COUNTRY

The oil-rich Islamic Sultanate of Brunei Darussalam is close to vital sea lanes running through the South China Sea linking the Indian and Pacific Oceans. In the formal name of the country, ‘Brunei Darussalam’, the last word comes from the Arabic dar as-salaam, which means ‘house of peace’. Except in formal situations, the country is simply known as Brunei.

The climate is tropical. The capital is Bandar Seri Begawan. The country consists of two parts physically separated by a finger of Malaysian territory. Brunei’s major natural resources are petroleum, natural gas and timber.

Brunei was a powerful state from the 16th to the 19th century, but in 1888 it became a British protectorate. Britain retained responsibility for the state’s defence and foreign affairs until 1984, when the sultanate became fully independent.

As of May 2019, the population is estimated to be 440,000. The official religion is Islam and the official language is Malay; English and Chinese languages are also spoken.

Officially a a constitutional sultanate, Brunei is in effect an absolute monarchy. The sultan and prime minister is Sir Hassanal Bolkiah (since 5 October 1967). General law is based on English common law; for Muslims, sharia supersedes civil law in a number of areas.

Total GDP was estimated to be US$12.1bn in 2017; the per capita equivalent at purchasing power parity was US$71,810. Revenues in 2011 were $2.87 billion against expenditure of $4.45 billion. The currency is the Bruneian dollar.

In 2000, Brunei instituted a tax-privileged international financial centre (the BIFC) providing regimes for banking, insurance, investment funds and trust management. Accordingly, Brunei is a ‘dual jurisdiction’, whereby the international legislation offers offshore facilities, alongside the usual range of ‘domestic’ legislation drawn from that of England and Wales. Legislation passed in 2000 introduced a number of additional corporate forms which are available to business operations in the International Financial Centre, including international business companies, international limited partnerships, and international trusts.

In Brunei there is no personal income tax, and there are no export, sales, payroll or manufacturing taxes. Sole proprietorship and partnership businesses are not subject to income tax. The main tax for resident (‘domestic’) companies is corporate tax, but this does not apply in the BIFC.

Traditionally, the constitutional sultanate of Brunei was a busy commercial centre, with strong ties with the United Kingdom and Singapore, and crude oil and natural gas production accounting for nearly half of GDP. The establishment of the International Financial Centre in 2000 has helped to diversify the economy, and has brought financial services to the fore, providing regimes for banking, insurance, investment funds and trust management. The Financial Centre offers “offshore” facilities under separate legislation to that governing the domestic sector. Domestic companies (except for sole-proprietorships and partnerships) are subject to a 21% rate of corporate income tax, although there is no personal income tax, or export, sales, payroll or manufacturing taxes. Import duties are imposed, although they are generally waived for the majority of basic goods, and those intended for industrial use. Commonly used business forms include the sole proprietorship, the partnership, the private company, the public company, and the branch. The jurisdiction has tax treaties in place with a number of countries, including the United Kingdom, Indonesia, China, and Singapore, Vietnam, Bahrain, Oman, Japan, Pakistan, Malaysia, Hong Kong, Laos and Kuwait .

TAXATION

  • Headline tax rates: CIT 22%, PIT 0%, VAT 0%
  • Treaty Jurisdictions: Bahrain, China, Hong Kong, Indonesia, Japan, Kuwait, Laos, Malaysia, Oman, Pakistan, Singapore, United Kingdom, Vietnam
  • TIEA Jurisdictions: Australia, Canada, Denmark, Faroe Islands, Finland, France, Greenland, Iceland, Norway, Sweden

Brunei has no capital gains tax, or sales taxes, no Value Added Tax (VAT), no export taxes, payroll taxes, or personal income tax.

A LLC is subject to corporate tax rate of 22% on profits. Annual tax returns must be filed with the Collector of Income Tax of the Ministry of Finance.

An IBC does not pay corporate tax, income tax, capital gains tax, stamp duty, or any other direct taxes.

Note, U.S. citizens and taxpayers from countries taxing worldwide income must declare all income to their tax agency.

BUSINESS

  • Suitable for: Aviation, Trading Goods, Intellectual Property/Licensing, E-gaming
  • Company Types: Limited companies, public limited companies, sole proprietorships, branches, trusts and limited partnerships
  • Formation Cost: 2700 – 4300 USD$
  • Formation Time: 4 – 7 days
  • Maintenance cost: 1000 – 2200 USD$

INCORPORATION

Limited Liability Company (LLC)

A Brunei Limited Liability Company (LLC) is governed by Chapter 39 of the Companies Act of 1984 (Amended in 2017) (hereafter called the “Act”).

The LLC can be completely incorporated by foreigners as the shareholders can be from anywhere in the world.

Brunei Limited Liability Company (LLC) Name

LLC’s can’t use the same or similar name as another Brunei legal entity.

Since LLC’s are known as a private limited company, their company name must end with those words in its primary official language Malay which is “Sendirian Berhad” or their abbreviation of “SDN BHD”.

Incorporation
The first step towards incorporation is to research available company names available at the Registrar of Companies.

Then, file the following documents with the Registrar of Companies:

  • Memorandum
  • Articles of Association
  • Directors’ names and signed consents to act as directors
  • Statutory Declaration of Compliance
  • Registered office address
  • Copies of shareholders’ passports or identity cards.

After approval, the Registrar issues a Certificate of Corporation.

Shareholders
A minimum of two shareholders is required to incorporate. They can be citizens of and reside in any country. Shareholders may be natural persons or legal entities. The maximum number of shareholders is 50.

Shareholders are restricted from transferring their shares. They cannot sell shares or debentures to the public.

A register of the names of all shareholders must be kept at the registered office with all shareholders having access to inspect. However, this register is private and is not available to the public.

Directors
The minimum requirement is two directors where one must be a Brunei citizen. Otherwise, the other director may be a citizen of any country and can reside anywhere in the world.

Limited Liability
Shareholders’ liability is limited to their contributions towards the share capital.

Registered Office and Agent
Every LLC must appoint a local registered agent and maintain a registered office address.

Minimum Capital
No requirements exist for a minimum authorized share capital.

International Business Company (IBC)

A Brunei International Business Company (IBC) is controlled by the International Business Companies Order of 2000. Brunei’s legal system is based upon British Common Law and for their Muslims, the Islamic Shari’a Law.

Brunei IBC Company Name
Brunei IBC’s must have a company name different from existing company names in Brunei.

The end of an IBC name must include one of the following words or its abbreviation: “Berhad”, “Sendirian Berhad”, “Limited”, “Corporation”, or “Incorporated”.

Trading Restrictions
An IBC cannot own real estate or conduct trade in Brunei. IBC’s cannot engage in banking, insurance, provide mutual funds management services, or provide investment advice without an appropriate license. The public cannot be invited to make investments without prior written approval from the Registrar.

Registration
The Registered Agent submits the Memorandum and Articles of Association along with a Certificate of Due Diligence verifying compliance with the law. All documents may be submitted in English.

Currently, the first year’s registration fee is $500 USD with annual renewal fees of $400 USD.

Limited Liability
Members (shareholders), officers, directors, and agents of an IBC are not liable for any obligation, debt, or default of the IBC unless contracted to accept such liabilities.

Shareholders
The IBC can have a minimum of one shareholder who can be a resident of any country. Shareholders can be companies or natural persons. Nominee shareholders are allowed for increased privacy.

The IBC may issue registered shares, redeemable shares, preference shares, and shares with or without voting rights. Bearer shares are prohibited. The transfer of shares is restricted so as not to be publicly sold.

Directors and Officers
A minimum of one director is required who can reside in any country and can be a legal entity (such as a LLC, corporation, trust, etc.) or natural persons.

A company secretary is required who must be a local resident. The registered agent’s office can provide the company secretary which can be a natural person or a corporation. Trust companies act as registered agents in Brunei.

Registered Office and Local Agent
A local registered agent must be appointed whose office address may be the registered office for the IBC. Trust companies normally serve as registered agents.

Authorized Capital
The normal authorized share capital is $1 million USD where all shares have par value. The minimum issued capital is one share. No additional fee is required if a larger authorized capital is adopted.

Dedicated Cell Companies (DCC)

Brunei Dedicated Cell Companies (DCC) are similar to a protected cell company (PCC) first created in 1997 in Guernsey and used by several offshore jurisdictions. Foreigners can form a DCC and create several companies with separate assets and liabilities like a PCC.

The International Business Company Order of 2000 (IBCO) (hereinafter the “Order”) governs all types of companies involving foreign ownership including the DCC.

Name of DCC

Every DCC must select a company name completely different from a legal entity’s name in Brunei.

The DCC shall include the words “Dedicated Cell” at the end of its company name or use its abbreviation “DCC”.

Explanation of a DCC
Since a Brunei DCC follows the PCC structure, an explanation of how a PCC works can explain the DCC as well.

Every PCC has a “core” company with segregated parts known as “cells”. Each cell operates independently from the core company and the other cells. Therefore, one cell has its unique name, different assets, incurs separate liabilities (debts, obligations, etc.), and engages in different business activities. Experts call this a “ring-fenced” structure separating each cell from the others like fenced homes are separate from the other fenced homes in the same neighborhood.

If one cell can’t pay its debts and becomes insolvent, its creditors cannot seek recourse from the core company or the other cells. Thus, the risks of different business ventures by the same core company and its separate cells are isolated to one of its cells. If the core company is sued or has unpaid creditors, neither the lawsuit judgment plaintiff nor the unpaid creditors can seek compensation form any of the cells. The same goes for a cell if it is sued or simply doesn’t have the assets to pay its creditors (insolvency), the plaintiff and the debt creditors can’t sue the core company or its other cells or seize their assets.

Another way of explaining the DCC is a cell company is a single legal entity whereby numerous separate cells are created in order to segregate and protect assets. Creditors of one cell only have the right to seek redress from that cell and not the others or the cell company.

The Order in Section 147 states that a DCC is an individual legal entity and the cell is not a separate legal entity from the DCC. A cell is created for “the purpose of segregation and protection of dedicated assets”. Therefore the Order establishes “general assets” of a DCC distinguished from “dedicated assets” to a particular cell.

A Brunei IBC can be incorporated as a DCC or an existing IBC can be re-constituted as a DCC.

Memorandum of a DCC
The Memorandum of a DCC must include:

  • Declare that it is a DCC
  • The company name as a DCC
  • That each cell will have its own distinct name or designation as a cell.

Registration
Registered agents wishing to incorporate or re-constitute an IBC as a DCC shall file the Memorandum and the Articles of Association with the Registrar of Companies.

Liability of a DCC
Section 147M of the Order states that any liability resulting from a specific cell of the DCC will:

  • The dedicated assets of that specific cell will be primarily liable;
  • The DCC’s general assets will be secondarily liable if insufficient dedicated assets exist with the specific cell; and
  • The dedicated assets of all other cells will not be held liable.

This means that if a specific cell’s creditors can’t obtain full satisfaction of the debts from the specific cell’s dedicated assets they can seek redress from the DCC’s general assets, but not from the other cells’ dedicated assets.

Shareholders
Only one shareholder is required for the DCC and for a cell to be formed. Shareholders may be residing anywhere and citizens from any country.

The Order in Section 147G specifies that the shareholders of the DCC are separate from the shareholders of a specific cell. Thus, the DCC may issue “dedicated shares” for each cell. In addition, each cell will have its own “dedicated share capital” separate from the share capital of the DCC.

DCC’s can pay dividends in respect to dedicated shares as a “cellular dividend” which can only be paid in reference to the cell’s dedicated assets and profits.

Directors
A minimum of one director is required to form the DCC and a cell. Directors can be natural persons or legal entities and reside anywhere and be citizens (or registered) in any country.

Company Secretary
The DCC must appoint a company secretary who is a local resident. The secretary may be a natural person or a legal entity.

Registered Agent and Office
The DCC must appoint a local registered agent whose office can be the registered office. Local, licensed trust companies are authorized to serve as registered agents.

Minimum Capital
The minimum authorized share capital is $1 million USD with all shares having par value.