Issuance of Income Tax Form
Filing of Income Tax Return
Types of Income
Allowable Deductions
Disallowable Deductions
Capital Gains Tax
Withholding Tax
Capital Allowances
Losses Carryover
Tax Relief and Incentives
Assessment
Objection
Issuance of Income Tax Return
The Collector of Income Tax issues Income Tax Form to companies in January of each year. This form is sent to the company's registered address or their tax agent.
A company must file Income Tax Returns ("Returns") within 3 months from the date of the form to the Collector of Income Tax.
The Form must be submitted together with a Certified copy of the Balance Sheet, Trading and Profit and Loss Account, Income Tax Computation and supporting schedules.
Failure to file returns is an offence against the Income Tax Act and upon conviction, will be liable to a fine of B$10,000 and in default payment to imprisonment for 12 months.
Among the types of income which are subjected to tax are:
- Gains or profits from any trade, business or vocation;
- Gains or profits from any employment;
- the net value of land and improvements;
- dividends, interest, or discounts;
- any pension, charge or annuity;
- rents, royalties, premiums and any other profits arising from property.
Detailed description of which can be found at Part III of the Income Tax Act.
Dividend Income
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 which are excluded;
Dividends received in Brunei Darussalam from the United Kingdom or Commonwealth countries are grossed up in the tax computation and credit is claimed against the Brunei tax liability for tax suffered either under the double tax treaty with the United Kingdom or provision for Commonwealth tax relief.
All expenses wholly or exclusively incurred in the production of taxable income are allowable as deductions for tax expenses. These deductions include:
- Interest on borrowed money used in acquiring income;
- Rent on land and buildings used in trade or business;
- Costs of repair or premises, plant and machinery;
- Bad debts and specific doubtful debts, with any subsequent recovery being treated as income when received;
- Employers’ contributions to approved pensions or provident funds.
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 or 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 or in other countries;
- Payments to any unapproved pension or provident funds;
- Donations are not allowable but claimable if they are made to approved institutions.
Interest paid to non resident companies is subject to withholding tax at the rate of twenty percent (20%) (Section 37).
Depreciation is not an allowable expense and is replaced by capital allowances for qualifying capital expenditure. The rates of Capital Allowance can be found in the Subsidiary Legislation of the Income Tax Act.
An initial allowance of 10% of the cost given in the year of expenditure, and an allowance of two percent (2%) of the qualifying expenditure is provided on a straight line basis until the total expenditure is written off
An initial allowance of twenty percent (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 three percent (3%) to twenty five percent (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.
Unabsorbed capital allowances can be carried forward indefinitely but must be set off against income from the same trade.
Losses incurred by a company can be carried forward for six (6) years for set-off against future income and can be carried back one (1) year provided it is claimed in writing within one year after the year of assessment.
Relief may be obtained on income arising from Commonwealth countries that provide reciprocal relief. The maximum relief cannot exceed half the Brunei Darussalam rate and it applies to both resident and non-resident companies.
This Order was introduced to encourage the establishment and development of industrial and other economic enterprises in Brunei Darussalam and also to attract local and foreign investors to invest in Brunei Darussalam.
The period of assessment is on a preceding year basis where a calendar year ending 31st December is adopted as the basis period.
Assessment is done on a formal basis where tax returns are examined before the Notice of Assessment is issued.
Tax shall be payable to the office of Collector of Income Tax within 30 days after the service of the notice eventhough the company has made an objection to the assessment.
If any person disputes the assessment, he may apply to the Collector, by notice of objection in writing, to review the assessment rendered upon him by stating precisely the grounds of his objections within 60 days from the date of the service of Notice of Assessment.