Foreign Investment

 

Foreign investment is welcome in Brunei Darussalam and foreign investors are welcome to participate actively in the country’s current economic diversification program, the crux of which is private sector development. In 1989 the Ministry of Industry and Primary Resources was formed and charged with promoting and facilitating industrial development in Brunei Darussalam. As a rule, Brunei Darussalam provides investors with stability, security, confidence, continuity, and competitiveness.

 

There are a number of attractive investments incentives ready and available for investors at all points of the cycle from start-up to maturity. In 1975 the Investment Incentive Act was enacted and it offers tax advantages at the start up point and ongoing incentives during the growth and expansion period that are at least as good if not better than incentives offered by other countries in the region. The Investment Incentive Act also provides for encouraging the establishment and development of industrial and other economic enterprises for incident purpose and economic expansion.

 

Depending on the program, the following benefits may be offered:

 

• Tax exemptions on imported duties on machinery, equipment, component parts, accessories or building structures;

• Exemption from income tax;

• Tax exemptions on imported raw material not available or produced in Brunei Darussalam intended for the production of the pioneer products;

• Carry forward losses and allowances.

 

The following tax relief is also proved for companies that are granted pioneer status:

 

• Exemptions from corporate tax;

• Exemptions from import taxes on raw materials and capital goods for a period ranging from 2 to 5 years, depending on fixed capital expenditure with possible extension at the discretion of the relevant authorities;

 

Enterprises granted expansion certificates are given tax relief for between 3 to 5 years.

It is also possible to exempt approved foreign loans from paying the 20% withholding tax for interest paid to non-resident lenders.

 

Foreign equity requirements are flexible in Brunei Darussalam. 100% foreign equity is permitted in many export-oriented industries. The exceptions to this include industries based on local resources and industries related to national food security and car dealership. Some level of local participation is required in these cases.

 

In 2000, Brunei opened a tax-privileged International Financial Centre. Even before the formal establishment of the IFC, though, Brunei was a thriving commercial center as exhibited by HSBC’s, Standard Chartered’s, Citibank’s, Overseas Union Bank’s, RHB’s, Maybank’s, Baiduri Bank’s, Islamic Bank of Brunei Berhad’s, Islamic Development Bank of Brunei’s, and The Brunei Islamic Trust Fund’s active presence.

 

Brunei goal is to position its sovereignty, wealth and human resources in a conservative but assertive manner. The Brunei IFC provides a wide-range of international legislation that has been thoughtfully designed to allow modern, flexible, cost effective capabilities, including the entire range of facilities necessary to efficiently conduct global business.

 

The Brunei IFC will also meet regularly with international regulatory bodies. This will make Brunei a "dual jurisdiction", through which "offshore" facilities will be offered based upon international legislation next to the usual range of "domestic" legislation, which was drawn from that of England and Wales. In other words the jurisdictional distinction will be purely legal rather than physical and as such the judicial system will relate to both domestic and international law.

 

The first portion of IFC legislation included the implementation of measures against money laundering and criminal conduct (recovery of proceeds) that meet international standards. In addition, before these activities began, meaningful and enforceable regulation of the Trust, Company Administration, Securities, Insurance and Banking industries was legislated for and established. Brunei also has a tradition of severe drug trafficking legislation has been in place for some time.

 

 

Offshore Legal and Tax Regimes

 

Please be aware that the following is simply a brief summary of some of the more important aspects of Brunei’s tax law and should be considered only general information. Please do not substitute it for professional tax advice.

 

Overview

 

Brunei became a “dual jurisdiction” when the International Financial Centre (BIFC) was established whereby international legislation offers "offshore" facilities, alongside the usual range of "domestic" legislation drawn from that of England and Wales.

 

Forms of Offshore Operation

 

The following forms of offshore operations may be established in Brunei:

 

• International Business Company

• International Limited Partnership

• International Trust

 

Tax Treatment of Offshore Operations

 

For more information on the general principles of Brunei corporate taxation please refer to the section entitled Domestic Corporate Taxes. In most cases these principles also apply to offshore entities except as described below.

 

International Business Companies, International Limited Partnerships and International Trusts are not subject to any forms of corporate taxation.

 

International banks along with their staff, customer, and products are not subject to taxation.

 

No taxes or duties of any description are levied, withheld or collected in relation to international insurance business of any licensee, including insurers, managers, brokers, and underwriters, of shares and no filing or presentation of documents with or to any taxing or analogous authority in Brunei Darussalam is required.

 

Financial institutions are required to pay annual registration fees as follows:

 

Insurance Sector:

• general insurance business, US$6,000;

• life insurance business, US$6,000;

• life and general insurance business, US$12,000;

• captive insurance business, US$1,500;

• international insurance manager, US$1,500;

• international underwriting manager, US$1,500;

• life and general insurance business, US$12,000;

• international insurance broker, US$1,500.

 

Banks:

• a full international license, US$50,000;

• an international investment banking license, US$35,000;

• an international Islamic banking license, US$50,000;

• a restricted international banking license, US$25,000.

 

Taxation of Foreign Employees of Offshore Operations

 

Not only are there no special rules applying to foreign or Brunei employees of offshore operations but also the government of Brunei does not levy any personal income tax at all. Neither are sole-proprietorship and partnership businesses subject to income tax. Moreover, there are no export, sales, payroll or manufacturing taxes.