Fiji Individual Tax Guide

Fiji

Suva GMT +12

EY Street address:

Mail address: Pacific House

G.P.O. Box 1359 Level 7

Suva 1 Butt Street Fiji Suva Fiji

Executive and immigration contact

Steven Pickering

A. Income tax

+679 330-8241

Fax: +679 330-0612 Email: steve.pickering@fj.ey.com

Who is liable. Fiji residents are subject to tax on worldwide income. Nonresidents are subject to tax on Fiji-source income only.

Section 6 of the Fiji Income Tax Act defines a resident as a per son who resides in Fiji and includes a person who meets any of the following conditions:

• His or her domicile is located in Fiji.

• He or she is present in Fiji continuously or intermittently during more than one-half of the income year. However, this does not apply if the tax authorities are satisfied that the person’s usual place of abode is outside Fiji and that the person does not intend to take up residence in Fiji.

• He or she is a government employee posted abroad.

Income subject to tax

Employment income. Taxable income includes the following:

• All wages, salaries, or other remuneration or allowances derived by the employee with respect to employment, including leave pay, payments in lieu of leave, overtime pay, bonuses, commissions, fees, gratuities and work condition supplements

• The value of a fringe benefit, other than an exempt fringe ben efit, derived by an employee with respect to employment that is not subject to tax under the Fringe Benefits Tax Decree

• An amount derived by the employee as consideration for enter ing into an employment agreement, for agreeing to conditions of employment or changes to the conditions of employment or for the acceptance of a restrictive covenant with respect to past, present or prospective employment

Self-employment and business income. Resident individuals are subject to tax on worldwide business income. Nonresident indi viduals are taxed on Fiji-source income only.

Taxable income is determined based on the accounting profit shown in the annual financial statements, adjusted for taxable and non-taxable items.

Investment income. Dividends paid by publicly listed companies and those paid by other companies out of profits that have been subject to tax are tax-exempt to the recipient. Dividends paid by unlisted companies out of profits that have not been subject to tax are taxable as ordinary income. Dividends paid from realized capital gains are exempt from income tax but subject to capital gains tax.

Interest income is taxable at the rates set forth in Rates.

Interest, royalties and know-how fees paid to nonresidents are subject to the final withholding taxes shown in the treaty withholding tax rate table below. These withholding taxes are subject to double tax treaties entered into by Fiji. Effective from 1 August 2017, dividends paid to residents and nonresidents are not subject to withholding tax. The following is the treaty with holding tax rate table.

Interest Royalties Know-how % % %

Australia 10 15 15

India 10 10 10

Japan 10 10 15

Korea (South) 10 10 15 Malaysia 15 15 15

New Zealand 10 15 15

Papua New Guinea 10 15 15 Singapore 10 10 15 United Arab Emirates —* 10 —* United Kingdom 10 15 15 Non-treaty countries 10 15 15

* No reduced rates apply to interest and know-how payments under the treaty.

Social responsibility tax. In addition to normal income tax, a social responsibility tax (SRT) is payable on chargeable income exceeding FJD270,000 of resident and nonresident individuals. However, the rates now have been reduced by 5% and an Environmental and Climatic Adaption Levy (ECAL) is imposed at a rate of 5%. For a listing of the tax rates, see Rates.

Environmental and Climatic Adaption Levy. The ECAL is imposed at a rate of 5% and is included in the Pay-As-You-Earn (PAYE) tax tables. In addition, the following items are subject to ECAL:

• Certain imports: 5%. Effective from 1 August 2020, the ECAL applies to all imported white goods (white goods are all electri cal appliances and equipment, except for furniture fittings, building materials and machinery).

• Prescribed services under the ECAL Act 2017: 5%

There has been a total ban of plastic bags.

Capital gains. A 10% capital gains tax is imposed on all capital gains on the sale of capital assets, except for exempt capital gains. The following gains are the only gains that are exempt:

• Gains less than FJD30,000 made by a resident individual or Fiji citizen

• Gains derived from the sale of the principal place of residence of a resident individual or Fiji citizen, if the residence has been the individual’s principal place of abode

• Gains derived from the sale of shares listed on the South Pacific Stock Exchange

• Gains derived from the transfer of assets between spouses through “love & affection”

• Gains derived from the sale of capital assets used solely to earn exempt income

The capital gain is computed by deducting the cost of the capital asset at the time of disposal from the consideration received.

Effective from 1 August 2020, an asset that is a depreciable is considered a capital asset.

Deductions

Deductible expenses. If a lump-sum entertainment allowance is paid by an employer, an employee must justify the amount spent for business entertainment. The allowance is taxable to the extent that it is not fully justified.

Business deductions. In general, all expenses incurred in produc ing taxable income are deductible, with the exception of expenses of a capital, private or domestic nature. Depreciation of fixed assets used in the production of taxable income is allowed at rates set by the tax authorities.

Rates. The income tax rates, SRT rates and ECAL rates for employment income (excluding redundancy payments) and selfemployment and business income are shown below. The thresh old for income tax is increased to FJD30,000 for residents only. Income tax, SRT and ECAL are all subject to PAYE.

Income tax. The following are the income tax rates applicable resident taxpayers.

Taxable income (FJD)

Income tax payable 0 to 30,000 0

30,001 to 50,000

50,001 to 270,000

270,001 to 300,000

300,001 to 350,000

350,001 to 400,000

400,001 to 450,000

450,001 to 500,000

500,001 to 1,000,000

1,000,001 and above

18% of excess over FJD30,000

FJD3,600 + 20% of excess over FJD50,000

FJD47,600 + 20% of excess over FJD270,000

FJD53,600 + 20% of excess over FJD 300,000

FJD63,600 + 20% of excess over FJD350,000

FJD73,600 + 20% of excess over FJD400,000

FJD83,600 + 20% of excess over FJD450,000

FJD93,600 + 20% of excess over FJD500,000

FJD193,600 + 20% of excess over FJD1,000,000

Income tax is imposed on nonresidents at a rate of 20% of taxable income.

SRT. The following are the SRT rates applicable to resident and nonresident taxpayers.

Taxable income (FJD)

SRT payable

0 to 270,000 0

270,001 to 300,000

300,001 to 350,000

350,001 to 400,000

400,001 to 450,000

450,001 to 500,000

500,001 to 1,000,000

1,000,001 and above

13% of excess over FJD270,000

FJD3,900 + 14% of excess over FJD 300,000

FJD10,900 + 15% of excess over FJD350,000

FJD18,400 + 16% of excess over FJD400,000

FJD26,400 + 17% of excess over FJD450,000

FJD34,900 + 18% of excess over FJD500,000

FJD124,900 + 19% of excess over FJD1,000,000

ECAL. ECAL is imposed on resident and nonresident taxpayers at a rate of 5% of the excess of taxable income over FJD270,000.

Withholding taxes. Dividend taxation is no longer imposed in Fiji except for the 1% Dividend Transitional Tax for pre-2014 undis tributed profits and 2014 and 2015 undistributed profits. After dividend taxes for these periods are paid, any further distributions of profits are exempt from tax, effective from 1 July 2017.

Interest, royalties and know-how fees paid to nonresidents are subject to final withholding taxes as described in Investment income.

Relief for losses. Losses incurred in any trade or business may be offset against an individual’s taxable income from other sources in the same year, except for employment income, because employment income is subject to final tax at source, which is withheld by the employer. To the extent that it is not fully offset, a loss may be carried forward for the next four years unless the business that gave rise to the loss is discontinued, sold or changed substantially in nature. Effective from 1 August 2019, any losses incurred before 31 December 2018 are allowed to be carried forward for four years and any losses incurred on or after 1 July 2019 are allowed to be carried forward for eight years. No mon etary limits are imposed on the amount of losses for carryforward or offset purposes. Effective from 1 April 2020, an amendment in the COVID-19 Response Budget introduced a new provision for the offsetting of business losses against employment income. Under this new amendment, individuals who have incurred busi ness losses and also have earned employment income in a tax year are entitled to deduct losses of up to FJD20,000 against 2020 employment income. Any loss exceeding FJD20,000 that is not utilized can be carried forward to offset business income for the next eight years and subsequent tax years.

B. Other taxes

Other taxes and levies include the value-added tax, service turn over tax and environmental levy. All stamp duty tax has been

abolished from 1 August 2020. Fiji does not impose tax on prop erty, net worth, inheritances or gifts.

C. Social security

Although Fiji imposes no social security taxes, all employers must contribute an amount equal to at least 5% of the gross earn ings of all regular employees to the Fiji National Provident Fund (FNPF). Total contributions must equal a minimum of 10% (theoretically, a contribution of 5% from the employer and 5% from the employee), but an employee need not contribute or may contribute a smaller amount if an employer contributes the differ ence on his or her behalf. Contributions of up to 30% are al lowed; however, amounts in excess of 10% are taxable to the employee. Effective 1 January 2022, FNPF mandatory contribu tions will increase from 10% to 12% (that is, 6% employee con tribution and 6% employer contribution).

On retirement, the fund provides either a lump-sum payment equal to total contributions made plus accrued interest or a pension based on the amount of total contributions made plus accrued interest.

D. Tax filing and payment procedures

The tax year in Fiji is the calendar year, and returns must be filed by 31 March. Extensions to May and future months are normally granted on request.

For employees, withholding of tax from employment income and social responsibility tax deductions are made in accordance with tables to ensure that an employee’s liability is fully covered. Because employment income is subject to withholding of PAYE tax, which is a final tax, tax return filling is not required.

For self-employed individuals, provisional tax based on the lia bility for the preceding year must be paid in three installments in April, August and November. An assessment is made when the return is filed, and a final payment or refund is made.

E. Double tax relief and tax treaties

Income derived by Fiji residents from treaty and non-treaty coun tries is subject to tax in Fiji. However, a credit is allowed for tax paid in the source country, to the extent that Fiji tax applies to the same income.

Expatriate employees who are resident in Fiji as a result of employment under a service contract of up to three years in dura tion are taxed only on income earned in Fiji.

F. Visitor visas

A visitor’s visa, which is usually issued for one month but may be extended to six months, is normally granted to tourists or to individuals wishing to investigate business opportunities in Fiji.

Foreign nationals from visa exempt countries may obtain visitors’ visas at the port of entry if they have valid passports, return or onward tickets, and sufficient funds for living expenses. All other persons from non-visa exempt countries must obtain visas before entering Fiji.

G. Work permits and self-employment

The right to work in Fiji is restricted, but the Fiji government recognizes the need to admit individuals with special commer cial, professional or technical skills to improve Fiji’s economic development. Therefore, permits to reside and work in Fiji are granted to foreign investors and expatriate employees under qualifying circumstances.

Permits to reside and work in Fiji are granted to fill positions that cannot be filled adequately by local Fiji citizens. In these cases, the Fiji Immigration Department requires foreign nationals to be employed under a contract of employment, and the prospective employer must show evidence that the position cannot be ade quately filled locally. In most cases, the prospective employer is required to advertise the position locally and to submit all appli cations received to the Immigration Department for review.

Permits are usually granted for an initial period of three years for long-term work permits and are renewable only if the continued presence of the permit holder is considered to be to Fiji’s eco nomic advantage and essential to the employer’s operations.

Applications for all categories of visas and permits except for visitor visas must be applied for outside Fiji. The application must be accompanied by health and police clearance certificates from the applicant’s home country. Processing permit applications normally takes four to six weeks. Applicants are not permitted to work until the permits are issued, and changing employers is allowed only in special circumstances.

Foreign nationals with investment in approved business ventures in Fiji are granted investor permits that allow them to increase and manage their investments. These permits are usually valid for a three-year period, and extensions are virtually assured as long as the capital remains invested in Fiji.

Foreign investors, regardless of nationality, wanting to establish a business in Fiji must have the prior approval of Investment Fiji (IF). To obtain this approval, a separate application describing all pertinent information relating to the proposed project must be filed with IF.

No set guidelines are used to evaluate or approve business ventures involving foreign investors. Fiji welcomes investment in virtually all sectors, particularly in tourism, mining, manufacturing and high-technology industries. Certain activities are reserved or have a requirement for local equity participation. In general, proposed projects meeting the following criteria are well received:

• Substantial capital outlay

• New technology

• High employment-generating potential

• High local equity participation

H. Residence permits

As a matter of policy, Fiji is not open to immigration. However, individuals who wish to live or retire in Fiji and are able to demon strate that they have sufficient funds from overseas sources to live in Fiji may obtain renewable three-year permits. In these instances,

the Immigration Department considers the age of the applicant and the source and amount of funds available from abroad.

Alternatively, any person who has been in Fiji on a valid permit for five years or more may apply for citizenship, which is nor mally granted, unless the person is proved to be undesirable in the eyes of the law. Fiji also permits dual citizenships.

I. Family and personal considerations

Family members. The spouse and dependent children of a work permit holder are granted permits to reside in Fiji upon applica tion. These permit holders are not permitted to engage in any form of employment.

Driver’s permits. A holder of a valid driver’s license from most developed countries may drive legally in Fiji. However, a Fiji driver’s license should be obtained no later than three months after arriving in Fiji. Generally, a Fiji driver’s license is issued on presentation of a valid driver’s license from most countries. If the expatriate does not have a valid foreign driving license, to obtain a local driver’s license, one must take written and verbal tests on road codes, as well as a fairly simple practical driving test.