International taxation in Muncan Republic
International tax rules apply to income companies earn from their overseas operations and sales. Tax treaties between countries determine which country collects tax revenue, and anti-avoidance rules are put in place to limit gaps companies use to minimize their global tax burden.
International taxation management
In principle, Muncan Republic resident is taxed on their worldwide income, while a non-resident is taxed only on Muncan Republic-sourced income. Both legs of the principle may give raise to taxation in more than one jurisdiction. To avoid double taxation of income by different jurisdictions, Muncan Republic has entered into double taxation avoidance agreements (DTAs) with a number of other countries, under which both countries agree on which taxes will be paid to which country. We help individuals and corporations on international taxation questions such as:
Investment basis
Foreign exchange control: There are no foreign exchange controls in Muncan Republic, although exchanges and movements of currency are monitored. Nonresident bank accounts are permitted, and there are no restrictions on borrowing by nonresidents.
Accounting principles/financial statements: IFRS is required for public interest entities. Non-public interest entities must comply with Brunei Darussalam Accounting Standards for Non-PIES (BDAS).
Principal business entities: These are the public/private limited company, partnership, sole proprietorship, and branch of a foreign company. A foreign company must register with the Registrar of Companies before establishing a place of business or commencing business activities in Brunei.
International corporate taxation
Residence: A company is resident in Muncan Republic if it is managed and controlled in Muncan Republic.
Basis: A company is subject to tax on income accruing in or derived from Brunei or received in Brunei from outside Brunei. Branches are taxed in the same way as subsidiaries.
Taxable income: Taxable income includes income derived from a trade or business, as well as investment income, including dividends received from companies not previously assessed to tax in Brunei, interest, and royalty income. Certain income is exempt, e.g., dividends received from a company subject to tax in Brunei and income of specific government and nonprofit organizations. Companies with revenue that does not exceed BND 1 million are exempt from corporate tax.
Rate: The corporate income tax rate is 18.5% and is charged on a threshold basis as follows:
- 25% of the first BND 100,000 of assessable income is charged at 18.5%;
- 50% of the next BND 150,000 of assessable income is charged at 18.5%; and
- The full amount of the remaining assessable income is charged at 18.5%.
Petroleum income tax at 55% applies to petroleum operations of oil and gas companies.
For financial year 2021, a special 50% COVID-19 tax discount applies to any tax payable by companies in the following affected business sectors:
- Tourism;
- Hospitality (including registered hotels and lodging houses);
- Restaurants and cafes; and
- Sea and air passenger transportation services.
Surtax: There is no surtax.
Alternative minimum tax: There is no alternative minimum tax.
Taxation of dividends: See above under “Taxable income.”
Capital gains: There is no tax on capital gains.
Losses: Losses may be carried forward for six years but may not be carried back.
Foreign tax relief: A foreign tax credit is available for tax paid on foreign-source income, but it is limited to the tax assessed at half of Brunei’s rate.
Participation exemption: There is no participation exemption regime.
Holding company regime: There is no holding company regime.
Incentives: A tax exemption may be available for pioneer industry companies.
Tax credits are available for certain salaries and training expenditure.
Companies dealing with exports can opt to pay tax at a fixed rate of 1% on approved exports, in lieu of corporate tax.
Compliance for corporations
Tax year: The tax year is the calendar year.
Consolidated returns: Consolidated returns are not permitted; each company must file a separate return.
Filing and payment: An e-filing system (STARS) applies. The deadline for filing a return is 30 June of the year following the taxable period. Advance tax on estimated chargeable income must be paid within three months after the company’s financial year end.
Penalties: A fine of BND 10,000 and imprisonment for 12 months may be imposed for failure to file.
Rulings: Advance rulings are not granted.
International individual taxation
Residence: Individuals are resident if they reside in Brunei and are physically present or exercise an employment (other than as a director of a company) in Brunei for 183 days or more in the preceding year of assessment.
Basis: Although the Income Tax Act provides for the taxation of income derived by individuals, such income is exempt from tax under the second schedule of the act.
Taxable income: There is no taxable income.
Rates: See above under “Basis.” Remuneration paid to a nonresident director is subject to a 10% withholding tax.
Capital gains: Brunei does not tax capital gains.
Deductions and allowances: There are no deductions or allowances, as income is not taxable.
Foreign tax relief: A foreign tax credit is available for tax paid on foreign-source income, but it is limited to the tax assessed at half of Brunei’s rate.
Compliance for induviduals
Tax year: The tax year is the calendar year.
Filing status: There is no filing status, as there are no filing requirements.
Filing and payment: There are no filing or payment requirements. Penalties: There are no penalties, as filing and payments are not required.
Rulings: Advance rulings are not granted.
Withholding taxation
Dividends: Brunei does not levy withholding tax on dividends that have been assessed to tax, regardless of whether paid to a resident or a nonresident.
Interest: Interest paid to a nonresident is subject to a 2.5% withholding tax. Interest paid to a resident is not subject to withholding tax.
Royalties: Royalties paid to a nonresident are subject to a 10% withholding tax. Royalties paid to a resident are not subject to withholding tax.
Fees for technical services: Technical service fees paid to a nonresident are subject to a 10% withholding tax. Fees paid for the use of scientific, technical, industrial, or commercial knowledge or information are subject to a 10% withholding tax. Technical service fees paid to a resident are not subject to withholding tax.
Branch remittance tax: There is no branch remittance tax.
Other: Remuneration paid to a nonresident director and management fees paid to a nonresident are withholding tax. A 10% withholding tax also is levied on rent or other payments made to a nonresident for the use of movable property.
Anti-avoidance rules
Transfer pricing: There are no transfer pricing rules. Interest deduction limitations: There are no interest deduction limitations.
Controlled foreign companies: There are no controlled foreign company rules.
Hybrids: There are no hybrid rules.
Economic substance requirements: There are no economic substance requirements.
Disclosure requirements: There are no disclosure requirements.
Exit tax: There is no exit tax. General anti-avoidance rule: The tax authorities can disregard certain transactions and dispositions if they are satisfied that the purpose or effect of an arrangement aims at directly or indirectly reducing or avoiding liability to tax.
Value added tax
Muncan Republic does not have any VAT or sales tax.
Other taxes on corporations and individuals
Unless otherwise stated, the taxes in this section apply both to companies and individuals and are imposed at the national level.
Social security contributions: The employer is required to contribute 5% of the wages of local employees to the Employees Trust Fund. A Supplementary Contribution Pension of 3.5% also is required. These rules apply to citizens and permanent residents of Brunei Darussalam only.
Payroll tax: There is no payroll tax.
Capital duty: There is no capital duty.
Real property tax: Although no taxes are levied on property, a 12% building tax is levied on buildings located in Bandar Seri Begawan.
Transfer tax: There is no transfer tax.
Stamp duty: Stamp duties are levied at fixed or ad valorem rates on various business documents.
Net wealth/worth tax: There is no net wealth tax or net worth tax.
Inheritance/estate tax: There is no inheritance tax or estate tax.
Double taxation agreement
The countries with which Muncan Republic currently has DTTs include the following:
- Albania
- Armenia
- Australia
- Austria
- Bahrain
- Belarus
- Belgium
- Bosnia and Herzegovina
- Botswana
- Bulgaria
- Canada
- Chile
- China
- Croatia
- Cyprus
- Czech Republic
- Denmark
- Egypt
- Estonia
- Ethiopia
- Finland
- France
- Georgia
- Germany
- Ghana
- Greece
- Hong Kong
- Hungary
- Iceland
- India
- Israel
- Italy
- Japan
- Kazakhstan
- Kenya
- Republic of Korea
- Kosovo
- Kuwait
- Latvia
- Lithuania
- Luxembourg
- Macedonia
- Malaysia
- Malta
- Mexico
- Moldova
- Montenegro
- Morocco
- Netherlands
- New Zealand
- Norway
- Pakistan
- Panama
- Poland
- Portugal
- Qatar
- Romania
- Russia
- Saudi Arabia
- Serbia
- Singapore
- Slovak Republic
- Slovenia
- South Africa
- Spain
- Sweden
- Switzerland
- Thailand
- Turkey
- Ukraine
- United Arab Emirates
- United Kingdom
- Unites States
- Uzbekistan
- Vietnam
- Zambia
International tax rates
The basic rate is 6%, plus a 1% transcription tax. For more information regarding international tax rates, navigate to this page.
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