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Concept of Residence
A company, whether incorporated locally
or overseas, is considered as resident in Brunei Darussalam for tax
purposes if the control and management of its business is exercised in
Brunei Darussalam. The control and management of a company is normally
regarded as resident in Brunei Darussalam if, among other things, its
Directors' meetings are held in Brunei Darussalam.
Treatment of Dividends
Dividends accruing in, derived from, or
received in Brunei Darussalam by a corporation are included in taxable
income, apart from dividends received from a corporation taxable in
Brunei Darussalam which are excluded. No tax is deducted at source on
dividends paid by a Brunei Darussalam corporation.
Dividends received in Brunei Darussalam
from United Kingdom or Commonwealth countries are grossed up in the
tax computation and credit is claimed against the Brunei Darussalam
tax liability for tax suffered either under the double tax treaty with
the United Kingdom or the provision for Commonwealth tax relief. Any
other dividends are included net in the tax computation and no foreign
tax is available. Brunei Darussalam does not impose any withholding
tax on dividends.
Allowable Deductions
All expenses wholly or exclusively
incurred in the production of taxable income are allowable as
deductions for tax purposes. These deductions include:-
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Interest on borrowed money used in acquiring income;
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Rent on land and buildings used in the trade or business;
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Costs of repair or premises, plant and machinery;
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Bad debts and specific doubtful debts, with any subsequent
recovery being treated as income when received;
and
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Employer's contributions to approved pensions or provident
funds.
Disallowable Deductions
Expenses not allowed as deductions for
tax purposes include:
* Expenses not wholly or exclusively
incurred in acquiring income;
* Domestic private expenses;
* Any capital withdrawal or any sum used
as capital;
* Any capital used in improvements apart
from replanting of plantations;
* Any sum recoverable under an insurance
or indemnity contract;
* Rent or repair expenses not incurred
in the earning of income;
* Any income tax paid in Brunei
Darussalam or in other countries; and
* Payments to any unapproved pension or
provident funds.
Donations are not allowable but claimable if they are made to
approved institutions.
Allowances for Capital Expenditure
Depreciation is not allowable expense and is replaced by
capital allowances for qualifying expenditure. The tax payer is
entitled to claim wear and tear allowances calculated as follows:-
An initial allowance of 10% is given in the year of
expenditure, and an annual allowance of 2% of the qualifying
expenditure is provided on a straight-line basis until the total
expenditure is written off.
An initial allowance of 20% of the cost is given in the year
of expenditure together with annual allowances calculated on the
reducing value of the assets. The rates prescribed by the Collector of
Income Tax range from 3% to 25%, depending on the nature of the asset.
Balancing allowances or charges are made on disposal of the industrial
building machinery or plant.
These adjustments cover the shortfall or excess of the tax
written down value as compared to the sale proceeds. Any balancing
charge is limited to tax allowances previously granted, and any
surplus is considered a capital gain and therefore does not become
part of chargeable income.
Unabsorbed capital allowances can be carried forward
indefinitely but must be set off against income from the same trade.
Loss Carryovers
Losses incurred by a company can be carried forward for six
years for set-off against future income, and can be carried back one
year. There is no requirement regarding continuity of ownership of the
company, and also the loss set-off is not restricted to the same
trade.
Foreign Tax Relief
A double taxation agreement exists with the United Kingdom
and provides proportionate relief from Brunei Darussalam income tax
upon any part of the income that has been or is liable to be charged
with United Kingdom income tax. Tax credits are only available for
resident companies.
Unilateral relief may be obtained on income arising from
Commonwealth countries that provide reciprocal relief. However, the
maximum relief cannot exceed half the Brunei Darussalam rate. This
relief applies to both resident and non-resident companies.
Withholding Taxes
Interest paid to non-resident companies under a charge,
debenture or in respect of a loan, is subject to withholding tax of
20%. There are no other withholding taxes.
Stamp duties are levied on a variety of
documents. Certain types of documents attract an ad- valorem duty,
whereas with other documents the duty varies with the nature of the
documents.
Special Legislation exists in respect of
income tax from petroleum operations which is taxable under the Income
Tax (Petroleum) Act 1963 as amended.
Estate duty is levied on an estate of
over B$2 million at 3% flat rate for a person who died on or after
15th December 1988.
In general, basic foodstuffs and goods
for industrial use are exempted from import duties. Electrical
equipment and appliances, timber products, photographic materials and
equipment, furniture, motor vehicles and spare parts attract duties of
20%, while cosmetics and perfumes are subject to 30% duty. In
addition, cigarettes are dutiable items.
There are recent regulations on import
duties of goods to Brunei.
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General Section
