Brunei welcomes and encourages foreign investment in most sectors, including up to 100% foreign ownership in many instances. The country has some of the lowest taxes in the region, with no personal income tax, and no sales, payroll, manufacturing or export taxes. This and other factors, including a stable economic and political environment, an excellent infrastructure, and flexible labour regulations governing recruitment of foreign workers, make it one of the most attractive ASEAN countries for foreign investors.

The Ministry of Industry and Primary Resources acts as a one-stop agency for approving foreign investment proposals and co-ordinates all industrial development activities. Brunei's Economic Planning Unit regulates the development of existing businesses and the Economic Development Board (EDB) governs the establishment of new industries. The EDB focuses on promoting private investment, especially with a view to diversifying Brunei's economy. The EDB is also responsible for overseeing and implementing Brunei's Small and Medium Business Scheme.

Pioneer service companies - Companies engaged in service activities can qualify for pioneer status if this is deemed to be in the public interest. Eligible activities include engineering and technical services, IT services, tourism, industrial design, education, medicine and financial services, to name just a few. Qualifying enterprises enjoy tax exemption for an eight-year period, with further extensions available, up to a total of 11 years.

Other incentives - A range of further tax exemptions are available, including tax allowances for enterprises deemed to be 'post-pioneer companies', as well as companies engaging in the expansion of established industries and services. The Muara Export Zone is located near Muara Port and offers a number of incentives to businesses. These include discounts on warehouse rental and wharfage.

International Finance Centre (IFC) - To accelerate Brunei's position as one of Asia's leading centres of offshore banking, the multi-disciplinary IFC was established under the Ministry of Finance . Its main roles are to diversify and generate growth in the country's financial sector, create career opportunities for Bruneians, encourage skills transfers from expatriate professionals, and help to promote stronger communication between Brunei and other financial centres. In this respect, the IFC was conceived as means of encouraging economic activity rather than specifically generating income.

Since 2000, the government has enacted a raft of legislation to accelerate the IFC's development, including measures to stimulate international banking and business, insurance, securities and mutual funds. The most recent legislation, in 2002, affects international insurance and Takaful companies, both of which are seen as key growth markets. Takaful is an Islamic insurance service, complementing Brunei's well-established Islamic banking industry.

Trade development - To enhance bilateral, regional and multilateral economic cooperation, Brunei has proactively developed bilateral investment treaties with foreign governments, as well as Memoranda of Understanding with the private sectors of these nations. It is also pursuing regional and multilateral trading arrangements, such as the ASEAN Free Trade Area (AFTA) and the General Agreement on Trade and Tariffs (GATT). Brunei has been a member of the World Trade Organization since 1 January 1995. BACK TO TOP

Businesses can be operated in Brunei in the form of a sole proprietorship, a partnership, a private or public company, or a branch of a foreign company.

Sole proprietorships and partnerships can operate in the country on a tax-free basis, although they must first register with and be approved by the Registrar of Companies and Business Names. While sole proprietorships cannot be formed by foreign-owned companies or foreign individuals, foreign participation is permitted in partnerships, provided approval is granted by the Immigration Department, the Department of Economic Planning and Development, and the Labour Department. By law, partnerships are limited to 20 partners.

Public companies (Berhad) must have at least seven shareholders, with at least half of the company's directors comprising Brunei citizens or permanent residents. Private companies (Sendirian Berhad) must have at least two but not more than 50 shareholders, none of whom need to be Brunei citizens or permanent residents. A parent company can also hold shares in its subsidiary. Companies incorporated in Brunei may be limited by shares, by guarantee, by both shares and guarantee, or unlimited.

Both public and private companies must meet a number of other requirements, such as appointing local auditors registered in Brunei, submitting accounting data to the Ministry of Finance and the proper keeping of minutes and registers. The Registrar of Companies and Business Names must also receive a copy of a company's memorandum and articles of association, which should be printed on the prescribed forms.

If a foreign company has an established business presence in Brunei, but has chosen not to be locally incorporated, it must register as a branch of a foreign company. All such branches have the same powers and authority as local Brunei companies.

For all company types, the government is keen to encourage local equity participation in terms of both ownership and management. While this is not mandated, it can offer a number of strategic advantages to a business operating in Brunei, particularly when tendering for government and Brunei Shell Petroleum contracts.

Foreign land ownership is currently not permitted in Brunei, except with the prior written approval of His Majesty.
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To stimulate economic growth and accelerate international business, trade regulations in Brunei are considerably more simplistic than many other countries worldwide.

Customs duties - In general, import duties are not levied on basic foodstuffs or items for industrial use. Items such as electrical equipment and appliances, timber products, motor vehicles and spare parts are subject to import duty of 20%, while perfumes and cosmetics are subject to 30%. Cigarettes are also dutiable, but at lower levels than other countries in the region.

Import licences - A number of items, including certain drugs and poisons, can only be imported with a special licence. There is also a list of items that are prohibited from entering the country. Companies or individuals intending to import goods should check with the relevant authority beforehand.

Exchange controls - Brunei imposes no restrictions on foreign exchange. BACK TO TOP

Brunei has no export, sales, payroll or manufacturing taxes, and individuals in Brunei are not liable to personal income tax. Likewise, sole proprietorships and partnerships are not liable to income tax. Only income accruing in, derived from or received in Brunei by a local company or the branch of a foreign company is subject to income tax, at a flat rate of 30%. For the purposes of calculating tax, a company is deemed to be resident if it is controlled or managed from Brunei. For instance, companies holding their directors' meetings in Brunei are considered taxable as residents. Non-resident companies are only required to pay tax on income arising in Brunei. Foreign income not remitted to Brunei is not taxable, while interest payments to a non-resident company are subject to a withholding tax of 20%. Although Brunei has no sales or capital gains taxes, the latter may be taxable as revenue gains if they are part of normal trading activities. Income from petroleum operations is subject to special legislation and higher taxes.

Under Bruneian tax law, depreciation is not an allowable expense, however a range of capital allowances is available for qualifying expenditure. This includes an initial 10% allowance for industrial buildings, with an annual allowance of 2% on a straight-line basis until the expenditure is written off. Investments in machinery and plant are eligible for a 20% capital allowance in the first year, with subsequent annual allowances that are calculated according to the nature of the asset. A range of deductions are allowable, so long as those expenses are incurred wholly or exclusively in the production of income. This includes interest on loans used to acquire income, rent on business property, repair of machinery and contributions to approved pension and provident funds. Brunei also has a double taxation agreement with the United Kingdom and a number of other Commonwealth countries. The maximum relief available under such agreements, however, cannot exceed 50% of the Brunei tax rate. BACK TO TOP

Brunei has a workforce of some 157,594 people, with approximately one third of the working population employed in the public sector. According to the government's latest census in 2001, some 7.2% of the labour force was unemployed.

The government remains committed to ensuring that local Bruneians have opportunities to develop rewarding careers. This includes encouraging workers to acquire technical and managerial skills. To this end, the government has created a number of employment training programmes and has taken measures to increase female participation in the workforce. Local companies are also encouraged to develop training programmes for their employees.

Employment in Brunei is subject to a number of labour laws covering areas such as medical care, maternity leave, termination of employment and overtime payment. All employees in the private sector are required to contribute to a mandatory retirement fund. By law, 5% of an employee's salary and 5% from the employer must be credited to the fund.

Working visas for foreign workers are readily granted, however companies are advised to make their applications well in advance of an employee's intended arrival. Foreign workers, mainly from Malaysia, Thailand, the Philippines, India and Bangladesh, account for approximately one third of Brunei's total workforce.

Applications for the employment of foreign nationals must first be submitted to the Labour Department , which will then give its recommendation to the Immigration Department . Work permits issued to foreign workers are valid for two years. The Labour Department also requires a deposit for each approved worker, paid in cash or as a banker's guarantee, to cover the cost of a one-way air ticket to the worker's home country.

Trade unions are allowed under Bruneian law, but unionism is not a common practice, largely because some 95% of the business community comprises small enterprises. This, combined with a prevailing culture of non-confrontation, means that collective bargaining and unionisation are generally practised only in the oil industry. BACK TO TOP