Brunei's Corporate Tax Second Lowest in ASEAN
Saturday, Jan 03, 2015
Brunei's new corporate tax rate of 18.5 per cent that will come into effect this year will make the country one of the lowest tax jurisdictions in ASEAN.
An announcement was made early last year during the 10th Legislative Council Session to reduce the corporate tax rate for the 2015 year of assessment from 20 per cent to 18.5 per cent.
This places Brunei the second lowest, next only to Singapore which has a corporate tax rate of 17 per cent in ASEAN, based on a 2013 review of regional tax rates from KPMG, a global accountancy firm. Other countries were cited to have 20 per cent or higher in corporate taxes.
The global publishing, research and consultancy firm Oxford Business Group said reducing rates will encourage investment and develop the economy.
In its recent publication The Report: Brunei Darussalam 2014, the OBG cited a survey done in March last year by accountancy firm Deloitte. The survey revealed the Sultanate's tax environment is one of the least complicated and most attractive for investors.
Brunei is also the only country in ASEAN country which doesn't levy personal income tax. The country also does not impose taxes on sole-proprietorships and partnerships.
For companies paying corporate income tax, the OBG said expenses exclusively incurred in generating income, capital allowances and tax lossess from statutory income are deductible. Interest on loans, zakat, fitrah or any religious dues under any written law are tax deductible.
The OBG said that expenses such as directors' remuneration and entertainment are allowed so long as the amounts are reasonable. Other expenses like trade fairs, export market development and research and development are also allowed further deductions.
Pg Hj Moksin Pg Hj Yusof, president of Brunei Darussalam Institute of Certified Public Accountants and a partner at Deloitte, told OBG that the country's respondents in the survey conducted by Deloitte that tax officials feel they are given fair treatment by local tax officials when carrying out tax audits.
The respondents also felt that when there is a dispute with the tax authority, they were confident in the administrative procedures to resolve the issue, he said.
"Notwithstanding the fact that tax policy continues to lag behind the pace of business development, all the Asia Pacific respondents indicated that they expect Brunei Darussalam to be within the top three least complex tax regimes in the Asia Pacific region in 2017," he said.
However, Pg Hj Moksin also said that the performance of the tax authority from the perspective of the taxpayer is average, with room for improvement. He said the System for Tax Administration and Revenue Services, the government online tax filing system, has stabilised and fixes were promptly carried out by authorities when there were reports of bugs.
He also believed that tax officers need further training to narrow the gap with business developments and specific industry practices.
"The tax officers have to be well versed in the tax laws and should be able to assist taxpayers in better understanding them," he said.
He also said that the speed and timeliness of tax audits as well as the response to enquiries for tax rulings or refunds have to be improved.