2015

FIJI TAX AND CUSTOMS INCENTIVES

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CONTENTS

Introduction                                                                                                                              3

ICT Incentives                                                                                                                                  9 

Other Incentives                                                                                                                                11

Other Customs Concessions

2     ABOUT US

The Fiji Revenue and Customs Authority (FRCA) is a statutory authority under the FRCA Act 1998 that is governed by a Board and administered by a Chief Executive Officer together with about 800 managers and staff. 

FRCA’s roles are to:

1. Collect taxes and duties on behalf of the government;
2. Provide quality advice on tax and customs matters to all its stakeholders;
   1. Facilitate trade and travel; and
      1. Protect the border.

FRCA comprises of Taxation, Customs and Corporate divisions and operates from nine locations throughout Fiji - Labasa, Lautoka, Levuka, Nadi, Rakiraki, Rotuma, Savusavu, Sigatoka and Suva, where the headquar ters is also located.

The structure has been able to support the core roles of the organization as well as the additional responsibilities that the organization has taken on board in recent years.

Fiji Tax and Customs Incentives 2015

INTRODUCTION

www.frca.org.fj

The Fiji Revenue & Customs Authority while administering tax and customs laws, is also tasked with facilitating tax and customs incentives for investment.

FRCA collects around 86% of total government revenue. In 2014, it surpassed the $2 billion mark, collecting a total revenue of around

$2.115 b which is a 13.7% growth compared to 2013. The 2015 tax revenue target stands at $2.4b, an increase of 13.8% compared to the 2014 revenue collection. As shown in Graph 1 below, the revenue collection has grown steadily in the last 10 years since surpassing the $1 b mark in 2004.

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Table 1: Tax Types and Tax Rates                                                              3

Fiji Tax and Customs Incentives 2015

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2001 - 2015 INVESTMENT PACKAGE

TaxRate Deduction

• A foreign company that establishes/relocates its Headquar ters to Fiji will be subject to a low corporate tax rate of 17%.

• A listed company on the South Pacific Stock Exchange (SPSE) will be subject to a low corporate tax rate of 10%.

• Income earned from trading of shares in SPSE will be exempted from Income Tax and Capital Gains Tax.

2015 PAYE AND SOCIAL RESPONSIBILITY TAX (SRT)   STRUCTURE

RESIDENT TAXPAYERS                                   NON-RESIDENT TAXPAYERS

2001 - 2015 INVESTMENT PACKAGE

INVESTMENT ALLOWANCE

Investment allowance (excluding cost of labor) of 40% for extension and renovation expenses with a minimum qualifying capital expenditure of $50,000. This is only available to existing businesses in Vanua Levu.

ACCELERATED  DEPRECIATION

• Accelerated depreciation for building erected before 2001 has been extended to 2018. 20% depreciation for building used for agricultural, commercial or industrial purpose can be written off within any 5 of 8 years.

• 100% write off will be available in the year the expenditure was incurred on water storage facilities and renewable energy plant and machineries.

• This will also be available to new plants and machineries used for manufacturing purposes.

EXPORT INCOME DEDUCTION

• “Export income” means net profits derived by a taxpayer from the business of exporting goods and services but excludes re-exports.

• Expor t income deduction will only be allowed if the Commissioner of Inland Revenue is satisfied that the export earnings will be remitted to Fiji.

LOSS CARRIED FORWARD

Loss carried forward can be claimed up to 4 years. Loss carried forward by a company is allowed if that entity satisfies the continuity of ownership test or the same business test.

DUTY CONCESSIONS

PRODUCTION INPUTS

All goods used as raw materials in the manufacture of approved goods not available locally will attract 3% fiscal duty + 15% VAT, and all raw material used for manufacturing by companies outside of Viti Levu will attract 0% fiscal duty + 15% VAT.

CAPITAL ITEMS

Duty rates on machinery used to manufacture approved goods will attract 0% fiscal duty and 15% VAT.

DUTY SUSPENSION SCHEME

•   Enables exporters to have access to inputs without having to pay for duties upfront.

• Imported goods are conditionally relieved from payment of fiscal duty and VAT on the basis that such goods will be substantially transformed through manufacturing or processing and subsequent expor tation.

• The Scheme would entitle exporters to import duty free an amount equal to the proportion of approved imported inputs required to produce exports. This is called Entitled Proportion (EP).

•   Administered by the Fiji Expor t Council, which is a private sector led organization.

•   Zero fiscal duty on New Machinery and Equipment that are directly related to the production process.

HOTEL INDUSTRY INCENTIVES

STANDARD   ALLOWANCE

• Investment allowance (in addition to ordinary depreciation) of 55% of total capital expenditure is allowed as a deduction provided there is no shift of tax revenue to other countries.

• Applicable to building of new hotel, including renovations or refurbishments or extensions of existing hotel and International Retiree Facilities and buying and selling of residential units in hotel and integrated tourism developments.

•   Investment Allowance can only be written-off against the income of the hotel business or income from the hotel premises.

•  Losses carried forward extended to 8 years.

•   Recipients of the provisional approval for Standard Allowance to commence implementation of project within one year.

• Investors would only need to provide a sketch plan to obtain provisional approval for the investment allowance, and not necessarily a certified approved.

•  Duty concessions also apply.

NEW SHORT LIFE INVESTMENT PACKAGE

•  10 year tax holiday for capital investments not less than $7 million.

• Import duty exemption on all capital goods (capital equipments, plant, machineries and any other goods employed in them production of other goods but does not include furniture or motor vehicles).

•  Short Life Investment Package (SLIP) Incentives is also available for retirement facilities and hospital resorts.

•   Recipients of the provisional approval for SLIP to commence implementation of project within one year

• Short Life Investment Package (SLIP) Incentives is also available for NEW Apartments provided the length of stay is not more than 6 months.

• Investors would only need to provide a sketch plan to obtain provisional approval for the investment allowance, and not necessarily a certified approved.

•  Duty concessions also apply.

BACKPACKER  OPERATIONS

•   Income tax exemptions will be introduced for locally owned backpacker operators with annual sales turnover of $1m or less.

• Duty exemption on the importation of raw materials and equipment used for the establishment of a backpacker hotel. (This incentive will only be available to backpacker businesses who are granted the income tax holiday).

AUDIO VISUAL INCENTIVES

INCOME TAX DEDUCTIONS

•   150% deduction for capital expenditure on an F1 audio-visual production.

•   125% deduction for capital expenditure on an F2 audio-visual production.

Levels of Expenditure in Fiji for an audio-visual production for F1 and F2 status should not be less than:

• 40% for a large format film, a feature film or broadcast television programmes;

• 50% for a direct to video programme or video disk programme; and

• 55% for an audio recording.

INCOME TAX EXEMPTION

• Net income from an F1 production is exempt until taxpayer has received a 60% return on capital expended. Thereafter, net income will be fully taxed at the marginal rate.

• Net income from an F2 production is exempt until taxpayer has received a 50% return on capital expended. Thereafter, net income will be fully taxed at the marginal rate.

STUDIO CITY ZONE CONCESSIONS

• Any sole proprietor, partnership or company that carries on a production activity (the production of, distribution of or supply of services to audio-visual productions) may qualify for an operating licence in the Studio City Zone and be entitled to an exemption from tax on the income from the production activity carried on in the Zone.

•   Tax free status for “permanent residents” of the Studio City Zone on income derived as earnings from audio-visual productions.

•   For residence in the Zone to be approved, in the case of citizens, the individual must be:

• resident in the Zone for at least 183 days;

• have pre-tax audio visual earnings in excess of $100,000;
• have fixed assets in the Zone in excess of $250,000; and
• maintain a primary place of residence in the Studio City Zone.

• For residence in the Zone to be approved, in the case of non-citizens (or a citizen who derives a minimum of 80% of audio visual earnings from outside Fiji), the individual must be: -

• resident in the Zone for at least 60 days;
• have pre-tax audio visual earnings in excess of $100,000;
• have fixed assets in the Zone in excess of $250,000; and
• maintain a permanent place of residence in the Studio City Zone.

INCOME TAX EXEMPTION

• Net income from an F1 production is exempt until taxpayer has received a 60% return on capital expended. Thereafter, net income will be fully taxed at the marginal rate.

• Net income from an F2 production is exempt until taxpayer has received a 50% return on capital expended. Thereafter, net income will be fully taxed at the marginal rate.

FILM TAX REBATE

Summary Part IV, 6th Schedule – Income Tax Act                                                                  

Additional  Incentives  (Allowable Expenditures):

• Allowable expenditure incurred for services rendered by the producers (producer’s fees) – provided that such expenditure shall not exceed 10% of the total Fiji Expenditure. Producers are not restricted to remain in Fiji throughout the production of the film.

• 75% of the expenditure incurred to purchase costumes, make-up and set design properties not available in Fiji that will be used in relation to the film production in Fiji provided that any such costumes, make-up and set design proper ties shall be left in Fiji at the end of the production.

• Expenditure incurred to purchase the writer’s story and rights for the production of the film provided that the producer submits the following documentary evidence:

• Notarized legal contract with the writer which is registered in Fiji with the Registrar of Deeds upon payment of the appropriate stamp duty;
• Evidence of payment made directly into the writer’s bank account from the Fiji bank account; and o Receipt of acknowledgement of payment received.

• Approved post-production expenditure on the film paid from a Fiji bank account to the extent that it is incurred or reasonably attributable to approved post-production services in relation to the completing of the film made in Fiji. The maximum payable in rebate shall be granted upond the production of documentary evidence of the expenditure. Rebate is around 2%-2.5% of production budget.

• Expenditures incurred on hiring of cameras and filming equipment from outside Fiji, where such cameras and filming equipment are not available in Fiji.

Additional Requirements:

• Companies should engage Audio Visual Agents

• Fiji as a location needs to be accredited and acknowledged in the film’s credits and other accreditation as stipulated by Film Fiji in their approval letter.

AGRICULTURE INCENTIVES

Commercial Agriculture and Agro- Processing

New Businesses from 2009 onwards

• The income of any new activity in commercial agricultural farming and agro-processing approved and established from 1 January 2015 to 31 December 2018 shall be exempt from tax as follows:

-           capital investment from $250,000 to $1,000,000, for a period 5 consecutive fiscal years; or

-           capital investment from $1,000,000 to $2,000,000, for a period of 7 consecutive fiscal years; or

-           capital investment above $2,000,000 for a period of 13 consecutive fiscal years.

Bio – Fuel Production

• 10 year tax holiday is available to a taxpayer undertaking a new activity in processing agricultural commodities into bio-fuels as approved by the Commissioner from 1 January 2009 to 31 December 2018. To qualify, the taxpayer must have:-

-           Minimum level of investment of $1,000,000; and

-           Employ 20 local employees or more for every income year.

8   •   Duty free importation of plant, machinery and equipment for initial establishment of the factory.

• Duty free importation of chemical required for bio-fuel production.

•  The Importation of all agricultural items will be subject to zero Duty.

SMALL AND MICRO ENTERPRISES  (SME’S)

Small And Micro Enterprises (SME’s)

•   Income tax exemption to be applicable to selected sectors with maximum turnover threshold of $500,000. The sectors include:

•   Agriculture and Fishing (For Agriculture, this will cover activities in the entire Agriculture Sector).

• Tourism (Sea Cruise and River tour Operators).

•  Community and Social Services (Amusement, recreation services; traditional handicraft producers (not “middleman” or agents).

• Supportive projects to tourism industry (flora, fauna and other natural characteristics of Fiji; and history, traditions, cultures and ways of life of its people).

TAX FREE REGION INCENTIVES

Tax Free Region Incentives

Who will qualify for this incentive?

-              This incentive is available to a newly incorporated entity engaged in a new trade, business or manufacture established in the following areas:-

-              Vanua Levu – included Taveuni, Rabi, Kioa and other islands generally included for government’s administrative purpose as being in the Northern Division.

-        Rotuma

-        Kadavu

-        Levuka

-        Lomaiviti

-        Lau; and

-        East of Viti Levu (Korovou-Tavua region)

•   Any company may apply to the Minister for Finance in a prescribed form for an operating license. Criteria for Grant of License

•   The company is a newly incorporated entity engaged in a new trade, business or manufacture.

• The minimum initial level of investment should be $250,000 from 1 January 2010.

Tax  Exemptions Available

(i)          The income of any new activity approved and established between 1 January 2010 to 31 December 2018 for Rotuma, Kadavu, Levuka, Lomaiviti & Lau and between 1 January 2014 to 31 December 2018 for East of Vitilevu (Korovou to Tavua region) shall be exempt from tax as follows:

-        capital investment from $250,000 to $1,000,000, for a period 5 consecutive fiscal years; or

-        capital investment from $1,000,000 to $2,000,000, for a period of 7 consecutive fiscal years; or

-        capital investment above $2,000,000 for a period of 13 consecutive fiscal years.

(ii)      The income of any new activity approved and established from 1st January 2019 shall be exempt from tax for a period of 13 consecutive fiscal years with an initial capital investment of $2,000,000 or more.

Duty Exemption

-              Import duty exemption on the importation of raw materials, machinery and equipment (including par ts and materials) insofar as they are required for the establishment of the business in the Tax Free Region.

Other benefits under the TFR

-              Additional 5 years of income tax exemption is available to any company granted a license and having indigenous Fijian landowner equity of at least 25 percent.

-              Additional 7 years of income tax exemption is available to any hotel developer granted a license and having indigenous Fijian landowner equity of at least 25 percent.

INFORMATION COMMUNICATION TECHNOLOGY (ICT)  INCENTIVES

ICT INCENTIVES

(i)            The income of an Information Communication Technology (ICT) operator operating in the declared Kalabu Tax Free Zone from 1 January 2007 to 31 December 2016 shall be exempt from tax for 10 years.

•   Income tax exemption is available to ICT investors under the following criteria:-

-           Business employs 50 employees or more for any 6 months within the income year; and

-           60 percent of its total services is exported.

(ii)          The income of any new operator who is granted a license from 1 January 2009 to be exempt from tax for a period of 13 years

• Any new operator may apply and pay a license fee of $1,000 per annum to the Commissioner of Inland Revenue. The Tax exemption is granted from the date of the initial license.

•   Income tax exemption is available to investors under the following criteria:-

• Business employs 50 employees or more for any 6 months within the income year; and

•  50 percent of its total services is exported.

•   Duty free importation of computer, computer parts & accessories, plant, equipment & fittings, and specilised

furniture for initial establishment and during its ongoing operations to approved ICT/BOP Business operators from 1January 2009.

ICT Accredited Training Institutions

- The income of any new operator setting up internationally accredited ICT training institutions who is granted a license from 1 January 2015 to be exempt from tax for a period of 13 years

• Any new operator may apply and pay a license fee of $1,000 per annum to the Commissioner of Inland Revenue. The Tax exemption is granted from the date of the initial license.

• Income tax exemption is available to investors under the following criteria:-

• Business employs 50 employees or more for any 6 months within the income year; and

• 50 percent of its total services is exported.

• Duty exemption on the importation of all items required for the establishment of the business.

Application Design and Software Development The income of any new operator setting up ICT businesses involved in

Application designing and Software development who is granted a license from 1 January 2015 to be exempt from tax for a period of 13 years

• Any new operator may apply and pay a license fee of $1,000 per annum to the Commissioner of Inland Revenue. The Tax exemption is granted from the date of the initial license.

• Income tax exemption is available to investors under the following criteria:-

• Business employs 50 employees or more for any 6 months within the income year; and

• 50 percent of its total services is exported.

• Duty exemption on the importation of all items required for the establishment of the business.

ICT start-ups

• For ICT start-ups, a 150% deduction on all start-up costs will be made available with no employment conditions/ requirements attached.

MANUFACTURERS INCENTIVES

Food Processing & Forestry

- 100% of the amount of investment as a deduction for investing in food processing as well as forestry. Re- investment will also be allowed for expansion purposes. In order to qualify, the investor should utilize 50% of local produce in its production process.

Renewable Energy Projects and Power Co- generation

• 5 year tax holiday is available to a taxpayer undertaking a new activity in renewable energy projects and power co-generation as approved by the Commissioner.

• Duty free importation of renewable energy equipment and goods is also available\

SHIPPING COMPANIES

Maritime Shipping

-          A 7 years tax holiday will be introduced for shipping companies servicing uneconomical routes, which includes Rotuma and Lau. The uneconomical routes will be ring- fenced.

-          All importation of spare parts for commercial inter-island vessels will be subject to zero duty.

UNIT TRUST COMPANIES

Withholding Tax and Capital Gains Tax Waiver

-          Withholding taxes and capital gains taxes on interest income distribution to investors of the Unit Trusts will be waived.

FIJI MY SECOND HOME PRO- GRAMME

•  This Programme is open to citizens of other countries  recognized by Fiji in the “Fiji My Second Home Programme” as administered by the Reserve Bank of Fiji.

• Interest income is exempt from tax under the following criteria:-

• Age below 50 years old:

• Minimum deposit of $150,000 and maintain the deposit in Fiji for a minimum of two years.

• Age 50 years and above:

• Minimum deposit of $100,000 and maintain the deposit in Fiji for a minimum of two years.

• To qualify the applicant must maintain a minimum balance of $50,000 from the third year onwards and throughout the entire stay in Fiji.

FOREIGN CURRENCY ACCOUNT SCHEME

• Interest income is exempt from tax which accrues to or in

favor of a non-resident including former Fiji residents who hold funds in Fiji commercial bank accounts under the following criteria:-

• For foreign currency accounts, interest income for deposit above the equivalent of FJD$150,000;

• For Fiji Dollar accounts, any amount of interest income.

• Employment Taxation Scheme – 150% of the salary and wages paid within 1 January 1997 and 31 December 2018 are tax deductible. The deduction is restricted to salary and wages paid in respect of 12-month period commencing from the date of the appointment of the employee provided he or she has not previously been in full-time paid employment.

This is extended to trainees and apprentices.

• Donation of new Computers, Laptops & Tablets - 150% and 200% tax deductions for donation of computers to schools registered with the Ministry of Education, will be available with the following features:

-          200% tax deduction relates to donation to schools in rural areas.

-          150% tax deduction relates to donation to schools in urban areas

Donations to be between $10,000 to $100,000.

• Voluntary Contribution for Disaster Relief - A 150% tax deduction for voluntary contribution of cash donation by businesses towards a Disaster Relief Fund was introduced from 1 January 2014. The threshold will range from a minimum contribution of $10,000 to a maximum contribution of $100,000.

•  Sports Sponsorship - The minimum threshold for the 150% tax deduction for sports sponsorship will be reduced from $100,000 to $50,000.

• Sponsorship of hiring of international Coaches – A new 150% tax deduction will be introduced in 2014 for sponsorship between $100,000 and $200,000 towards the hiring of international sporting coaches.

• Cash Contribution towards Housing Projects -

A new 150% tax deduction will be introduced in 2014 for cash contributions up to $50,000 towards any Government sanctioned housing project for squatters and informal settlements.

• Incentives for Senior Citizens - All Senior citizens (over 55 years) and Pensioners will be exempted from paying resident interest withholding tax on interest income of up to $16,000 from bank deposits, provided this is their only source of income.

• Voluntary Contribution for Disaster Relief for FARMERS - A new 200% tax deduction for voluntary contribution of cash donation by taxpayers towards a Farmers Emergency Fund Account for disaster relief is introduced on 1 January 2015. The minimum threshold for contribution is $10,000.

SELECTED CUSTOMS CONCESSIONS