Tax incentives are often granted by the host nation to attract businesses or individual investors to set up and expand operations in a country.
These incentives provide extra impetus for such enterprises or entities to maintain their commercial activities which can benefit their host country’s economy significantly and generate positive spin-off effects such as job generation and the cascading of downstream industries.
In an effort to encourage business activities in Brunei, the Revenue Division of the Ministry of Finance was appointed to handle the country’s tax administration and continuously review and strengthen the Income Tax legislations to increase tax compliance and collection.
The Division is also responsible for conducting and negotiating Avoidance of Double Taxation Agreement (DTA), Bilateral Investment Treaty (BIT) and Tax Information Exchange Agreement (TIEA). Several units were established in assisting taxation processes in the country. Under the Revenue Division, System for Tax Administration and Revenue Services (STARS) is an online tax system built to facilitate companies in handling matters related to taxes, such as filing of income tax returns and payment of corporate income tax online.
The Income Tax Board of Review (ITBOR) was established in February 2017 by the Ministry of Finance to oversee processes of hearing, examining and settlement of objection cases as brought about by companies. ITBOR illustrates the ministry’s efforts in pushing for a transparent and fair corporate tax system.
Currently, the country imposes a corporate income tax rate of 18.5 per cent to businesses, one of the lowest among the Asean countries. However, companies involved in the exploration and production of oil and gas receive a tax rate of 55 per cent. Newly incorporated companies also receive an exemption for the first BND100,000 chargeable income. Additionally, a tax threshold is granted to both newly incorporated and existing companies to reduce the tax liabilities of SMEs.
Brunei does not impose any personal income tax on individuals or any social security tax. However, all citizens and permanent residents are required to contribute five per cent of their salary to the Employees Trust Fund (TAP) – a state-managed provident fund – and 3.5 per cent to the Supplemental Contributory Pension (SCP) scheme. Employers are required to contribute the same amount for its employees to both the fund and the scheme.
The country does not levy any indirect taxes such as value added tax (VAT) or other consumption based taxes. It also has no export duty. Property tax is only imposed on properties under commercial use, with rates determined by the local municipal board.
Copyright 2017 Borneo Bulletin Yearbook 2017 All rights reserved.
