Brunei is a small, oil-rich country located on the island of Borneo in Southeast Asia. The country has a relatively simple taxation system, with no personal income tax for residents. In this article, we will explain how the taxation system works in Brunei, whether the country offers any double taxation agreements, the main taxes expats need to be aware of, any special tax breaks that could apply to expats, how and when to file a tax return as an expat, and the tax exit procedures for anyone leaving Brunei to move abroad.
The Taxation System in Brunei
Brunei operates a territorial taxation system, which means that only income earned in Brunei is subject to tax. Personal income tax is not levied on residents or non-residents, making Brunei an attractive destination for expats looking to work or invest in the country.
Double Taxation Agreements
Brunei has signed double taxation agreements with several countries to avoid double taxation for individuals and companies. These agreements ensure that income is not taxed twice in both countries, which can result in a significant tax burden for taxpayers. Some of the countries that have signed double taxation agreements with Brunei include the United States, the United Kingdom, and Singapore.
Main Taxes in Brunei
As mentioned earlier, Brunei does not levy personal income tax on residents or non-residents. However, there are other taxes that expats need to be aware of, including corporate tax, withholding tax, and goods and services tax (GST).
Corporate tax
Corporate tax is levied on companies operating in Brunei. The tax rate is 18.5% for oil and gas companies and 55% for non-oil and gas companies.
Withholding tax
Withholding tax is levied on certain types of payments made to non-residents, including dividends, interest, and royalties. The withholding tax rate varies depending on the type of payment and can range from 5% to 30%.
Goods and services tax (GST)
Brunei has a GST system that was introduced in 2012. The tax rate is 5%, and it is levied on the supply of goods and services in Brunei. The GST applies to both residents and non-residents who supply goods and services in the country.
Special Tax Breaks for Expats
There are several tax breaks available for expats who invest in Brunei. The government offers tax incentives for companies engaged in certain sectors, including agriculture, fisheries, and manufacturing. The tax incentives include exemption from corporate tax and import duties on machinery and equipment.
Filing a Tax Return in Brunei
As there is no personal income tax in Brunei, expats are not required to file a tax return. However, companies operating in Brunei are required to file a tax return annually.
Tax Exit Procedures for Leaving Brunei to move abroad
If you are leaving Brunei to move abroad, you will need to follow certain tax exit procedures to ensure that you fulfill all your tax obligations in the country. The first step is to inform the Brunei tax authorities of your departure by submitting a notification of cessation of business or employment.
You will also need to settle any outstanding tax liabilities before leaving the country, including corporate tax, withholding tax, and GST. If you have any assets in Brunei, such as property or investments, you may also need to pay any applicable taxes before you can transfer ownership.
It’s always advisable to consult with a tax advisor or accountant to ensure that you understand the tax regulations in Brunei and fulfill all your tax obligations.
Brunei has a simple taxation system, with no personal income tax for residents or non-residents. However, there are other taxes that expats need to be aware of, including corporate tax, withholding tax, and GST. Expats who invest in Brunei can benefit from tax incentives in certain sectors, including agriculture, fisheries, and manufacturing. As there is no personal income tax in Brunei, expats are not required to file a tax return. If you are leaving Brunei to move abroad, you will need to follow certain tax exit procedures to ensure that you fulfill all your tax obligations in the country.
It’s important to note that tax regulations in Brunei can change, and it’s essential to stay up-to-date with any new tax laws or changes. It’s always advisable to consult with a tax advisor or accountant to ensure that you comply with all the tax regulations in Brunei and fulfill all your tax obligations.