Foreign Entrepreneurs: Starting A Business In Brunei

Brunei is an attractive place to start a business, with a low cost of living, a supportive government, and a good quality of life. However, there are several legal requirements and regulations that must be followed when starting a business in the country. While the process can be challenging, it is possible for foreigners to start a business in Brunei. The first step is to choose the appropriate business structure, as there are several options available, each with its own requirements and implications. The most common form of business structure in Brunei is the sole proprietorship, but this is not allowed for non-residents. Partnerships are another option, but they also have restrictions for foreigners. The only business structure that allows for foreign ownership is the company structure, which offers stronger corporate governance and more transparency. There are different types of companies, such as private and public, and each has its own requirements for shareholders, directors, and residency. The registration process can be completed online and typically takes around 4-8 weeks. Overall, while there are some challenges and restrictions, it is possible for foreigners to navigate the legal requirements and start a business in Brunei.

Business structure

There are several types of business structures in Brunei, each with distinct levels of personal liability protection, tax ramifications, ownership and management flexibility, as well as compliance requirements.

Sole Proprietorship

The simplest form of business structure, a sole proprietorship is an extension of the owner's legal personality. The owner remains personally liable for all obligations incurred by the business. While this provides greater simplicity operationally, it might be problematic when closing the business. Any transfer of business is not allowed and hence, there is no continuity. Sole proprietors are not subject to tax in Brunei Darussalam, but are personally liable for the obligations of their businesses. Registration approval is generally not granted to foreigners. A registration fee of $30 will be charged.

Partnership

A partnership is a form of business that must have at least two business partners but cannot have more than twenty partners. It is not seen as a separate legal entity, hence partners have unlimited liability and can be personally liable for all debts and obligations incurred by the business. Similar to a sole proprietorship, a partnership can only be registered by local citizens and permanent residents. A registration fee of $30 will be charged.

International Limited Partnership

With a minimum of one or more general partners, this type of limited company can be formed for any legal purposes. Typically, in the event of a winding up, general partners can be made personally liable for all the debts and obligations of the company. Between the general partners, there must be at least one who owns a licensed entity in Brunei. However, a limited partner will be exempted from any personal liability and has no national requirement. As such, with lower stakes, a limited partner is also not permitted in participating in the conduct of the business. A minimum share capital of US$2 is required to set up an International Limited Partnership.

Corporations

Corporations constitute a separate legal entity from the shareholders and directors, preventing them from incurring unlimited liability and liability for the debts of the company. In general, corporations have stricter requirements as compared to the other structures for incorporation and compliance, though these steps have become increasingly simplified as the Brunei sultanate seeks to increase the ease of doing business in the country. For now, companies will need to have at least two directors, two shareholders and file their annual returns and reports. Half of the directors must be ordinary residents. Minimum capital for both structures is only US$1.

Public Corporations

Public corporations are subject to stricter requirements. They must have at least seven shareholders and all of them must be local residents. They also are subject to statutory audits. However, this gives them the right to issue and transfer stocks, which allows them to raise capital more easily.

Brunei Free Trade Zone Company

This is a special form of limited liability company that is established within the Pulau Muara Besar Free Trade Zone. This form of company offers several advantages, the biggest of which is that they are able to enjoy tax exemptions while still being allowed to deal with local clients. They also need one less director and shareholder.

Branch Offices

Branch offices in Brunei are only required to have one registered company secretary and a registered local office. They typically exist to represent a foreign registered company. Operations are commonly defined by the parent company, which will also be subject to unlimited liability and has to be prepared to incur the losses and debts of its branch office. Appointing a resident director is also necessary when incorporating a branch office. Unlike other International Business Company types, branch offices are subject to a standard corporate tax and withholding tax. They are also not exempted from filing financial statements annually. To set up a branch office, you will also require a local registered office as well as a local agent.

Registration

Registering a company in Brunei can be a lengthy process, taking up to twelve weeks. The first step is to choose a business structure. Only the formation of a company structure is allowed for foreigners. The company business structure is a separate legal entity from its directors and shareholders. A minimum of two shareholders and two directors are required, with at least one director being an ordinary resident of Brunei Darussalam. A registration fee of $300 is charged for this type of business.

The second step is to choose and register your business name. This is done through the One Common Portal (OCP) of the Ministry of Finance and Economy. Under Brunei's business name act, you cannot use the same or resembling names of existing firms, nor can you use the words "Royal", "Diraja", "Brunei", "Co-operative", "Savings", or "Trust/Trustee". Once your business name is approved, you will be prompted to pay the registration fee. After payment, an official business/company registration certificate will be sent to your email.

The third step is to set up a corporate bank account with proof of your company registration.

The whole registration process can be facilitated by consultants, who offer a comprehensive service package that includes planning and strategizing with clients to select a suitable business entity, completing the registration and documentation processes, obtaining required licenses, opening a corporate bank account, and ensuring compliance with government regulations.

Taxation

The corporate income tax rate is 18.5%, and all limited companies, whether registered in Brunei or overseas, are subject to local taxes on income derived from Brunei. Companies are charged 18.5% on the following thresholds:

• 25% of the first BND 100,000 in assessable income (US$72,273)
• 50% of the next BND 150,000 in assessable income (US$106,909)

For non-resident companies, the tax is based on income sourced in Brunei or profits earned through business operating locally.

There is no withholding tax on dividends, interest, royalties, and fees for technical services for resident companies. Non-resident companies will have to pay rates between 2.5% and 10%. Director's remuneration can be charged a withholding tax rate of 20%, and royalties paid to non-residents are subject to a 10% withholding tax rate.

Brunei has established various income tax treaties to avoid double taxation, which may reduce the withholding tax rate charged on royalties.

Businesses in Brunei are also required to submit annual financial statements by 30 June of the year of assessment and submit an estimated record of chargeable income returns within three months of their financial year-end.

The simplest form of business, a sole proprietorship, is not subject to corporate tax. However, sole proprietorships can only be registered by local citizens and permanent residents, not foreign investors. Partnerships are taxed similarly but are also only available to local citizens and permanent residents.

The business income of sole proprietorships and partnerships is taxed as per personal income tax rates, which is attractive since there is no personal income tax in Brunei. However, this also means that any transfer of business is not allowed, and there is no continuity.

The Brunei Free Trade Zone Company is a special form of a limited liability company that enjoys tax exemptions while still dealing with local clients. These companies are exempt from tax.

Overall, Brunei's taxation system is straightforward and business-friendly, with low tax rates and a simple structure.

Foreign company registration

Business Structure

The first step is to choose the appropriate business structure. In Brunei, there are three main legal structures: Sole Proprietorship, Partnership, and Company. However, for foreigners, only the company structure is allowed.

To register a company in Brunei, you will need a minimum of two shareholders and two directors, with at least one director being an ordinary resident of Brunei Darussalam. There is a registration fee of $300. After registration, you will need to create an account with the Ministry of Finance and Economy for your ROC (Registry of Companies and Business Names) account registration through their One Common Portal (OCP), which will guide you through the process.

Choosing and Registering Your Business Name

The next step is to choose and register your business name using the ROC account. Under Brunei's business name act, exact or resembling business names of existing firms are not allowed. Additionally, specific words are prohibited, such as "Royal," "Diraja," "Brunei," "Co-operative," "Savings," and "Trust/Trustee," to prevent any association with the Sultan or the government of Brunei.

Once your business name is approved, you will be prompted to pay the registration fee of $300 for foreigners. After payment, an official business/company registration certificate will be sent to your email, and your business will be automatically registered with the Tabung Amanah Perkejah (TAP), a compulsory employee trust fund.

Corporate Bank Account

The final step is to set up your corporate bank account, which requires proof of your company registration. Working with consultants or advisors who have relationships with banks in Brunei can make this process smoother.

Additional Considerations

When planning your business in Brunei, it is essential to consider the initial capitalization requirements. Your business must have an initial capitalization of $50,000. Additionally, ensure that you have a current trademark registered with the government and a valid trademark registration certificate from the Registrar of Trade Marks.

Brunei also requires businesses to have an annual income of at least $10,000 and be in good standing with the authorities, registered with at least one local authority.

Benefits of Starting a Business in Brunei

Starting a business in Brunei offers several advantages. The country has a low cost of living, a supportive government that encourages entrepreneurship, and a good quality of life, making it easier to recruit talented employees. Brunei also has a stable political structure and is generally sheltered from natural disasters, providing an ideal business environment for investors.

Company formation requirements

To register a company in Brunei, you will need to meet the following requirements:

• A certificate of incorporation.
• Articles and Memorandum of Association.
• A compliance declaration.
• A minimum of two shareholders.
• A minimum of two directors, one of whom must be either a citizen or permanent resident of Brunei or an Ordinary Resident within Brunei.
• A director's certificate.
• Notarized passport copies of shareholders or another form of identification.
• A legal registered agent.
• A legal registered office address.

The process of registering a company in Brunei can be done online and can take up to twelve weeks to complete. The cost of registering a company is US$2250, which includes the preparation of legal documents, company registration, payment of all taxes and fees, and a legal address for the company for one year.

Frequently asked questions