FAVOURABLE TAX SYSTEM

Taking advantage of the congenial business atmosphere in the Sultanate, more and more foreign companies are choosing Brunei Darussalam as their preferred investment destination.

The Revenue Division of the Ministry of Finance and Economy (MoFE) was appointed to handle the country’s tax administration. The division continuously reviews and strengthens the income tax legislations to increase tax compliance and collection.

Under the Revenue Division, the System for Tax Administration and Revenue Services (STARS) was set up as an online tax system. The system facilitates companies in handling matters related to taxes such as filing of income tax returns and payment of corporate income tax online.

Brunei has the least number of taxes in the region, making it an attractive investment destination. There are no sales tax, payroll tax, capital gains tax, manufacturing tax and personal income tax. Corporate income tax in Brunei is at 18.5 per cent, one of the lowest in the region. However, companies involved in the exploration and production of oil and gas receive a tax rate of 55 per cent.

Newly incorporated companies receive an exemption for the first BND100,000 chargeable income during the first three years of assessment. Additionally, a tax threshold is granted to newly incorporated and existing companies to reduce the tax liabilities of small and medium-sized enterprises (SMEs).

Corporate income Tax is levied on limited companies incorporated or registered under the Companies Act (Chapter 39) or any law in force elsewhere, usually as a “Sdn Bhd”, “Bhd” or “Pvt Ltd”, which accrues in, derives from or receives income in Brunei.

Currently, no tax is levied on unincorporated companies, personal income and capital gains from the sale of property or an investment.

Pioneer status companies operating specific industries, which has been granted pioneer certificate will be given incentives including tax holiday from corporate income tax ranging from five years to 20 years. Other benefits include exemption from import duties on machinery and raw materials.

Other notable incentives include tax relief for capital expenditure in excess of BND1 million and the withholding of tax exemptions for interest on certain loans from non-residents.

The country does not levy any indirect taxes such as value added tax (VAT) or other consumption based taxes. Property tax is imposed only on properties for commercial use with rates determined by the local municipal board.