Private Binding Rulings - January 2022

By Atnesh Prasad, Director Taxation

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FRCS now allows taxpayers to request a PBR. The PBR needs to be requested in a specific format with clear and concise information. The CEO of FRCS will review the information provided in respect of the taxpayer and the relevant circumstances.

The CEO will interpret and apply the taxation laws based on the facts and information provided and specifically addressed to the taxpayer’s circumstances. The ruling will be binding on FRCS providing no erroneous or misleading information has been provided. The aim of PBRs is to provide taxpayers with certainty on the taxation implications of a particular transaction or set of circumstances.

This new process commenced from 24th January 2022 and application fees to FRCS will apply.

For assistance with PRIVATE BINDING RULINGS please contact Mr Atnesh Prasad, our Director Tax on [email protected]

 

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Sale of a Depreciable Asset – Tax Implications

Any sale of a capital asset at a profit may have both income tax and capital gains tax ramifications. The introduction of CGT was to broaden the tax base in Fiji and to bring equity in the tax system so that both the ordinary and capital incomes are taxed appropriately. The incorporation of CGT into the income tax act came with some fundamental changes, which was later amended as part of 2020/2021 national budget. As a means to streamline the CGT administration, the capital assets definition was amended to include depreciable assets.

Prior to 1st August 2020, a depreciable asset did not qualify as a capital asset and any disposal of a depreciable asset would be subject to Income Tax if depreciation was claimed.

The current rules are that a depreciable asset qualifies as a capital asset.

Section 34 of the ITA 2015 provides rules for the taxation of depreciable assets, which are applicable in situations where real property is disposed with a building. Taxpayers need to consider the following determinations.

If the sale or consideration exceeds written down value, depreciation claimed on the asset up to the amount of the excess is added back to assessable income of the taxpayer.

Any residual excess is subject to Capital Gains Tax under Part 3 of the Income Tax Act 2015.

If the sale results in a loss, that loss is allowed as a deduction against gross income of the taxpayer.

For further taxation advice contact Atnesh on email address; [email protected]

 

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HLB Mann Judd (Fiji) Community Help

A newly built house Handed over to Ms Lata by the Commissioner Northern Division (CND) Uraia Rainima. Her house was completely destroyed during TC Yasa in December last year. The incident also claimed the life of her late husband, Mr Ramesh Chand. HLB Mann Judd (FIJI) through a generous sponsorship helped construction of Ms Lata's house

New Family Home For TC Yasa Survivor

Mrs Lata’s house was completely destroyed during TC Yasa in December 2020. Sadly, she also lost her husband during the cyclone.

The new 3 bedroom house was made possible through generous assistance from local donors coordinated by the Ministry of Rural and Maritime Development and Disaster Management, through the Office of the Commissioner Northern Division (CND).

As the major donor, HLB Mann Judd Fiji took this opportunity to give back to the community in a positive way in a well-coordinated and successful public-private partnership.
Amazing support was provided from other donors, engineers from the Republic of Fiji Military Forces (RFMF), Commissioner Northern Division (CND), family, friends and the local community.

On behalf of CND, Uraia Rainima handed over a newly built house to Tropical Cyclone Yasa survivor, Mrs Roop Lata of Anuve Settlement in Bulileka, Labasa.
After 7 months, Mrs Lata and her two children have a roof over their heads and can begin to rebuild their lives.

Image Sourced from THE FIJI SUN
Image Sourced from THE FIJI SUN

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Fiji Budget -Tax Highlights

As part of our services to clients we will post Budget Tax highlights as and when the Government introduces new budget measures whether by way of a full budget or mini budget. We also send out very regular newsletters on tax changes as they happen, reminders and general updates. Our Tax team are willing to answer any questions you may have in regards to tax changes which may impact your business.

For the 2020 – 2021 Fijian Government Financial Year, the following direct tax incentives were announced:

  1. Social Responsibility Tax (“SRT”) and Environment & Climate Adaptation Levy (“ECAL”);
  2. Advance Payment of Tax;
  3. Debt Forgiveness;
  4. Thin Capitalization;
  5. Depreciation Write off – Initiative;
  6. Accelerated Depreciation;
  7. Tax Deduction for reduction of commercial rent;
  8. New Medical Investment Incentive;
  9. New Incentive Package for Subdivision of Lots;
  10. New Incentive Package for Private sector investment in buildings;
  11. Residential Housing Development Incentive – Development of Housing for Public Rental;
  12. Tax incentives for Corporate Bonds;
  13. FNPF Contribution;
  14. Capital Gains Tax (CGT);
  15. Income Tax Act – Section 2: Definition of Capital Asset;
  16. Fringe Benefit Tax;
  17. Non Resident Withholding Tax;
  18. Permanent Establishment;
  19. Tax deduction on loans taken for medical purposes;
  20. Corporate Reorganization;
  21. Donation to the Sports Fund;
  22. Tax deduction to hire local artists;
  23. Amendments to Tax Administration Act;
  24. Amendments to Stamp Duty Act and;
  25. Amendments to Airport Departure Tax Act.

Contact our tax team for assistance or information on these tax measures and incentives.

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Fiji slashes taxes and duty in COVID Response Budget

Welcomed measures for Fiji's growing economy

By William Crosbie, Managing Partner

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The announcement of Fiji’s 2020 – 2021 Covid Response Budget on 1st August 2020, signaled the biggest ever tax cut in modern day. The Fiji Government chose to make Fiji’s tax system even more attractive and there has been very positive response from businesses and investors alike.

Fiji particularly is aiming to keep the economy afloat during this recession. With a third of Fiji’s workforce under reduced hours or being laid off and the other two thirds facing a bleak future as trade and travel restrictions continue to limit economic activities, the Government of the day has taken this bold step to try and rejuvenate the economy and position Fiji as the “business hub” of the Pacific.

Duties

  • Customs Duties were reduced by up to 80% and even eliminated on many items.
  • Stamp duties eliminated.

Taxes

VAT remained at 9% however other taxes were drastically reduced to set a solid platform for the new “normal”. For instance:

  • Service Turnover Tax has been removed
  • The Environment and Climate Adaptation Levy (ECAL) portion of the Social Responsibility Tax (SRT) is reduced to 5% with the threshold for SRT and ECAL set at $270,000. This restructure will greatly benefit many small businesses that fall below the SRT and ECAL threshold.
  • Landlords for commercial spaces were given an incentive to reduce rental charges whereby Government announced a tax reduction for landlords relating to commercial rents
  • The Income tax threshold remained the same however, the Government adjusted the conditions for the advance payment of tax for businesses to nine installments in comparison to the old requirement of three installments. This adjustment will give some breathing space for businesses who are not having favorable cash flows.

Policy adjustments

Further to this, Government also made some policy adjustments in relation to Debt Forgiveness, Thin Capitalization, Depreciation write off and Accelerated depreciation.

  • Additional relief was provided to businesses by reducing the mandatory FNPF contribution from 10% to 5%.
  • A tax deduction is now allowed to the employer for Fringe Benefit Tax.

Investing in Fiji

Acknowledging Fiji’s ever growing population and the need for more robust health care facilities, the Government adjusted the current capital investment threshold for Private Hospitals and Ancillary Medical Investment Incentive to FJD$2.5 million for the construction of new hospitals and FJD$0.5 million for hospital renovation, refurbishment and extension.

Investments over FJD$2.5 million obtain 7 year tax free status and in excess of FJD$10 million receive 20 year tax free concession. Duty concessions also granted.

A new incentive package will be introduced for investment in the business of sub-division of lots for residential or commercial purpose.

Amendments to policies regarding Capital Gains tax, Non- resident Withholding Tax, Airport departure tax and other taxation measures were also announced in the Budget. Click this link to view more regarding these tax and customs reforms plus other revenue measures announced in the 2020-2021 Budget.

Contact the friendly team at HLB Mann Judd Fiji should you wish to learn more about investing in Fiji.

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