Brunei Darussalam
This report analyses the implementation of the AEOI Standard in Brunei Darussalam with respect to the requirements of the AEOI Terms of Reference. It assesses both the legal frameworks put in place to implement the AEOI Standard and the effectiveness of the implementation of the AEOI Standard in practice.
The methodology used for the peer reviews and that therefore underpins this report is outlined in Chapter 2.
Overall findings
AEOI legal framework
Brunei Darussalam’s legal framework implementing the AEOI Standard is in place and is consistent with the requirements of the AEOI Terms of Reference. This includes Brunei Darussalam’s domestic legislative framework requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (CR1) and its international legal framework to exchange the information with all of Brunei Darussalam’s Interested Appropriate Partners (CR2).
Effectiveness of AEOI in practice
Brunei Darussalam’s implementation of the AEOI Standard is partially compliant with the requirements of the AEOI Terms of Reference to ensure the effectiveness of the AEOI Standard in practice. While Brunei Darussalam is on track with respect to exchanging the information in an effective and timely manner (CR2), there are significant issues with respect to ensuring that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures (CR1).
Overall rating in relation to the effectiveness in practice: Partially Compliant
General context
Brunei Darussalam committed to commence exchanges under the AEOI Standard in 2018. However, its implementation of the Standard was delayed and Brunei Darussalam subsequently exchanged in 2020 the information that was due to be exchanged in 2018, 2019 and 2020. Brunei Darussalam exchanges information on a non-reciprocal basis (i.e. Brunei Darussalam sends but does not receive information).
In order to provide for Reporting Financial Institutions to collect and report the information to be exchanged, Brunei Darussalam:
issued Income Tax (International Tax Compliance Agreements) (Common Reporting Standard) Regulations 2017; and
Under this framework Reporting Financial Institutions were required to commence the due diligence procedures in relation to New Accounts from 1 January 2017. With respect to Preexisting Accounts, Reporting Financial Institutions were required to complete the due diligence procedures on High Value Individual Accounts by 31 December 2017 and on Lower Value Individual Accounts and Entity Accounts by 31 December 2018.
With respect to the exchange of information under the AEOI Standard, Brunei Darussalam is a Party to the Convention on Mutual Administrative Assistance in Tax Matters and activated the associated CRS Multilateral Competent Authority Agreement in time for exchanges in 2018.
Table 1 sets out the number of Financial Institutions in Brunei Darussalam that reported information on Financial Accounts in 2021 as defined in the AEOI Standard (essentially, because they maintained Financial Accounts for Account Holders, or that were related to Controlling Persons, resident in a Reportable Jurisdiction). It also sets out the number of Financial Accounts that they reported in 2021. In this regard, it should be noted that Brunei Darussalam requires the reporting of Financial Accounts based on a prescribed list of exchange partners and some accounts may be required to be reported more than once (e.g. jointly held accounts or accounts with multiple related Controlling Persons), which is reflected in the figures below. These figures provide key contextual information to the development and implementation of Brunei Darussalam’s administrative compliance strategy, which is analysed in the subsequent sections of this report.
Table 2 sets out the number of exchange partners to which information was ultimately successfully sent by Brunei Darussalam, noting that the exchanges in 2020 included information due to be sent in prior years (this also includes where the necessary frameworks were in place, containing an obligation on Reporting Financial Institutions to report information, but no relevant Reportable Accounts were identified). These figures provide key contextual information in relation to Brunei Darussalam’s exchanges in practice, which is also analysed in subsequent sections of this report.
In order to provide for the effective implementation of the AEOI Standard, in Brunei Darussalam:
the Collector of Income Tax, Revenue Division of the Ministry of Finance and Economy (part of the tax authority) has the responsibility to ensure the effective implementation of the due diligence and reporting obligations by Reporting Financial Institutions and for exchanging the information with Brunei Darussalam’s exchange partners;
technical solutions necessary to receive and validate the information reported by Reporting Financial Institutions were put in place by developing a secured portal where the Financial Institutions submit their required information; and
the Common Transmission System (CTS) is used for the exchange of the information, along with the associated file preparation and encryption requirements.
It should be noted that the review of Brunei Darussalam’s legal frameworks implementing the AEOI Standard concluded with the determination that Brunei Darussalam’s domestic and international legal frameworks are In Place. This has been taken into account when reviewing the effectiveness of Brunei Darussalam’s implementation of the AEOI Standard in practice.
Findings and conclusions on the legal frameworks
The detailed findings and conclusions on the AEOI legal frameworks for Brunei Darussalam are below, organised per Core Requirement (CR) and then per sub-requirement (SR) as extracted from the AEOI Terms of Reference (see Annex C).
CR1 Domestic legal framework: Jurisdictions should have a domestic legislative framework in place that requires all Reporting Financial Institutions to conduct the due diligence and reporting procedures in the CRS, and that provides for the effective implementation of the CRS as set out therein.
Brunei Darussalam’s domestic legislative framework is in place and contains all of the key aspects of the CRS and its Commentary requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (SRs 1.1 – 1.3). It also provides for a framework to enforce the requirements (SR 1.4).
SR 1.1 Jurisdictions should define the scope of Reporting Financial Institutions consistently with the CRS.
Brunei Darussalam has defined the scope of Reporting Financial Institutions in its domestic legislative framework in accordance with the CRS and its Commentary.
SR 1.2 Jurisdictions should define the scope of Financial Accounts and Reportable Accounts consistently with the CRS and incorporate the due diligence procedures to identify them.
Brunei Darussalam has defined the scope of the Financial Accounts that are required to be reported in its domestic legislative framework and incorporated the due diligence procedures that must be applied to identify them in accordance with the CRS and its Commentary.
SR 1.3 Jurisdictions should incorporate the reporting requirements contained in Section I of the CRS into their domestic legislative framework.
Brunei Darussalam has incorporated the reporting requirements in its domestic legislative framework in accordance with the CRS and its Commentary.
SR 1.4 Jurisdictions should have a legislative framework in place that allows for the enforcement of the requirements of the CRS in practice.
Brunei Darussalam has a legislative framework in place to enforce the requirements in accordance with the CRS and its Commentary.
CR2 International legal framework: Jurisdictions should have exchange relationships in effect with all Interested Appropriate Partners as committed to and that provide for the exchange of information in accordance with the Model CAA.
Brunei Darussalam’s international legal framework to exchange the information is in place, is consistent with the Model CAA and its Commentary and provides for exchange with all of Brunei Darussalam’s Interested Appropriate Partners (i.e. all jurisdictions that are interested in receiving information from Brunei Darussalam and that meet the required standard in relation to confidentiality and data safeguards) (SRs 2.1 – 2.3).
SR 2.1 Jurisdictions should have exchange agreements in effect with all Interested Appropriate Partners that permit the automatic exchange of CRS information.
Brunei Darussalam has exchange agreements that permit the automatic exchange of CRS information in effect with all its Interested Appropriate Partners.
SR 2.2 Such an exchange agreement should be put in place without undue delay, following the receipt of an expression of interest from an Interested Appropriate Partner.
Brunei Darussalam put in place its exchange agreements without undue delay.
SR 2.3 Jurisdictions should ensure that the exchange agreements in effect provide for the exchange of information in accordance with the requirements of the Model CAA.
Brunei Darussalam’s exchange agreements provide for the exchange of information in accordance with the requirements of the Model CAA.
Findings and conclusions in relation to effectiveness in practice
The detailed findings and conclusions in relation to effectiveness in practice of AEOI for Brunei Darussalam are below, organised per Core Requirement (CR) and then per sub-requirement (SR) as extracted from the AEOI Terms of Reference (see Annex C).
CR1 Effectiveness in practice: Jurisdictions should ensure that in practice Reporting Financial Institutions correctly implement the due diligence and reporting procedures, which includes a requirement for jurisdictions to have in place an administrative framework to ensure the effective implementation of the CRS.
Brunei Darussalam’s implementation of the AEOI Standard is partially compliant with respect to ensuring that Reporting Financial Institutions are correctly conducting the due diligence and reporting procedures. More specifically, while Brunei Darussalam is meeting expectations with respect to collaboration with its exchange partners to ensure effectiveness (SR 1.6), there are significant issues with respect to ensuring effectiveness in a domestic context, such as through having an effective administrative compliance framework and related procedures (SR 1.5). Brunei Darussalam should continue its implementation process to ensure its effectiveness, including by addressing the recommendations made.
SR 1.5 Jurisdictions should ensure that in practice Reporting Financial Institutions identify the Financial Accounts they maintain, identify the Reportable Accounts among those Financial Accounts, as well as their Account Holders, and where relevant Controlling Persons, by correctly conducting the due diligence procedures and collect and report the required information with respect to each Reportable Account. This includes having in place:
an effective administrative compliance framework to ensure the effective implementation of, and compliance with, the CRS. This framework should:
be based on a strategy that facilitates compliance by Reporting Financial Institutions and which is informed by a risk assessment in respect of the effective implementation of the CRS that takes into account relevant information sources (including third party sources);
include procedures to ensure that Financial Institutions correctly apply the definitions of Reporting Financial Institutions and Non-Reporting Financial Institutions;
include procedures to periodically verify Reporting Financial Institutions’ compliance, conducted by authorities that have adequate powers with respect to the reviewed Reporting Financial Institutions, with procedures to access the records they maintain; and
effective procedures to ensure that Financial Institutions, persons or intermediaries do not circumvent the due diligence and reporting procedures;
effective enforcement mechanisms to address non-compliance by Reporting Financial Institutions;
strong measures to ensure that valid self-certifications are always obtained for New Accounts;
effective procedures to ensure that each, or each type of, jurisdiction-specific Non-Reporting Financial Institution and Excluded Account continue to present a low risk of being used to evade tax; and
effective procedures to follow up with a Reporting Financial Institution when undocumented accounts are reported in order to establish the reasons why such information is being reported.
In order to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures, Brunei Darussalam implemented some of the requirements in accordance with expectations. However, significant issues were identified. The key findings were as follows:
Brunei Darussalam has an overarching strategy to ensure compliance with the AEOI Standard based on a risk assessment that takes into account relevant information sources to inform its compliance activities.
Brunei Darussalam relies on several information sources to identify all Financial Institutions for the purposes of the AEOI Standard; e.g. the list of regulated financial institutions, the Foreign Financial Institution list for FATCA, the business register, as well as information from trusts and company service providers.
The tax authority responsible for implementing Brunei Darussalam’s compliance strategy appears to have the necessary powers and resources to discharge its functions. With respect to resourcing, Brunei Darussalam has assigned the equivalent of three full time staff to monitor and ensure compliance by Reporting Financial Institutions, in addition to allocating an IT budget. The tax authority confirmed that the adequacy of the resources allocated will be reviewed in the context of the implementation of the strategy.
Brunei Darussalam has started questionnaire-based compliance activities to verify the correct classification as Reporting Financial Institutions, as well as to verify that the information reported is complete and accurate, including following up on undocumented accounts in the context of such audits.
Brunei Darussalam does not have comprehensive procedures in place to address circumvention of the AEOI Standard.
Brunei Darussalam plans to annually review its list of Excluded Accounts to ensure they continue to pose a low risk of being used for tax evasion (Brunei Darussalam does not have a jurisdiction-specific list of Non-Reporting Financial Institutions).
Table 3 provides a summary of the specific activities undertaken, or that are planned to be undertaken, in relation to each of the key parts of the framework described above.
With respect to the Financial Account information collected and sent by Brunei Darussalam, the presence of the key data points of the Tax Identification Numbers and dates of birth appeared to be in line with most other jurisdictions. While the information provided by Brunei Darussalam had shown a relatively high number of undocumented accounts reported by its Reporting Financial Institutions, when compared to other jurisdictions, meaning that it was not possible for the Reporting Financial Institution to identify whether the accounts were held by Reportable Persons, the number of undocumented accounts has reduced substantially over time.
One exchange partner highlighted issues with respect to a high number of missing and incorrect Tax Identification Numbers in the information received from Brunei Darussalam. Follow-up discussions confirmed that Brunei Darussalam is aware of these issues and is seeking to improve the situation, including by approaching Reporting Financial Institutions as needed. More generally, many of the exchange partners that received a significant number of records from Brunei Darussalam indicated that they achieved a success rate when matching the information received from Brunei Darussalam with their taxpayer database that was broadly equivalent to, or better than, what they usually achieve.
Based on these findings it was concluded that Brunei Darussalam is partially meeting expectations in ensuring that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures, including by having in place the required administrative compliance framework and related procedures. More specifically, significant issues have been identified, including with respect to implementing the compliance and verification activities, as well as enforcement procedures. Brunei Darussalam should therefore continue its implementation process accordingly, including by addressing the recommendations made.
Brunei Darussalam should commence in-depth compliance, including appropriate verification of underlying documentation.
Brunei Darussalam should commence enforcement activities where non-compliance is identified.
Brunei Darussalam should develop and implement a comprehensive policy that provides that, where circumvention is identified, action is taken to address it.
Brunei Darussalam should commence to systematically follow up on Reporting Financial Institutions reporting undocumented accounts.
SR 1.6 Jurisdictions should collaborate on compliance and enforcement. This requires jurisdictions to:
use all appropriate measures available under the jurisdiction’s domestic law to address errors or non-compliance notified to the jurisdiction by an exchange partner; and
have in place effective procedures to notify an exchange partner of errors that may have led to incomplete or incorrect information reporting or non-compliance with the due diligence or reporting procedures by a Reporting Financial Institution in the jurisdiction of the exchange partner.
It should be noted that, as Brunei Darussalam exchanges information on a non-reciprocal basis and does not therefore receive information, it is not required to have in place procedures to notify its exchange partners. SR 1.6 b) has therefore not been assessed in this case.
Brunei Darussalam has put in place procedures to collaborate on compliance and enforcement, in relation to issues notified to them (i.e. under Section 4 of the MCAA or equivalent). No such notifications have yet been received.
Based on these findings it was concluded that Brunei Darussalam is fully meeting expectations in relation to collaborating with its exchange partners to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures.
CR2 Effectiveness in practice: Jurisdictions should exchange the information effectively in practice, in a timely manner, including by sorting, preparing, validating and transmitting it in accordance with the AEOI Standard.
Brunei Darussalam’s implementation of the AEOI Standard is on track with respect to exchanging the information effectively in practice, including in relation to sorting, preparing and validating the information (SR 2.4), correctly transmitting the information in a timely manner (SRs 2.5 – 2.7) and providing corrections, amendments or additions to the information (SR 2.9). The requirements in relation to the receipt of the information (SR 2.8) have not been assessed as Brunei Darussalam exchanges information non-reciprocally, so does not receive information. Brunei Darussalam is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.
SR 2.4 Jurisdictions should sort, prepare and validate the information in accordance with the CRS XML Schema and the associated requirements in the CRS XML Schema User Guide and the File Error and Correction-related validations in the Status Message User Guide (i.e. the 50000 and 80000 range).
Three exchange partners highlighted particular issues with respect to preparation and format of the information sent by Brunei Darussalam (representing 5% of its partners). These generally related to schema validation. More generally, 10 (or 19%) of Brunei Darussalam’s exchange partners reported rejecting more than 25% of the files received due to the technical requirements not being met, although only one rejected more than 50% of files received. This is a very high amount when compared to other jurisdictions. Brunei Darussalam has generally addressed and solved the issues.
Based on these findings it was concluded that, overall, Brunei Darussalam is meeting expectations in relation to sorting, preparing and validating the information. Brunei Darussalam is encouraged to continue its implementation process accordingly, including in relation to the area highlighted.
Brunei Darussalam should review its systems and procedures to sort, prepare and validate the information to ensure they meet the requirements of the AEOI Standard.
SR 2.5 Jurisdictions should agree and use, with each exchange partner, transmission methods that meet appropriate minimum standards to ensure the confidentiality and integrity of the data throughout the transmission, including its encryption to a minimum secure standard.
In order to put in place an agreed transmission method that meets appropriate minimum standards in confidentiality, integrity of the data and encryption for use with each of its exchange partners, Brunei Darussalam linked to the CTS.
Based on these findings it was concluded that Brunei Darussalam is fully meeting expectations in relation to agreeing and using appropriate transmission methods with each of its partners. Brunei Darussalam is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.6 Jurisdictions should carry out all exchanges annually within nine months of the end of the calendar year to which the information relates.
Feedback from Brunei Darussalam’s exchange partners did not raise any concerns with respect to timeliness of the exchanges by Brunei Darussalam and therefore with respect to Brunei Darussalam’s implementation of this requirement.
Based on these findings it was concluded that Brunei Darussalam is fully meeting expectations in relation to exchanging the information in a timely manner. Brunei Darussalam is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.7 Jurisdictions should send the information in accordance with the agreed transmission methods and encryption standards.
Feedback from Brunei Darussalam’s exchange partners did not raise any concerns with respect to Brunei Darussalam’s use of the agreed transmission methods and therefore with Brunei Darussalam’s implementation of this requirement.
Based on these findings it was concluded that Brunei Darussalam is fully meeting expectations in relation to sending the information in accordance with the agreed transmission methods and encryption standards. Brunei Darussalam is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.8 Jurisdictions should have the systems in place to receive information and, once it has been received, should send a status message to the sending jurisdictions in accordance with the CRS Status Message XML Schema and the related User Guide.
It should be noted that, as Brunei Darussalam exchanges information on a non-reciprocal basis and does not therefore receive information, it is not required to have in place systems to receive the information and provide status messages. SR 2.8 has therefore not been assessed in this case.
SR 2.9 Jurisdictions should respond to a notification from an exchange partner as referred to in Section 4 of the Model CAA (which may include Status Messages) in accordance with the timelines set out in the Commentary to Section 4 of the Model CAA. In all other cases, jurisdictions should send corrected, amended or additional information received from a Reporting Financial Institution as soon as possible after it has been received.
Feedback from Brunei Darussalam’s exchange partners did not raise any concerns with respect to Brunei Darussalam’s response to notifications or provision of corrected, amended or additional information and therefore with respect to Brunei Darussalam’s implementation of these requirements.
Based on these findings it was concluded that Brunei Darussalam appears to be meeting expectations in relation to responding to notifications from exchange partners and the sending of corrected, amended or additional information. Brunei Darussalam is encouraged to continue to ensure the ongoing effectiveness of its implementation.