An Introduction to Income Tax

Personal Income tax in Fiji is a direct tax imposed on individuals or taxpayers in respect of the taxable income or profits earned by them. Income tax in Fiji is computed at rates increasing in income bands. The tax rate increases as taxable income increases on a graduated scale. Different scales apply to resident taxpayers and non-residents. In addition to personal tax, FRCS imposes SRT and ACAL on incomes over a certain threshold. Refer to our Insight for the latest Personal Tax Table for IT, SRT and ECAL for 2020 / 2021

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An Introduction to Environmental Climate and Adaptation Levy (ECAL)

The Environment & Climate Adaptation Levy (ECAL) is a new tax introduced in alignment to Fiji’s recognition of the importance of safeguarding the environment and the impact the economy has had on Climate Change. It is charged at the rate of 5% on the gross annual turnover of a prescribed service. ECAL is computed by applying the rate to the prescribed service amount. The ECAL is administered by FRCS however it will be collected by the prescribed service provider. Registration for ECAL is dependent on the taxable threshold.

ECAL is computed by applying the rate to the prescribed service amount. The ECAL is administered by FRCS however it will be collected by the prescribed service provider. Registration for ECAL is dependent on the taxable threshold.

ECAL is a new tax introduced in alignment to Fijis recognition of the importance of safeguarding the environment and the impact the economy has had on Climate change. It is charged at the rate of 5% on the gross annual turnover of a prescribed service.

ECAL is computed by applying the rate to the prescribed service amount. The ECAL is administered by FRCS however it will be collected by the prescribed service provider.

All prescribed service providers whose annual gross turnover in respect of the provision of a service listed under Schedule 1 of the Act exceeds $ 3million must register for ECAL in FRCS effective 1 August 2018.

Services that fall under ECAL are:

Service Providers Services subject to ECAL
Licensed hotels Accommodation, refreshments and any other services.
Tourist vessels operating within Fiji waters Accommodation, refreshments and any other services provided on board.
Licensed bars Meals, beverages and any other services provided in a licensed bar. This includes licensed bars located, for example, in private clubs.
Licensed Nightclub Services such as music, dancing or other entertainment including other services
Inbound tour operators Travel, tour and sight-seeing services.
Organizers of entertainment programs /product exhibitions Entry fees to the events venue.
Recreational Activity operators Recreational activities provided by these operators E.g. Skydiving
Cinema Operators Entry fees and all services provided within the cinema premises.
Licensed Rental/hire car operators Applicable from 01/01/15 for any hire of chauffeur driven motor vehicles. This applies to motor vehicles that come with a driver, does not have a meter/the fare is negotiated or is fixed. It also includes vehicles with ‘LH’ license plates and the hire of rental cars and other transport services by a rental car operator. However, it does not include the hire of taxis.
Bistros and coffee shops Meals, beverages and other services.
Licensed Restaurants Meals, beverages and other services.
Aircraft operators This applies to charter flight services except for charter flights for medical or natural disaster relief evacuations services are not subject to STT and ECAL.
Water sports operators All water sports activities including river safaris.
Home stay operators Accommodation and other services provided in a private residence or property that accommodates tourists, international students or overseas visitors who are paying guests. It does not apply to hostels/accommodation operated by public educational institutions.

 

Service providers who now have an annual gross turnover less than $ 3million shall no longer be considered as prescribed service providers and are not mandated to impose ECAL as long as they are under the said threshold.

Revised threshold of $3 million came into effect 1st August 2020

For new businesses, the owner or person who is responsible for the daily management of a prescribed service (Accountable Person) should register with FRCS once they become liable or legally responsible to register. The Accountable Person should first obtain a Taxpayer Identification Number (TIN), and then register for ECAL purposes. Registration must be done within 30 days before the business commences.

ECAL registration depends upon the ECAL taxable threshold. A service provider will be required to register for ECAL where the annual gross turnover for the provision of such service has exceeded $ 3million.

Once the above persons reach the taxable threshold, they should register at FRCS so that they can start including ECAL in their service charges. The effective date to start accounting for ECAL is the month of registration

ECAL component of SRT

Taxed on individual’s income. ECAL threshold (as of September 2020) is FJD$270,000 

Chargeable Income ECAL Levy
270,001 – 300,000 5% of Excess over $270,000
300,001 – 350,000 5% of Excess over $300,000
350,001 – 400,000 5% of Excess over $350,000
400,001 – 450,000 5% of Excess over $400,000
450,001 – 500,000 5% of Excess over $450,000
500,001 – 1,000,000 5% of Excess over $500,000
1,000,000+ 5% of Excess over $1,000,000

Drop us an email or give us a phone call now if you would like us to guide you further regarding the implications of ECAL on you and your business.

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An Introduction to Pay As You Earn (PAYE)

Pay-As-You-Earn (PAYE) is a withholding mechanism through which taxes are collected from employment income. Employers having employees must register with FRCS for PAYE from the date of employment of the first employee. Once registered, employers must submit a withholding summary. All Periodic Summaries must be filed by the last day of the month following the end of the filing period and appropriate payments made to FRCS. PAYE is legislated under the Tax Administration Act 2009.

This issue highlights on the transformation of PAYE EMS reporting to Payday Reporting on the FRCS Tax Portal Online Service (TPOS).

Please note that Payday reporting has gone live on TPOS from  February 1st 2021.

Hence, please take note of the following on the administration of Payday Reporting:

  • Payday filing is a new requirement which will be filed in TPOS based on the pay frequency of the pay cycles either monthly, fortnightly, bi-monthly or weekly. Employers will be required to upload the Pay Day files in TPOS as soon as their employees have been paid out.
  • The specifications and format of Pay Day files are entirely different compared to the Employer Monthly Summary (EMS) and the file formats and structures have been provided to Payroll Vendors.

What is payday filing?

  • Payday Reporting/Filing is what the name depicts itself, which is reporting the pay details every payday. Automatic calculation of tax liability by the system is expected to minimize tax computation errors, increases consistency, and provides assurance to employers that their employees’ tax liability is being computed correctly.
  • The success of this approach, however, relies on the employer to correctly break down each employee’s pay into the correct classifications and to populate them correctly on the return.

How will the payroll process change?

  • The payroll process remains the same but the reporting format to FRCS will change. Employers should review their current process to ensure payday reporting does not become an extra step but saves steps in the overall process.

Overview of the TPOS payday reporting process

  • On TPOS, the employer will be required to create “Payment Periods” by entering the period start date, period end date, date on which the wages was paid and the payment frequency.
  • The employer has to then upload the Payday for all payment periods falling within the filing period. The Payday will be validated for TINs, date of birth, employment start date, employment end date and special payments approval numbers.

Therefore, if you require our service  on the Payday reporting, NTIS queries or on any other tax matter then please contact us on  [email protected] and we will attend to your request.

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An Introduction to Value Added Tax (VAT)

Value Added Tax (VAT) is a tax on spending that is levied on the supply of goods and services in Fiji at the rate of 9%, with effect from 1 January, 2016.

All businesses with a turnover of $100,000 or more are required to register for VAT and lodge return on a yearly basis provided the gross turnover does not exceed $300,000. However, should gross turnover exceed $300,000 then VAT is to be accounted for on a monthly basis.

Any person whose annual gross turnover is less than $100,000 can still apply to register for VAT voluntarily

VAT is levied on all goods and services at the rate of 9% and is effectively borne by the consumer.

VAT is zero rated for certain items including exports and sale of a business as a going concern.

Certain items are exempt from VAT including financial services.

The VAT Act requires most businesses and organizations involved in taxable activities in Fiji to:

  • register for VAT with FRCS within 21 days of becoming so liable;
  • charge and collect 9% VAT applicable to the range of goods and services they supply;
  • lodge their VAT Returns and pay the VAT collected to the FRCS when due.

VAT is said to be broad based and indirect in nature and any person who carries on a taxable activity (other than a produce supplier) where annual gross turnover has exceeded the threshold of $100,000 is required to register for VAT with FRCS.

VAT completion and filing requirements are onerous and need to be handled professionally. All claims must be supported with source documents to minimize unnecessary VAT audits and rejection of claims by FRCS.

We can offer you our expertise to ensure all your VAT related matters with FRCS are taken care of. So talk to us now and together we can expeditiously ensure all your VAT related matters are kept in order.

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An Introduction to Fringe Benefit Tax (FBT)

Introduced by FRCS on January 1 2012, with the intention of helping Fijians financially, Fringe Benefit Tax (FBT) now shifts the tax burden from employees to the employers. This tax is levied when an employer provides in kind or non-cash benefits to an employee.

As from 2012 employers are responsible for declaring and paying FBT on a quarterly basis at the rate of 20% on the following employee benefits; housing, motor vehicle, subsidised loans, travel and other personal benefits.

Health Insurance benefits provided to local employees (Fiji Citizens) are exempt from Fringe Benefit Tax

The computation of such tax can become cumbersome at times therefore, we at HLB stand ready to look after all your FBT related matters so that you can spend your valuable time on other valuable matters. Contact us now and let us share this responsibility with you.

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An Introduction to Capital Gains Tax (CGT)

Capital Gains Tax (CGT) is a tax that is levied on profits or gains realized on the disposal of capital assets. It came into effect from May 1, 2011 replacing the Land Sales Tax. Capital Gains Tax is imposed and collected on a self-assessment basis and the vendor is liable for the tax. It is computed on the VAT Exclusive Price (VEP) of the capital asset. If you are thinking of selling a Capital Asset, or currently have some Capital Assets to transfer, contact us now and together we can discuss further in detail the technical implications of CGT and the current incentives that is in place that you can take advantage of.

The following are the capital assets that attract capital gains tax upon disposal but subject to exemption and deferral provisions, as provided for in the Income Tax Act 2015:

  • Real property, structural improvement or an interest in real property
  • Vessels of over 100 tonnes e.g. ship
  • Yachts
  • Ship and Boats
  • A membership interest in a company, security or other financial asset
  • Intangible assets e.g. goodwill
  • An interest in a partnership or trust
  • An airplane, helicopter or other aircraft
  • An option, right or other interest in an asset but does not include trading stock, depreciable asset or a business intangible

 Exempt Capital Gains

  • a capital gain made by a resident individual or Fiji citizen that does not exceed FJD$16,000;
  • a capital gain made by a resident individual or a Fiji Citizen on disposal of either the individual’s first residential property or principal place of residence;
  • a capital gain made by a person on the disposal of shares listed on the South Pacific Stock Exchange;
  • a capital gain made on disposal of an asset that is used solely to derive exempt income;
  • any gain made by a person on the disposal of an interest in a company which is a trust, approved as a managed investment scheme under the Companies Act and includes a unit trust to which section 743 of the Companies Act applies;
  • a capital gain made by a resident individual or a Fiji Citizen on disposal of his or her interest in a family home, provided that the disposal of the interest is by way of transfer to an existing joint tenant or tenant in common;
  • a capital gain made by a resident person from the sale of shares where a private company goes through re-organisation, restructure or amalgamation for the purposes of listing or as part of a listing process on the South Pacific Stock Exchange, provided that—

(i)      the private company is listed on the South Pacific Stock Exchange within 24 months from the date of commencement of re-organisation, restructure or amalgamation; and

(ii) where the private company is not listed with the South Pacific Stock Exchange in accordance with sub-paragraph

(i), the gain from the re-organisation, restructure or amalgamation of the private company shall be taxable under this Act;

  • a capital gain made by the trustee or beneficiary of a deceased estate on the disposal of an asset forming part of the estate that, if the gain had been made by the deceased on a disposal of the asset immediately before death, the gain would be an exempt capital gain to the deceased, but only when the asset is disposed of by the trustee or beneficiary within 2 years after the death of the deceased or within such further time as the CEO allows.

Deferral of recognition of capital gain

For the purpose of Capital Gains Tax, no capital gain is taken to arise on the disposal of Capital Assets
by the transferor in any of the following cases:

  1. Disposal of an asset between spouses (including partners in a de-facto relationship) as part of a divorce settlement or under an agreement to live apart.
  2. Disposal of an asset by reason of the transmission of the asset on the death of a person to an executor or beneficiary of the person’s estate.
  3. Transfer of a principal place of residence, first residential property, an interest in a capital asset, or shares in a company, by reason of love and affection between spouses (also includes the de-facto relationship), siblings, parents to children and vice versa, and grandchildren to grandparents and vice versa.
  4. Disposal of an asset by reason of loss, destruction or compulsory acquisition of the (referred to as the “replaced asset”) if the consideration for the disposal is reinvested by the recipient in an asset of a like kind (referred to as a “replacement asset”) within one year of the disposal or within such further period as the CEO allows.

However, the transferee may be liable for Capital Gains Tax should it be disposed at a gain at a later date.

Accounting for Capital Gains Tax

A Capital Gains Tax return must be filed within one month after the disposal of the capital asset regardless of gain or loss made except for disposal of shares listed on the South Pacific Stock Exchange (SPSE).

The related Capital Gains Tax payment should be made within one month after the disposal of the capital asset.

Failure to lodge CGT returns and make necessary payments will render you liable for penalties. Capital Gains Tax returns lodged late will attract late lodgement penalty of 20% on the amount of CGT payable. Capital Gains Tax paid late will attract late payment penalty of 25% on the amount of CGT payable.

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An Introduction to Social Responsibility Tax (SRT)

Social Responsibility Tax (SRT) is designed as a special contribution to the welfare of the underprivileged in Fiji. It applies to resident and non-resident individuals who have a total chargeable income exceeding $270,000 during the income tax year.

Introduction

Social Responsibility Tax and the Environment & Climate Adaptation Levy are similar in nature in the sense that they are more inclined towards the responsibilities of businesses and individuals towards the environment and the underprivileged.

SRT is designed as a special contribution to the welfare of the underprivileged in Fiji. SRT the Environment & Climate Adaptation Levy are similar in nature in the sense that they are more inclined towards the responsibilities of businesses and individuals towards the environment and the underprivileged.

Brief

  • Applies to both Resident and Non- resident taxpayers
  • SRT will be accounted for in the same way PAYE is accounted for by employers for employees whose only source of income is from their employment and earn above the SRT threshold.
  • Those that earn both; employment income and other income (business/interest etc.) will either need to inform their employer of their estimated chargeable income for the year (for the employer to make direct deductions on their behalf to the FRCS) or the respective employees themselves will need to make the necessary lodgments and payments to the FRCS themselves.
  • Fiji nationals working for international organizations such as embassies or foreign missions will be required to make the necessary lodgments and payments to the FRCS if their organization does not have a PAYE system.
  • Self-employed individuals will be required to estimate their Chargeable income and then make the necessary arrangements with the FRCS.

SRT tax brackets:

Chargeable Income (FJD) SRT Payable
270,001 – 300,000 13% of Excess over $270,000
300,001 – 350,000 $5,400 + 14% of Excess over $300,000
350,001 – 400,000 $14,900 + 15% of Excess over $350,000
400,001 – 450,000 $24,900 + 16% of Excess over $400,000
450,001 – 500,000 $35,400 + 17% of Excess over $450,000
500,001 – 1,000,000 $46,400 + 18% of Excess over $500,000
1,000,000+ $161,400 + 19% of Excess over $1,000,000

Need more information?

Should you wish to learn more about Fiji tax compliance or setting up a business in Fiji – please contact a member of our friendly team.

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