Brunei Corporate Tax Guide

Brunei Darussalam

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Bandar Seri Begawan GMT +8

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+673 (2) 239-139, +673 (2) 239-140, Mail address: +673 (2) 239-141

P.O. Box 2162

Bandar Seri Begawan BS 8674 Brunei Darussalam

Street address: 3rd Floor, Room 309A Wisma Jaya

Jalan Pemancha

Bandar Seri Begawan BS 8811 Brunei Darussalam

Business Tax Advisory

Fax: +673 (2) 239-142

Kong Ee Pin +673 (2) 239-139

ee-pin.kong@bn.ey.com

A. At a glance

Corporate Income Tax Rate (%) 18.5 (a)

Capital Gains Tax Rate (%) 0 Branch Tax Rate (%) 18.5 (a)

Withholding Tax (%) (b)

Dividends

Interest 2.5

Royalties 10 Branch Remittance Tax

Net Operating Losses (Years) Carryback

Carryforward

(a) This is the standard rate. The rate of petroleum income tax is 55%. (b) For a listing of withholding taxes, see Section D.

B. 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 accru ing 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.

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.

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.

For the 2022 tax year, a tax discount of 50% on the tax payable is given for companies in the tourism, hospitality (including registered hotels and lodging houses), restaurant and cafés, and sea and air passenger transport services sectors.

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, Cambodia, China Mainland, the Hong Kong Special Administrative Region (SAR), Indonesia, Japan, Korea (South), Kuwait, Laos, Luxembourg, Malaysia, Oman, Pakistan, Qatar, Singapore, the United Arab Emirates, the United Kingdom and Vietnam. Both resident and nonresident companies may also apply for unilateral relief on income arising from British Commonwealth jurisdictions offering reciprocal re lief. However, the maximum relief cannot exceed half the Brunei Darussalam rate.

C. 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 gen erating the charge is used for the production of taxable income.

Provisions. A provision for doubtful debts is not tax-deductible. Trade debts written off as bad are generally allowable as tax deductions when there is sufficient evidence of reasonable steps taken for recovery.

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 40% of the qualifying expenditure is given on industrial buildings in the year of expendi ture, with a further annual allowance of 20% of qualifying expen diture provided on a straight-line basis until the total expenditure is written off.

Plant and machinery. An initial allowance of 40% of the cost of plant or machinery is given on the qualifying expenditure, and an annual allowance is given on the declining value of the asset. Effective from 1 January 2016, the rates of the annual allowance for all types of assets were changed to 25%. Alternatively, a com pany 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 auto mation 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 was increased to 150% for assets categorized as plant and machinery for companies in the manufacturing sector. This capital allow ance applies only to plant and machinery installed between 1 January 2014 and 31 December 2019.

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 expen diture, 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 the fraction of 1/20 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 balanc ing 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.

D. 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 busi ness 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 2.5 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 10 Management fees 10 Rent or other payments for the use of movable properties 10 Nonresident directors’ remuneration 10

The above withholding tax rates may be reduced under tax trea ties. Brunei Darussalam has entered into double tax treaties with Bahrain, Cambodia, China Mainland, the Hong Kong SAR, Indonesia, Japan, Korea (South), Kuwait, Laos, Luxembourg, Malaysia, Oman, Pakistan, Qatar, Singapore, the United Arab Emirates, the United Kingdom and Vietnam.