US Expat Taxes for Americans Living in Brunei – What You Need to Know
It has been estimated that there are several thousand Americans living in Brunei.
Living in Brunei is an incredible experience for a number of reasons, including the friendly locals, the close-knit expat community, the natuaral environment, and easy access to other Asian countries. As an American expatriate living in Brunei though, what exactly do you need to know regarding filing US expat (and Bruneian) taxes?
All US citizens and green card holders who earn a minimum of around $10,000 (or just $400 for self-employed individuals) anywhere in the world are required to file a US federal tax return and pay taxes to the IRS, regardless of where in the world they live or their income is generated.
The good news is if you are paying income tax in Brunei, there are various exclusions and exemptions available to prevent you paying tax on the same income to the IRS too.
US taxes – what you need to know
If you earn over US$10,000 (or just $400 of self-employment income), wherever the income originates in the world you have to file IRS form 1040.
While any US taxes due are still due by April 15th, expats get an automatic filing extension until June 15th, which can be extended further on request until October 15th.
If you have overseas assets worth over US$200,000 per person, excluding your home if it is owned in your own name, you also have to file form 8938 to declare them.
If you had a total of at least US$10,000 in one or more foreign bank and/or investment accounts at any time during the tax year, you also have to file FinCEN form 114, otherwise known as a Foreign Bank Account Report or FBAR.
“Although the Income Tax Act provides for the taxation of income derived by individuals, such income is exempt from tax under the second schedule of the act.” – Deloitte
If you pay income tax in Brunei, there are several exemptions that allow you to pay less or no US income tax on the same income to the IRS. The main exemptions are the Foreign Earned Income Exclusion, which lets you exclude the first around US$100,000 of foreign earned income from US tax if you can prove that you are a Bruneian resident. Remember though that even if you don’t owe any tax to the IRS, if your income is over US$10,000 (or $400 if you’re self-employed) you still have to file a federal return.
The US and Bruneian governments share taxpayer info, and Bruneian banks pass on US account holders’ account info to the IRS, so it’s not worth not filing or omitting anything on your return. The penalties for incorrect or incomplete filing for expats are steep to say the least.
If you’re a US citizen, green card holder, or US/Bruneian dual citizen, and you have been living in Brunei but you didn’t know you had to file a US tax return, don’t worry: there’s a program called the IRS Streamlined Procedure that allows you to catch up on your filing without paying any penalties. Don’t delay though, in case the IRS comes to you first.
Bruneian taxes – what you need to know
There is currently no income tax in Brunei. Bruneian residents pay social security taxes on income sourced in Brunei however, at a total rate of 8.5%. There is currently no capital gains tax, VAT, or wealth tax.
An expat is considered a resident in Brunei if they spent more than 183 days either present or employed in Brunei in the preceding year.
As there are no income taxes, there is no Bruneian tax filing requirement. The Bruneian tax authority is the Ministry of Finance.
We strongly recommend that if you have any doubts or questions about your tax situation as a US expat living in Brunei that you contact a US expat tax specialist.