Brunei Darussalam operates a distinct tax system compared to many other nations, notably lacking a personal income tax on individuals' salaries or wages. This fundamental aspect simplifies payroll processing significantly for employers and means employees receive their gross salary without income tax deductions. However, employers still have mandatory obligations related to social security contributions.
Companies operating in Brunei are subject to corporate income tax on their profits, but this is separate from individual employment income taxation. Understanding the specific requirements for employer contributions is crucial for compliance when employing staff in Brunei.
Employer Social Security and Payroll Tax Obligations
Employers in Brunei are required to contribute to two primary national schemes for their employees: the Tabung Amanah Pekerja (TAP) and the Supplemental Contributory Pension (SCP) schemes. These are mandatory provident fund and pension schemes designed to provide retirement and other benefits to employees. Contributions are calculated based on the employee's monthly gross salary.
Both the employer and the employee are required to make contributions to TAP and SCP. The contribution rates are fixed percentages of the employee's monthly wage.
| Scheme | Contributor | Contribution Rate |
|---|---|---|
| TAP | Employer | 5% |
| TAP | Employee | 5% |
| SCP | Employer | 3.5% |
| SCP | Employee | 3.5% |
These contributions must be calculated and remitted monthly to the respective authorities. The total mandatory contribution for an employee is 8.5% from the employer and 8.5% from the employee, totaling 17% of the gross monthly wage.
Income Tax Withholding Requirements
As Brunei Darussalam does not impose a personal income tax on employment income for either residents or non-residents, there are no income tax withholding requirements on salaries or wages paid to employees. Employers are not required to deduct income tax from their employees' payroll.
This differs significantly from jurisdictions where Pay As You Earn (PAYE) or similar systems are in place. The gross salary agreed upon with the employee is the amount paid out, subject only to the mandatory TAP and SCP deductions.
Employee Tax Deductions and Allowances
Since there is no personal income tax on employment income in Brunei, the concept of employee tax deductions and allowances in the traditional sense (used to reduce taxable income) does not apply to salaries and wages. Employees do not claim deductions for expenses, reliefs, or allowances against their employment income for tax purposes because that income is not taxed.
The only mandatory deductions from an employee's salary are their contributions to the TAP and SCP schemes, as detailed above.
Tax Compliance and Reporting Deadlines
Employer compliance primarily revolves around the timely calculation and remittance of TAP and SCP contributions. These contributions are typically due by the 15th of the following month. Late payments can incur penalties.
Employers must register with the TAP and SCP boards and ensure accurate reporting of employee wages and contributions each month. While there is no annual personal income tax filing requirement for employees based on their employment income, employers (as companies) are subject to corporate income tax and must comply with the relevant filing deadlines for their annual tax returns, which is generally within nine months after the end of the company's financial year.
Special Tax Considerations for Foreign Workers and Companies
Foreign workers employed in Brunei are generally treated the same as local employees regarding employment income tax – their salaries and wages earned from employment in Brunei are not subject to personal income tax. Their obligation to pay tax in their home country depends on their tax residency status in that country and any double taxation agreements that may be in place.
Foreign companies operating in Brunei are subject to Brunei's corporate income tax laws on income derived from Brunei. While this doesn't directly impact the payroll tax obligations (which remain focused on TAP/SCP), the foreign company acting as an employer must comply with both corporate tax regulations for the entity and the employer obligations for their staff in Brunei. There are no specific payroll tax variations based on the nationality of the employee or the foreign status of the employing company, beyond the standard TAP and SCP requirements applicable to all employers with employees in Brunei.
