Jurisdiction spotlight: The Sultanate of Brunei

History

Brunei DarussalamLocated on the north side of the island of Borneo, the Sultanate of Brunei traces its roots as far back as the 7th century, although the name Brunei (then Berune) does not appear in literature until the 1300s when Chinese settlers arrived. Prior to this, Brunei may have been a more or less autonomous part (vassal) of the Majapahit Empire. The Chinese held Brunei until the 1400s when Brunei developed close ties with the sultanate of Malacca. It was at this point the country transformed into a Muslim nation, which it remains to this date.

The Portuguese and Spanish were the first recorded Europeans to visit Brunei. While the Portuguese were more interested in trade, the Spanish Empire was far more hostile. Between 1565 and 1571, Spain and Brunei fought a number of naval battles. The Spanish ultimately won and seized Brunei from land and sea.

The Spanish rule over Brunei was short-lived. They left in 1578 due after severe outbreaks of cholera and dysentery.

After the Spanish left, Brunei went through a long period of relative peace but instability. It was not until 1839 a government could be formed with the help of British influence. It remained a British protectorate until 1984.

In modern times, Brunei has become one of the wealthiest nations in Asia due to vast natural resources and foreign investment. The sultanate of Brunei enjoys a 0% public debt and one of the highest GDP per capita in the world.

Brunei has very close ties with Singapore, even pegging its currency to the Singapore dollar.

Brunei does not recognize Israel and as such Israeli passport holders cannot enter the country or open bank accounts. There does not seem to be any problem for Israeli passport holders to form a Brunei IBC, if one can find an offshore service provider willing to accept the risk.

Overview Data

[ws_table id=”4″] [google-map-v3 width=”100%” height=”250″ zoom=”4″ maptype=”roadmap” mapalign=”center” directionhint=”false” language=”default” poweredby=”false” maptypecontrol=”true” pancontrol=”true” zoomcontrol=”true” scalecontrol=”true” streetviewcontrol=”true” scrollwheelcontrol=”false” draggable=”true” tiltfourtyfive=”false” addmarkermashupbubble=”false” addmarkermashupbubble=”false” addmarkerlist=”4 53 N, 114 56 E{}1-default.png” bubbleautopan=”false” showbike=”false” showtraffic=”false” showpanoramio=”false”]

Brunei offshore advantages

Brunei is an often overlooked offshore jurisdiction, if known at all.

It is a fiercely independent nation full of pride. Privacy is sacred and the country has signed few DTAs and TIEAs. There are no ambitions to increase this.

Couple this with a rock-solid economy, strict banking secrecy, and a population that speaks English very well and you have a powerful offshore jurisdiction.

Islamic banking is available.

Brunei offshore disadvantages

The offshore sector is not very mature and the incorporation costs can be significantly higher than other IBC jurisdictions.

Incorporating an offshore company in Brunei can take several weeks, although I have been told it can be as quick as a week.

Brunei IBC

The Brunei IBC has a few difference from the more popular IBC jurisdictions: Seychelles, Belize, BVI, et c.

Whereas other IBC jurisdictions charge a much higher annual fee for an authorized share capital over 50,000 (Belize) or 100,000 (Seychelles) USD, Brunei has a fixed annual fee for any authorized share capital. This makes Brunei superb for fund raising or other types of businesses that have a large number of shareholders.

A secretary is required and, if more than one secretary, one must be local. This is usually provided by the OSP, but it drags the price up a bit.

Similar to Mauritius GBC class I and II, a Brunei IBC’s authorized share capital cannot be the local currency. This is insignificant, but anyone who really wants Brunei dollar could just as well use Singapore dollar since it is pegged 1:1.

A minimum of one director and a minimum of one shareholder is required, both of which can be the same person (legal or natural).

Brunei IBCs pay no tax. No tax is levied on interest, dividends, or other forms of income.

Brunei Banking

Offshore banking in Brunei is improving all the time. It still has a long way to go to reach the likes of Singapore and Hong Kong but it’s now so good that I would recommend a Brunei IBC to open a bank account in Brunei. HSBC, Standard Chartered and the local Baiduri Bank are the banks which are the most open to IBCs.

Accounts can be opened remotely by using an introducer, though Islamic banks and banking are only available to Muslims.

Banking secrecy is provided by chapters 18 and 19 of the International Banking Order of 2000, which governs bankings for non-residents. The penalties for breaking the Brunei banking secrecy are imprisonment up to two years and a fine up to 100,000 USD. A court order is required to disclose banking information. This is rarely if ever done for what foreign jurisdictions consider tax crimes.

However, Brunei courts will force disclosure in cases of money laundering or other severe crimes.

Living in Brunei

With zero income tax and no tax on capital gains and dividends, Brunei can be an attractive location to live in. However, it is not a fully zero tax jurisdiction. There is property tax, a 5% social security tax, and stamp duty on many documents. Overall, though, the tax rates are much lower than most other jurisdictions.

Travelling to and from Brunei is almost exclusively done via Singapore, Malaysia, and Hong Kong with some flights going to Australia, though there are frequent direct flights from London and Dubai.

Israeli passport holders are not allowed to enter Brunei.

Internet in Brunei is slow and expensive, owing largely due to expensive connections with Singapore and poor connections with the poorly connected Indonesia.

Foreigners cannot own property but there are plenty of rentals. Costs of living are some of the highest in Asia, similar to Singapore and Hong Kong.

Details on immigration (permanent residence, long-stay visa, and work permits) change frequently. Check with a Brunei embassy or consulate for up-to-date information.

Final words

Brunei is definitely worth taking a look at if you need an offshore company with strict privacy protection.

2 Comments on "Jurisdiction spotlight: The Sultanate of Brunei"

  1. Both Mossack Fonseca and Kaizan have advised me today that Brunei is now regarded as high risk – from a banking perspective.

    They said that opening bank accounts in Hong Kong for Brunei IBCs are a real pain as they require a lot of supporting documents such as a bank reference letter from an existing bank account for that specific Brunei IBC .

    • I wrote this article before I had the focus I currently do on reputability and compliance. At some point, because the article is popular, I will re-write this one and better present the challenges that Brunei can pose (and go more in-depth in what Brunei has to offer). It is still fairly unknown but those who know it, know how secretive it is.

      Forming a Brunei IBC and immediately trying to open a bank account in a place like Hong Kong is very difficult. As Mossack & Fonseca and Kaizen have mentioned to you, it’s easier if your IBC has some history with another bank and a reference can be provided for that relationship (in addition to all other references).

Leave a comment

Skip to toolbar