Brunei

*Updated July 2020*

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• Legal system
• Inheritance and succession
• Estate planning
• Taxation
• Residence and domicile
• Other relevant information

Brunei’s source of law is derived principally from Acts and Orders. The Application of Law Act, Cap. 2 which was enacted on 25 April 1951, facilitated the application in Brunei of the common law of England and Wales, the doctrines of equity and statues of general application as administered or in force in England at the commencement of [the] Act, and to the extent that they are not inconsistent with Acts or Orders in place Islamic Shari’a law takes precedence in areas pertaining to Muslims such as matrimonial cases, probate and administration of estates and partly in Islamic banking and finance. Final recourse for civil cases can be made to the Judicial Committee of the Privy Council in London by prior mutual consent.

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Inheritance and succession

Succession

In the context of international trust regime as governed by the International Trusts Order 2000 (ITO), any person, and this includes a body of persons, corporate or unincorporated, that is not resident of Brunei with the capacity to transfer the intended trust property to trustees and each person who donates or contributes property to a trust, shall be considered a settlor. Further, forced heirship rule conferred by a foreign law shall not be recognised.

Family law and defined inheritance rules

Yes. The Emergency (Islamic Family Law) Order 1999 makes provisions relating to Islamic family law in respect of marriage, divorce, maintenance, guardianship and other matters connected to family law issues of Muslims.

Probate process

Upon death, the deceased’s estate is frozen. Where there is a valid will, upon probate the executor will distribute the estate according to the will. Where there is no will, the court appoints an administrator (who usually applies to the court for the appointment) to administer the estate.

For Muslims, Shari’a law applies, and the Kadi Court issues an inheritance certificate or fraidh to indicate which members of the family are eligible to be appointed as administrators. For non-Muslims, provisions state which members of the family may be appointed.

Mental capacity

Within the context of the ITO, the court has power to vary all or any of the terms of the trust. The court, if it thinks fit, may approve such arrangement on behalf of any person, who is either a minor or incapacitated by law, having directly or indirectly an interest whether vested or contingent under the trust. The court may only consider this arrangement if it will benefit or will not prejudice that person and it considers that its approval is appropriate for the benefit of the person it makes arrangement for.

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Estate planning

Use of trusts in estate planning

The trust concept is derived mainly from common-law traditions. The Application of Laws Act provides that the common law of England, doctrines of equity, together with statutes of general application as administered or in force in England, are in force in Brunei subject to permitted circumstances. Although trust law is not widely practised in Brunei, the ITO, a statute applicable only to international trusts (ITs) caters to private and corporate planning on an international level.

ITs are useful for both Islamic and conventional planning. On the private client side, provision is made for asset protection and special trust regimes. For major corporations, because commercial purpose trusts may be created without an individual beneficiary, they are used for special purpose vehicles (SPVs) and planning. They are not available to settlors or beneficiaries who are residents of Brunei.

Use of foundations in estate planning

NOT APPLICABLE.

Types of entities

Local and foreign entrepreneurs who wish to undertake commercial activities from or within Brunei may do so by setting up one of the following business entities:

a) Domestic entities

i) Sole proprietorship

• Fully and personally liable for own business obligations.
• Registration under Business Names Act (Cap 92).
• Not open for foreigners.
• Not subject to corporate tax.

ii) Partnership

• May consist of individuals, corporations of up to 20 partners.
• At least one partner is Bruneian citizen or a Brunei permanent resident.
• Regulated under the Contracts Act.
• Foreigners may register a partnership, but it is subject to approval from the Registrar.
• Not subject to income or corporate tax.

iii) Private Company (Sdn Bhd)

A limited liability company and is most common. Shareholders must not exceed 50. A private company may be incorporated as:

• Company limited by shares.
• Company limited by guarantee.
• Company limited both by shares and guarantee.
• Unlimited company.

Private companies are:

• Regulated under the Companies Act ( Cap 39).
• Open for foreigners.
• Subject to corporate tax, audit and filing of returns.

iv) Public Company (Bhd)

• A company that can transfer its shares freely to the public. It may be limited or unlimited, shares or guarantee or both.
• It can have more than 50 shareholders and it is open for foreigners to register.
• Regulated under the Companies Act (Cap 39).
• Subject to corporate tax, audit and filing of returns.

v) Branch of foreign company

• A foreign company wishing to have a presence as a branch in Brunei but not incorporated as a local company.
• It must appoint a local agent and a local registered office address is mandatory.
• Regulated under the Companies Act (Cap 39).
• Open for foreigners, and it is subject to approval from the Registrar.
• Subject to corporate tax, audit and filing of returns for the branch accounts.

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Taxation

Income tax system

A company, whether incorporated locally or abroad, is deemed resident in Brunei for tax purposes if the management and control of its business are exercised in Brunei. In general, a resident company is taxed on its worldwide income, whereas a non-resident company is only taxed on its income arising in Brunei.

Personal income tax rates

There is no personal income tax on individuals (residents and non-residents) by virtue of a tax exemption under the First Schedule of the Income Tax Act and there are no social security taxes in Brunei.

Corporate income tax rates

The tax rate for year assessment 2015 is 18.5 per cent for companies and 55 per cent for oil and gas companies. These rates apply to both resident and non-resident companies whether incorporated or registered as a foreign branch under the Companies Act (Cap 39) or incorporated abroad. IBCs, FICs and ILPs are tax-exempt international business entities.

Capital gains tax

There is no tax on capital gains.

Non-residents

• Royalties paid to non-residents are subject to withholding tax at 10 per cent.
• Interest payments to non-residents are subject to withholding tax at 15 per cent. This may be reduced under a tax treaty.
• Technical service fees paid to non-residents are subject to withholding tax at 20 per cent.
• Management fees paid to non-residents are subject to withholding tax at 20 per cent.
• Rent or other payments for the use of movable property are subject to withholding tax at 10 per cent.
• Non-resident director’s remuneration is subject to withholding tax at 20 per cent.

Withholding tax rate (non-treaty)

See list above. Dividends are not subject to withholding tax in Brunei.

Withholding tax rate (treaty)

See list above. Dividends are not subject to withholding tax in Brunei.

Taxation at death

Taxation of trusts does not exist within the taxation framework in Brunei. With effect from 1 January 2013, estate duties have been abolished.

Other taxes

There are no net wealth tax, gift tax, sales tax, VAT or GST, and no payroll or manufacturing taxes in Brunei.

Stamp duties are imposed on official documents at an ad valorem or fixed rate, depending on the nature or type of transactions presented in the documents.

Tax on exports

A flat rate of 1 per cent has been introduced to encourage export activities for certain approved types of export. Under the treatment, total turnover of the exporter is treated as exports, if the local sales do not exceed 20 per cent of the total turnover.

Tax treaties

The government of Brunei Darussalam has signed DTAs with the following countries: Bahrain, China, Hong Kong, Indonesia, Japan, Kuwait, Laos, Luxembourg, Malaysia, Oman, Pakistan, Qatar, Singapore, South Korea, Tajikistan, United Arab Emirates, United Kingdom and Vietnam.

Tax information exchange agreements

As part of its commitment in recognising the international standard on exchange of information, the government of Brunei Darussalam has also signed tax information exchange agreements (TIEAs) with the following countries: Australia, Canada, France India, and the Nordic countries.

On 1 May 2014, the Brunei authority issued a directive to all licensees under the Securities Markets Order 2013 (SMO) in relation to their obligations under FATCA that disclosure of clients’ information does not fall within the exempt disclosure provisions under s48 of SMO. The licensees are reminded that they are bound by the confidentiality provisions relating to clients’ information under s47. Any disclosure made to the US IRS will be strictly with the explicit consent from the clients and they are required to be notified in advance of the FATCA requirements and the licensees’ obligations prior to any disclosure.

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Residence and domicile

Special rules on becoming resident

Brunei does not issue temporary residence permits except for work permits for employment purposes. Permanent resident status may be applied for by eligible applicants such as the wife of a Bruneian citizen, wife of a Brunei permanent resident, child whose mother is a Bruneian citizen, child whose mother is a Brunei permanent resident and husband of a Bruneian citizen. Restrictions apply and all applications are based on a case-to-case basis.

Citizenship status may also be obtained by eligible applicants such as permanent residents (born in Brunei) having obtained PR status for at least 12 years, wife of a Bruneian citizen having married for at least five years and obtained permanent residence for at least three years and permanent residents (born outside Brunei) having obtained PR status for at least 20 years.

Special rules on ceasing residence

Not Applicable.

Domicile concept for gifts and inheritance

Not Applicable.

Taxation of holdings by non-residents on death and of gifts

• Gifts: no.
• Death: no.

Reporting/auditing requirements

Starting from 2012 year of assessment, all companies registered under the Companies Act (Cap 39) are required to lodge their tax returns online through the System for Tax Administration and Revenue Services (STARS) with the Collector of Income Tax at the Revenue Division, Ministry of Finance. The e-filing system is self-assessment and the filing due date is 30 June of the year of assessment. All companies must appoint local auditors and audit is mandatory. Companies must also file their annual returns with the Registrar of Companies.

Companies registered under the International Business Companies Order 2000 are required to lodge their annual returns online through the Registry and Licensing System (RALS) with the Registrar of IBCs at the AMBD. Companies may appoint local auditors, however, audit is optional.

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Other relevant information

Asset protection laws

In the context of ITs as governed by the ITO, asset protection is provided for where the burden of establishing an intent to defraud is on the creditor who is seeking to set aside the disposition. The creditor who is thereby prejudiced must commence action within six years after the relevant disposition takes place.

If a claimant has successfully proved there was a fraudulent disposition of an asset, then only that asset may be set aside. ITO provides that a disposition shall be set aside only to the extent necessary to satisfy the debt or liability owed to the claiming creditor together with such costs as the court may decide.The trust may remain valid after the disposition in question has been set aside by the court provided that the trust has complied with the provisions of the ITO.

Foreign currency restrictions

No.

Foreign ownership restrictions

Yes. Brunei welcomes foreign direct investments and it has no statutory restrictions on foreign ownership of business. However, foreigners cannot own land including landed properties in Brunei. Foreigners and permanent residents may hold properties under strata titles or long-term leasehold rights.

AML/due diligence and other requirements and regulatory procedures for advisors

• To establish a trust: yes.
• For incorporation: yes.
• To open a bank account: yes.

Other points of interest

R&D and other incentives may be granted for R&D activities or companies classified as pioneer status in the form of tax relief or tax holidays for between five and 20 years depending on certain criteria being met.

Key resources for further information

PUBLICATIONS

• Anti-Terrorism Order 2011
• Anti-Terrorism (Terrorist Financing) Regulations 2013
• Application of Laws Act (Cap 2)
• Autoriti Monetari Brunei Darussalam Order 2010
• Brunei Taxation Agreement
• Companies Act (Cap 39)
• Criminal Asset Recovery Order 2012
• Income Tax Act (Cap 35)
• Income Tax Act (Amendment) Order 2009, 2010, 2012, 2013
• Income Tax (Petroleum) Act (Cap 119)
• International Business Companies Order 2000
• International Limited Partnerships Order 2000
• International Trusts Order 2000
• Money Laundering Order 2000
• Probate and Administration Act (Cap 11)
• Stamp Act (Cap 34)
• Securities Markets Order 2013
• Securities Markets Regulations 2014

WEBSITES

• Government probate and administration information: www.judicial.gov.bn
• Revenue Division, Ministry of Finance on tax matters: www.mof.gov.bn
• Autoriti Monetari Brunei Darussalam: www.ambd.gov.bn
• Attorney General’s Chambers: www.agc.gov.bn
• Registrar of Companies: www.roc.gov.bn 

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STEP branches in Brunei

There is not currently a STEP branch in Brunei, but we do have branches in other countries in the South East Asia region:

• STEP Malaysia
• STEP Singapore

Firms in Brunei

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STEP members in Brunei

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