporate Income Tax (CIT)

Standard Rate: 18.5%
Brunei levies a corporate income tax rate of 18.5% on the net taxable income of companies.

Corporate Forms and Taxation:

  1. Corporation (Company): The standard corporate form in Brunei, subject to the 18.5% CIT rate.
  2. International Business Companies (IBC): IBCs conducting business internationally are eligible for certain tax exemptions on foreign-sourced income but are subject to CIT for income derived within Brunei.
  3. Branches of Foreign Companies: Taxed at the same CIT rate of 18.5% on Brunei-sourced income.

Exemptions and Incentives:

  • Tax Holidays: Companies in key sectors, such as manufacturing, tourism, and agriculture, can qualify for tax holidays ranging from five to eight years.
  • Investment Incentives: The government offers CIT exemptions or reductions for companies in priority sectors, including renewable energy, manufacturing, and ICT.

Goods and Services Tax (GST) / Value-Added Tax (VAT)

No VAT or GST:
Brunei does not impose a VAT or GST on goods and services. The country relies on other sources of revenue, including customs duties and the state’s vast oil and gas resources.

Personal Income Tax (PIT)

No Personal Income Tax:
Brunei does not impose personal income tax on individuals, making it an attractive jurisdiction for expatriates and high-net-worth individuals.

Additional Mandatory Contributions

Social Security Contributions (Tabung Amanah Pekerja):
Brunei operates a provident fund system, the Employees Trust Fund (Tabung Amanah Pekerja – TAP), which provides pensions for local workers. Employers and employees must contribute to the fund.

  • Employer Contribution: 5% of gross salary.
  • Employee Contribution: 5% of gross salary.

Withholding Taxes

  • Dividends: 10% for non-residents (exempt for residents).
  • Interest: 2.5%
  • Royalties: 10%
    Withholding tax rates may be reduced under Brunei’s double taxation agreements (DTAs).

Transfer Pricing Rules

Brunei does not have specific transfer pricing legislation, but companies engaging in cross-border related-party transactions are expected to follow the arm’s-length principle, consistent with international standards.

Special Tax Regimes

  • Oil and Gas Sector: Brunei’s economy is dominated by the oil and gas sector, and companies in this industry are subject to special taxation rules. The Petroleum Mining Act imposes a 55% Petroleum Profits Tax (PPT) on companies operating in the oil and gas industry.
  • Tax-Free Zones: Companies operating in designated tax-free zones may benefit from full or partial exemptions from CIT, as well as customs and excise duty exemptions, especially in sectors focused on export activities.
  • Islamic Finance: Brunei has specific tax incentives and exemptions for Islamic financial services, aligning with its national strategy to become a hub for Sharia-compliant financial products.

Other Taxes

  • Stamp Duty: Stamp duty is levied on legal documents, including property transfers, at varying rates depending on the value of the transaction.
  • Customs Duties: Brunei imposes customs duties on certain imported goods. The rates generally range from 0% to 20%, depending on the type of goods. Certain essential goods, including food and medical supplies, are exempt from customs duties.
  • Excise Taxes: Excise taxes are imposed on specific goods such as alcohol, tobacco, and luxury items.

Double Taxation Agreements (DTAs)

Brunei has signed several double taxation agreements (DTAs) with countries such as the United Kingdom, China, Singapore, and Malaysia. These agreements help reduce withholding taxes on dividends, interest, and royalties, and prevent double taxation of cross-border income.

Local Taxes

There are no local government taxes in Brunei, as the centralized government handles all tax collection and revenue distribution.

Compliance and Reporting

Annual Filing:
Companies must file corporate tax returns by June 30th of the following year. The tax year in Brunei follows the calendar year. Companies are required to submit estimated tax payments quarterly.

Penalties for Late Filing:
Penalties for non-compliance or late filing include fines and interest on unpaid taxes. Interest on overdue taxes is typically set at 1% per month.

Recent Developments

Economic Diversification and Non-Oil Sectors:
Brunei has been actively promoting economic diversification to reduce its dependence on oil and gas. The government has introduced tax incentives and relaxed regulations to attract foreign investment in sectors such as manufacturing, tourism, agriculture, and Islamic finance.

Sustainability and Renewable Energy:
Brunei is focusing on developing its renewable energy sector, particularly solar power, as part of its long-term strategy to reduce reliance on fossil fuels. The government offers tax incentives for companies investing in clean energy technologies and infrastructure.

Digital Economy Development:
Brunei is seeking to position itself as a regional leader in the digital economy. The government is offering tax breaks and incentives for companies involved in information and communications technology (ICT), fintech, and e-commerce, with a focus on attracting foreign investors to these sectors.

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