Brunei Darussalam Tax Regime

Brunei Darussalam operates a comparatively simple corporate tax system built around a flat 18.5% corporate income tax, no personal income tax on individuals, and no general goods and services tax or VAT. The regime is heavily shaped by the country's hydrocarbon economy: a separate, much higher 55% tax applies to profits from oil and gas exploration and production, reflecting the fiscal importance of petroleum revenue to the Sultanate. Outside the energy sector, Brunei has actively used tax exemptions and incentives — including a turnover-based exemption for micro, small and medium enterprises and a start-up tax holiday — to encourage economic diversification under its Wawasan Brunei 2035 vision. Income tax is governed by the Income Tax Act (Chapter 35) and, for the petroleum sector, the Income Tax (Petroleum) Act (Chapter 119), administered by the Revenue Division of the Ministry of Finance and Economy.

1.1 Sources

Primary legislation includes the Income Tax Act (Chapter 35), the Income Tax (Petroleum) Act (Chapter 119), the Companies Act (Chapter 39), and stamp duty and other indirect tax legislation administered by the Ministry of Finance and Economy.

1.2 Recent developments

Brunei has maintained its 18.5% standard corporate income tax rate through 2026 while continuing to expand SME-oriented relief, including the exemption from CIT for companies with gross sales or turnover not exceeding BND 1 million, aimed at supporting the micro, small and medium enterprise sector as part of economic diversification away from oil and gas. The government continues to refine sector-specific incentives for strategic industries such as downstream oil and gas processing, manufacturing, tourism and digital economy activities, alongside continued monitoring of Pillar Two developments in the region even though Brunei itself has not yet legislated a domestic minimum tax.

Headline statutory corporate income tax rate for a resident company. Where sub-national (state, provincial, cantonal or municipal) corporate taxes apply, the combined rate reported by the OECD is shown. Projected 2026–2028 rates carry the current rate forward unless a change is already enacted or officially scheduled. As-of 2026.

Top marginal statutory personal income tax rate on employment income for a resident individual. Where sub-national (state, provincial, cantonal or municipal) income taxes are a standard part of the system, the combined top rate is shown. Projected 2026–2028 rates carry the current rate forward unless a change is already enacted or officially scheduled. As-of 2026.

2.1 Rates and residence

Corporate income tax applies to income accruing in or derived from Brunei for both resident and non-resident companies. Only companies incorporated or registered under the Companies Act (Chapter 39), or an equivalent foreign law, are subject to tax under the Income Tax Act — the Act does not apply to income of individuals or unincorporated entities, which explains the absence of a personal income tax regime in Brunei. The standard CIT rate is a flat 18.5% for both resident companies and non-resident companies (branches of foreign companies) operating in Brunei on income derived from Brunei. A tiered chargeable-income threshold structure nominally applies to the first BND 250,000 of chargeable income, but the applicable statutory rate at each threshold band is itself 18.5%, so the practical effect is a uniform flat rate across all levels of chargeable income for ordinary companies.

Newly incorporated companies benefit from an exemption on the first BND 100,000 of chargeable income during each of their first three consecutive years of assessment, materially reducing the effective rate for qualifying start-ups in their early, typically lower-profit years.

2.2 Petroleum sector taxation

Profits of companies engaged in the exploration and production of oil and gas are taxed at a substantially higher rate of 55% under the Income Tax (Petroleum) Act, reflecting production-sharing arrangements between the government and international oil companies operating in Brunei's upstream sector. Downstream and midstream petroleum-related activity (refining, processing, distribution) that does not constitute upstream exploration and production is generally taxed at the standard 18.5% corporate rate, subject to sector-specific incentive arrangements the government has used to attract downstream investment and diversify the economy beyond upstream production.

2.3 Small business and start-up relief

To support the development of micro, small and medium enterprises, companies with gross sales or turnover not exceeding BND 1 million are exempted from corporate income tax entirely. Combined with the new-company exemption on the first BND 100,000 of chargeable income for three years, this gives Brunei one of the more generous small-business tax environments in the region, consistent with the government's economic diversification strategy away from dependence on oil and gas revenue.

2.4 Income determination and deductions

Taxable income is computed from the statutory accounts, adjusted for tax rules, and includes business profits, gains from the sale of capital assets used in trade to the extent taxable under domestic rules, and other income accruing in or derived from Brunei. Ordinary and necessary business expenses wholly and exclusively incurred in the production of income are deductible, including salaries, rent, and interest on borrowings used for business purposes. Capital allowances are available on qualifying plant, machinery and industrial buildings at prescribed rates in lieu of accounting depreciation, which is not itself deductible for tax purposes.

2.5 Interest limitation

Brunei does not apply an EU-style fixed-ratio interest barrier tied to a percentage of EBITDA. Interest deductibility is instead governed by the general requirement that expenses be incurred wholly and exclusively in the production of income, with related-party financing subject to arm's-length scrutiny by the Revenue Division. There is no statutory thin-capitalisation safe-harbour ratio, so groups financing Brunei operations with related-party debt should be prepared to justify commercial terms on a case-by-case basis.

2.6 Losses

Trading losses may generally be carried forward to offset future taxable income, subject to conditions preserving continuity of ownership and business activity, which guard against loss trafficking through shell company acquisitions. There is no loss carryback mechanism. Losses arising in the ring-fenced petroleum tax regime are computed and carried forward separately from losses arising in the general corporate tax base.

2.7 Group taxation

Brunei does not operate a formal group relief or tax consolidation regime; each company within a corporate group is assessed to tax separately, and losses of one group member cannot be surrendered to offset the profits of another. Groups with multiple Brunei entities should therefore plan intra-group pricing, financing and profit allocation carefully, since the absence of consolidation means group-level tax efficiencies must be achieved through commercial structuring rather than statutory relief.

2.8 Controlled foreign companies and transfer pricing

Brunei does not operate a codified CFC attribution regime comparable to OECD/ATAD-based rules. Related-party transactions are nonetheless expected to be conducted on arm's-length terms, and the Revenue Division retains the power to adjust non-arm's-length pricing between related parties, drawing on OECD Transfer Pricing Guidelines as persuasive (rather than binding, codified) guidance in the absence of detailed domestic transfer-pricing regulations or mandatory three-tier documentation requirements. Multinational groups active in Brunei's petroleum sector typically maintain transfer pricing documentation to support positions taken locally and to satisfy home-jurisdiction compliance obligations.

2.9 Incentives

Brunei's Investment Incentives Order and related legislation provide pioneer-industry status, tax relief periods (commonly five to eleven years depending on qualifying capital expenditure) and other incentives for approved projects in priority sectors such as downstream oil and gas, manufacturing, tourism, information and communications technology, and halal industries, administered through the Darussalam Enterprise agency and the Ministry of Finance and Economy. The exemptions described in section 2.3 for MSMEs and new companies function as economy-wide incentives rather than sector-specific relief. There is no patent box or formal R&D tax credit regime.

2.10 Pillar Two

Brunei has not adopted Pillar Two global minimum tax legislation as of June 2026, and few if any Brunei-headquartered groups meet the EUR 750 million consolidated revenue threshold that would bring them into scope as an ultimate parent. Inbound multinational groups otherwise within Pillar Two scope should nonetheless factor Brunei operations into their consolidated effective-tax-rate calculations, since the 18.5% standard rate combined with the MSME and start-up exemptions can produce low-taxed profits in Brunei that trigger top-up tax at the level of a parent jurisdiction applying an income inclusion rule or undertaxed profits rule.

2.11 Branch income and reorganisations

A branch of a foreign company is taxed on Brunei-source profits at the same standard 18.5% rate applicable to resident companies (or 55% if engaged in upstream petroleum activity); there is no separate branch profits or remittance tax. Brunei does not operate a dedicated tax-neutral reorganisation code comparable to jurisdictions with developed merger and demerger relief regimes; asset transfers on restructuring are generally treated as disposals at market value for tax purposes unless specific administrative concession is obtained, so groups contemplating reorganisations should model potential gain crystallisation into their planning.

3.1 No personal income tax

Brunei Darussalam does not levy personal income tax on individuals. The Income Tax Act applies exclusively to companies incorporated or registered under the Companies Act or equivalent foreign law; wages, salaries, business profits earned by sole proprietors in their personal capacity, investment income and capital gains of individuals are not subject to income tax. This is one of the more distinctive features of Brunei's tax system relative to almost all other jurisdictions and is a significant consideration for inbound expatriate employees and investors structuring personal remuneration.

3.2 Sole proprietorships and partnerships

Because the Income Tax Act applies only to incorporated entities, income earned by individuals operating as sole proprietors or in partnerships is generally outside the scope of corporate income tax, consistent with the absence of a personal income tax. Businesses that wish to access corporate tax incentives, capital allowances or loss carryforwards typically incorporate as a company under the Companies Act rather than operate as an unincorporated sole proprietorship or partnership.

3.3 Social contributions

Brunei operates mandatory retirement and supplementary contribution schemes — the Employees Trust Fund (Tabung Amanah Pekerja) and the Supplemental Contributory Pension scheme — funded by employer and employee contributions calculated as a percentage of monthly wages, subject to prescribed salary ceilings. These contributions are not a tax on income but are compulsory savings/insurance-style deductions that employers must withhold and remit alongside employee wages, and function as Brunei's principal payroll-related compulsory levy in the absence of personal income tax.

3.4 Inbound individuals

There is no net wealth tax, no inheritance tax and no capital gains tax on individuals in Brunei. Expatriate employees are not subject to income tax on employment income, which is a significant draw for skilled foreign workers, though work permit and immigration requirements (including local employment quotas in some sectors) govern the ability of foreign nationals to take up employment. Because there is no personal income tax, treaty relief for individuals is largely immaterial; Brunei's limited tax treaty network is oriented principally toward relieving double taxation of corporate profits and withholding tax on cross-border payments.

Brunei imposes withholding tax on certain payments made to non-residents. Interest paid to a non-resident is subject to withholding tax at 2.5%, royalties paid to a non-resident are subject to withholding tax at 10%, and payments for technical assistance, management services and the rental of movable property to non-residents are subject to withholding tax at 10%. There is no withholding tax on dividends, consistent with the one-tier corporate tax system under which dividends are paid out of already-taxed corporate profits and are not taxed again in the hands of the recipient. Brunei's double tax treaty network, while more limited than that of major capital-exporting economies, extends to a number of ASEAN and other trading partners and can reduce withholding on interest, royalties and certain service fees where applicable.

Because Brunei operates a one-tier corporate tax system with no dividend withholding tax, distributions of after-tax profits to shareholders — resident or non-resident, corporate or individual — are not subject to any further Brunei tax, which simplifies repatriation planning considerably relative to jurisdictions imposing dividend withholding. Interest, royalty and services withholding should nonetheless be modelled into cross-border financing and licensing arrangements, with treaty relief assessed on a counterparty-by-counterparty basis given the more limited treaty network.

5.1 General anti-abuse

The Income Tax Act contains general anti-avoidance provisions empowering the Revenue Division to disregard or adjust arrangements entered into with the primary purpose of obtaining a tax benefit, and to make arm's-length adjustments to related-party pricing. Enforcement in practice focuses heavily on the petroleum sector given its outsized contribution to government revenue, alongside increasing scrutiny of incentive claims by MSMEs and start-ups to ensure the turnover-based and new-company exemptions are not abused through artificial fragmentation of larger businesses into smaller qualifying entities.

5.2 Cross-border coordination

Brunei is a member of key regional and international tax transparency initiatives, including participation in exchange-of-information arrangements consistent with international standards, but has not adopted DAC6-style mandatory disclosure rules or a domestic country-by-country reporting regime of the kind found in OECD jurisdictions. Multinational groups with a taxable presence in Brunei should nonetheless expect information requests from the Revenue Division consistent with international tax transparency norms, particularly where cross-border related-party transactions are involved.

6.1 No VAT or GST

Brunei Darussalam does not levy a value-added tax or goods and services tax. This is a deliberate policy choice reflecting the country's substantial hydrocarbon revenue, which reduces reliance on broad-based consumption taxation. Import duties apply to goods entering Brunei under the Customs Act, with rates varying by tariff classification, and excise-style duties apply to specific categories such as tobacco and motor vehicles. The absence of VAT/GST simplifies compliance for businesses operating in Brunei relative to almost all neighbouring ASEAN jurisdictions, which have adopted broad-based consumption taxes.

6.2 Other taxes

There is no net wealth tax, no inheritance or estate tax, and no general capital gains tax in Brunei. Stamp duty applies to specified categories of documents, including property transfers and certain financing instruments, at rates set under the Stamp Act. Property tax is levied by local municipal boards on the annual rental value of certain immovable property. Brunei's overall indirect and 'other tax' footprint is therefore materially lighter than most peer economies, consistent with the broader policy of using hydrocarbon revenue to keep the domestic tax burden low.

7.1 Filing, assessment and audit

The tax year (basis period) generally follows a company's financial year, with tax assessed on income of the preceding accounting period. Companies must file an estimate of chargeable income within three months of the start of the financial year and a final tax return within specified statutory deadlines following the end of the accounting period. The Revenue Division of the Ministry of Finance and Economy administers assessment and collection, with a risk-based audit programme that pays particular attention to the petroleum sector and to companies claiming MSME or start-up exemptions, verifying that qualifying turnover and ownership-continuity conditions are genuinely satisfied.

7.2 Rulings, appeals and penalties

Taxpayers may seek administrative clarification from the Revenue Division, though a formal binding private-ruling system comparable to larger OECD tax administrations is limited. Disputed assessments may be objected to administratively and, where unresolved, appealed through the relevant tax appeal board and ultimately the domestic court system. Penalties apply for late filing, late payment and understatement of chargeable income, generally as a percentage surcharge on unpaid tax plus interest, with more severe sanctions reserved for cases involving fraud or wilful evasion.

Because Brunei's basis period follows each company's own financial year rather than a uniform government fiscal year, groups with Brunei subsidiaries on non-calendar year-ends should maintain a company-specific compliance calendar to track estimate-filing and final-return deadlines rather than assuming alignment with the parent group's reporting calendar.

9.1 Entity choice

Foreign investors typically operate through a locally incorporated private limited company under the Companies Act, which is the entity type eligible for the MSME turnover exemption, the new-company exemption and sector-specific pioneer-industry incentives. A branch of a foreign company is also available and is taxed on Brunei-source profits at the same 18.5% rate, but does not benefit from the new-company exemption in the same way as a locally incorporated subsidiary. Joint ventures with local partners are common in regulated sectors and in the petroleum industry, where production-sharing agreements with the government structure the commercial and fiscal terms of upstream investment.

9.2 Structuring and incentives

Groups establishing Brunei operations should evaluate eligibility for the MSME turnover exemption (gross sales/turnover not exceeding BND 1 million) and the new-company exemption on the first BND 100,000 of chargeable income for three years, both of which can materially reduce effective tax rates for smaller or newly established ventures. Larger or capital-intensive projects in priority sectors should engage with Darussalam Enterprise and the Ministry of Finance and Economy regarding pioneer-status and tax relief period incentives. Because there is no group relief regime, multi-entity structures should plan intra-group financing and service arrangements to avoid inefficient double taxation at the entity level, and should document related-party pricing on an arm's-length basis given the Revenue Division's transfer pricing adjustment powers.

9.3 Worked effective-rate illustration

A Brunei-incorporated general-sector company earns EBITDA of BND 1,500,000, books capital allowances of BND 200,000 in lieu of depreciation, and has no material related-party interest expense. Taxable profit is 1,500,000 − 200,000 = BND 1,300,000. Because gross turnover exceeds the BND 1 million MSME exemption threshold, the company does not qualify for the turnover-based exemption and is taxed at the standard flat rate: CIT at 18.5% is BND 240,500, an effective rate of 240,500 / 1,300,000 = 18.5% on taxable profit, matching the headline rate exactly since there is no separate minimum tax or additional local income tax layer. By contrast, an otherwise identical company with gross turnover of BND 950,000 (below the BND 1 million MSME threshold) would owe no corporate income tax at all on the same underlying profit — an effective rate of 0% — illustrating the significant cliff-edge value of the turnover exemption for businesses near the threshold.

9.4 Compliance

Expect an annual estimate of chargeable income, monthly instalment payments based on that estimate, and a final return reconciling to audited or statutory accounts. There is no VAT/GST compliance burden and no personal income tax withholding obligation on employee wages, which meaningfully reduces the overall compliance load relative to most ASEAN neighbours. Employers must nonetheless administer Employees Trust Fund and Supplemental Contributory Pension withholding correctly, and groups relying on the MSME or new-company exemptions should maintain clear records evidencing turnover levels and ownership continuity in case of Revenue Division review.