Corporate tax in Brunei

Summary

Corporate Income Tax Rate (%) 18.5 (a)
Capital Gains Tax Rate (%) 0
Branch Tax Rate (%) 18.5 (a)
Withholding Tax (%) (b)
Dividends 0
Interest 15
Royalties 10
Branch Remittance Tax 0
Net Operating Losses (years)
Carryback 0
Carryforward 6

a) This is the standard rate. The rate of petroleum income tax is 55%.

b) For a listing of withholding taxes, see Section D.

Taxes on corporate income and gains

Corporate income tax. Limited companies, regardless of whether they are incorporated overseas or locally or are registered as a branch of a foreign company, are subject to a tax on income accru­ing in, derived from or received in Brunei Darussalam.

Branches of foreign companies are taxed on their profits arising in Brunei Darussalam at the same rates as corporations.

Rate of corporate income tax. The income tax rate is 18.5% for resident and nonresident companies, except for those engaged in petroleum operations. The rate of petroleum income tax is 55%.

The first BND100,000 of chargeable income is taxed at a reduced rate of one quarter of the full rate, while the next BND150,000 is taxed at half the full rate. The balance of chargeable income is taxed at the full rate. For a new company, the first BND100,000 of chargeable income is exempt from tax. This exemption applies for a company’s first three consecutive years of assessment.

Certain enterprises and industries may be exempted from taxation if they are considered essential for the development of the country.

Effective from 1 January 2014, companies that have gross sales or turnover of BND1 million or less are exempted from corporate income tax or charged with a 0% corporate income tax (legisla­tion effecting this change has not been made available).

Capital gains. Capital gains are not taxed. Capital losses are not deductible. However, if assets have been acquired for resale rather than for a company’s use, any profit from the sale is regarded as taxable income.

Administration. The tax year is the calendar year. Tax returns must be filed by electronic means.

Corporations must file an annual tax return by 30 June of each year and pay any tax due by the same date. Corporations must also file an Estimated Chargeable Income (ECI) return within three months after their accounting year-end if they are unable to file their annual tax return within this period. Any tax due under an ECI return must be paid by the due date for filing the ECI return. If tax is paid under an ECI return, the tax is adjusted accordingly in the annual tax return. In general, extensions of time are not granted.

Foreign tax relief. Foreign income that is not received in Brunei Darussalam is free from tax. Brunei Darussalam has entered into double tax treaties with Bahrain, China, Hong Kong, Indonesia, Japan, Kuwait, Laos, Malaysia, Oman, Pakistan, Singapore, the United Kingdom and Vietnam. Brunei Darussalam has signed double tax treaties with other countries, but these treaties have not yet been ratified. Both resident and nonresident companies may also apply for unilateral relief on income arising from British Commonwealth countries offer ing reciprocal relief. However, the maximum relief cannot ex ceed half the Brunei Darussalam rate.

Determination of trading income

General. The following sources of income are subject to tax:

  • Gains or profits from any trade, business, profession or vocation
  • Gains or profits from employment
  • Net annual value of land and improvements occupied or used rent-free for residential or enjoyment purposes
  • Dividends, interest or discounts
  • Pensions, charges or annuities
  • Rents, royalties, premiums and any other profits arising from property

In computing taxable income, normal business expenses may be deducted.

Interest expenses are allowed as a deduction only if the loan gen­erating the charge is used for the production of taxable income.

Provisions. Provisions for debts are tax-deductible only if they are made against specific bad debts.

Tax depreciation. Depreciation charged in the financial accounts is not deductible for tax purposes. Instead, capital allowances (tax depreciation) are permitted.

Industrial buildings. An initial allowance of 20% of the qualifying expenditure is given on industrial buildings in the year of expendi­ture, with a further annual allowance of 4% of qualifying expen­diture provided on a straight-line basis until the total expenditure is written off.

Effective from 1 January 2014, the rates of the initial allowance and annual allowance are increased to 40% and 20%, respectively (legislation effecting this change has not been made available).

Plant and machinery. An initial allowance of 40% of the cost of plant or machinery is given on expenditure incurred on or after 1 January 2009, and an annual allowance is given on the declin­ing value of the asset. The rates depend on the type of asset and range from 3% to 25%. Alternatively, a company may choose to write off such expenditure over three years on a straight-line basis. For plant and machinery not exceeding BND2,000 per item, a company may choose to write off such expenditure fully in the year of acquisition subject to an aggregate cap of BND30,000 per year. For computer and office automation equipment, a company may also choose to write off such assets fully in the year of acqui­sition.

Effective from 1 January 2014, the capital allowance rate is increased to 150% for assets categorized as plant and machinery for companies in the manufacturing sector (legislation effecting this change has not been made available).

Mining. All expenditure incurred in connection with the working of a mine or other source of mineral deposit of a wasting nature is considered qualifying mining expenditure. An initial allowance of 10% of the qualifying expenditure is given in the year of expen­diture, with annual depletion allowances deductible over the life of the mine. These are determined by multiplying the residue of the capital expenditure by the greater of 20% and the following fraction:

Output for the year

Output for the year plus estimated future output

Disposals. When an asset is sold, scrapped or destroyed, a balanc­ing allowance or charge is made, based on the difference between the disposal price and the depreciated value on disposal. The balancing charge may be deferred if the plant and machinery disposed of are replaced by similar assets.

Relief for losses. Losses may be carried forward for up to six years to offset future profits. Continuity of trade or ownership is not required to carry forward losses. Losses in one trade or business may be set off against other sources of income for the same year of assessment.

Unabsorbed capital allowances may be carried forward indefi­nitely, provided the company continues to carry on the same trade or business.

Groups of companies. No special rules or reliefs apply to groups of companies; each company is taxed on its own income as appropriate.

Domestic and treaty withholding tax rates

Brunei Darussalam’s domestic tax law imposes withholding tax on various payments made to nonresident persons, which include companies and bodies of persons. A company is considered to be a nonresident company if the control and management of its busi­ness are not exercised in Brunei Darussalam. The following are the withholding tax rates.

Type of payment Rate (%)
Interest, commissions, fees or other payments with respect to loans or indebtedness 15
Royalties or other lump-sum payments for the use of movable properties 10
Payments for the use of, or the right to use, scientific, technical, industrial or commercial knowledge or information 10
Technical assistance and service fees 20
Management fees 20
Rent or other payments for the use of movable properties 10
Nonresident directors’ remuneration 20

The above withholding tax rates may be reduced under tax trea­ties. Brunei Darussalam has entered into double tax treaties with Bahrain, China, the Hong Kong Special Administrative Region, Indonesia, Japan, Kuwait, Laos, Malaysia, Oman, Pakistan, Sing­apore, the United Kingdom and Vietnam.

Brunei Darussalam has signed tax treaties with Korea (South), Luxembourg, Qatar, Tajikistan and the United Arab Emirates, but these treaties have not yet been ratified.