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Fiji Tax and Customs Incentives

2016/2017

Table of Contents

                                                                                                                     Page No.

                    Tax Rate Reduction                                                                      4

                      2016 – 2017 Investment Package                                                 5

                     Hotel Investment Incentives                                                         5

                      Film Making and Audio Visual Incentives                                      6

                    Agriculture Incentives                                                                   7

                     Small and Micro Enterprises (Sme’s)                                            7

                     Tax Free Region Incentives                                                           7

                      Information Communication Technology (Ict)                               8

Incentives

                    Manufacturers Incentives                                                             8

                    Shipping Companies                                                                     8

                    Unit Trust Companies                                                                   8

                     Fiji My Second Home Programme                                                8

                     Foreign Currency Account Scheme                                               9

                     Medical Investment Incentives                                                     9

                      Electric Vehicles Charging Stations                                               9

                      Residential Housing Development Incentives                               9

                   Other Incentives                                                                          10

                     Other Customs Concessions                                                        10

                    Tax Free Region Fiji Map                                                              11

Our performance measurements will focus on key results. Results 

a balanced set of performance measures offers an effective means to monitor actual performance, and to marshal support for improving results.

Continuous Improvement and Learning:

Achieving the highest level of performance requires a well-executed approach to continuous learning and improvement. The term “continuous learning” means incremental and breakthrough improvement. The term” learning” refers to adaptation to change, leading to new goals and or/or approaches.

Design Quality and Prevention:

We will emphasize design quality – problems and waste prevention at the design stage are less costly than correcting problems that happen 

“downstream.”

Partnership and Engagement:

We build internal and external partnerships to better accomplish our goals.

Valuing Employees:

Our success depends increasingly on the knowledge, skills and motivation of our workforce. We will invest in the development of our workforce through education, training, welfare and giving opportunities for their continual growth. In return FRCA has the right to expect high levels of productivity and integrity from its employees.

 TAX RATE REDUCTION

• A foreign company that establishes/relocates its Headquarters to Fiji will be subject to a low corporate tax rate of 17%.
• A 150% tax deduction is available for capital expenditure incurred for the set-up of the Headquarters relocation to Fiji
• A listed company on the South Pacific Stock Exchange (SPSE) will be subject to a low corporate tax rate of 10%.
• A 150% tax deduction is available for expenses incurred by companies carrying out restructure and reorganization for the purpose of listing on SPSE, on the condition that the company gets to list on SPSE within 24 months after the company commences with the restructure and reorganization.
• Income earned from trading of shares in SPSE will be exempted from Income Tax and Capital Gains Tax.

• RESIDENT TAXPAYERS: 2017 (July) 

NON-RESIDENT TAXPAYERS: 2017 (July)

 2016 – 2017 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” means net profits derived by a taxpayer from the business of exporting goods and services but excludes re-exports. Deduction shown below.

EXPORT INCOME DEDUCTION

• Export 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 0% fiscal duty + 9% VAT.

CAPITAL ITEMS

• Duty rates on capital items (which refer to machinery used for converting / processing raw materials) will attract 0% fiscal duty + 9% VAT.

HOTEL INVESTMENT INCENTIVES

STANDARD ALLOWANCE

Investment allowance (in addition to ordinary depreciation) of 25% 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. 

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 4 years.

Recipients of the provisional approval for Standard Allowance in 2016 shall complete the project within two years from the date the provisional approval was granted

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

There will be no Investment Allowance from 2017 for existing hotels.

NEW SHORT LIFE INVESTMENT PACKAGE

10 year tax holiday for capital investments not less than $7million. Import duty exemption on all capital goods (including capital equipment, plant & machinery) not available in Fiji but this does not include furniture or motor vehicles that are used in carrying out the investment.

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

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

Recipients of the provisional approval for SLIP in 2016 shall complete the project within two years from the date the provisional approval was granted.

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

There will be no SLIP from 2017 for existing hotels.

A new SLIP incentive with 4 years Tax holiday will be available to new hotels from 2017. This SLIP incentive will not be available to renovations

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).

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.
• 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.
• 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 EXEMPTIONS 

STUDIO CITY ZONE CONCESSIONS 

FILM TAX REBATE

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 properties 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: o 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 
• 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.

Summary Part 5 - Income Tax (Film-making and Audio-visual Incentives) Regulations 2016

Fiji Film Tax Rebate Bill

 AGRICULTURE INCENTIVES                SMALL AND MICRO 

ENTERPRISES (SME’S)

Commercial Agriculture and Agro-Processing                                                                                       Income tax exemption to be applicable to selected sectors with 

• The income of any new activity in commercial agricultural farming maximum turnover threshold of $500,000. The sectors include:

and agro-processing approved and established from 1 January • Agriculture and Fishing (For Agriculture, this will cover activities in 2015 to 31 December 2018 shall be exempt from tax as follows:the entire Agriculture Sector).

• capital investment from $250,000 to $1,000,000, for a period 5       •                Tourism (Sea Cruise and River tour Operators).

             consecutive fiscal years; or                                                                        •                    Community and Social Services (Amusement, recreation services; 

• capital investment from $1,000,000 to $2,000,000, for a period traditional handicraft producers (not “middleman” or agents).

of 7 consecutive fiscal years; or • Supportive projects to tourism industry (flora, fauna and other • capital investment above $2,000,000 for a period of 13 natural characteristics of Fiji; and history, traditions, cultures and consecutive fiscal years.ways of life of its peoples).

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.
• Duty free importation of plant, machinery and equipment for initial establishment of the factory.
• Duty free importation of chemical required for bio-fuel production.

form for an operating licence. Duty Exemption 

Criteria for Grant of Licence                                                                                                      Import duty exemption on the importation of raw materials, machinery 

• The company is a newly incorporated entity engaged in a new                 and equipment (including parts and materials) insofar as they are 

      business.                                                                                                                              required for the establishment of the business in the Tax Free Region.

• The minimum initial level of investment should be $250,000  Other benefits under the TFR

Tax Exemptions Available                                                                                             •           Additional 5 years of income tax exemption is available to any 

• The income of any new activity approved and established between         company granted a license and having indigenous Fijian landown(i)           1 January 2009 to 31 December 2018 for Vanua Levu,  Ro-              er equity of at least 25 percent. 

tuma, Kadavu, Levuka, Lomaiviti & Lau           •                Additional 7 years of income tax exemption is available to any (ii)  1 January 2014 to 31 December 2018 for East of Vitilevu                  hotel developer granted a license and having indigenous Fijian 

             (Korovou to Tavua region)                                                                                      landowner equity of at least 25 percent.

(iii)  1 January 2016 to 31 December 2018 from the airport side of 

 INFORMATION 

COMMUNICATION TECHNOLOGY(ICT) INCENTIVES

(i)     The income of an Income 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
• 60 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 1 January 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
• 60 percent of its total services is exported.
• Duty free and VAT 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
• 60 percent of its total services is exported.
• Duty free and VAT exemption on the importation of all items required for the establishment of the business.

Small ICT start-ups

• For small 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 Cogeneration  

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

Duty free importation of renewable energy 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 Maritime 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 PROGRAMME

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.

 MEDICAL INVESTMENT INCENTIVES

i. The income of any  business setting up Private Hospitals on or after 1 January 2016:

• Shall be exempt from tax for a period of 10 years provided that the minimum capital investment level is $7,000,000
• 60% Investment Allowance will apply for refurbishments, renovations and extensions with a minimum capital investment of $1,000,000
• Duty Concession (Free Fiscal Duty, Free Import Excise & Free VAT) on medical, hospital, surgical, dental goods that are used and imported by the business.
• Recipients of the provisional approval for setting up Private Hospitals  shall complete the project within two years from the date the provisional approval was granted
• Loss carried forward of 8 years ii. The income of any business setting up Ancillary Medical Services such as Pathology Lab, MRI, other diagnostics on or after 1 January 2016:
• Shall be exempt from tax for a period of 4 years provided that the minimum capital investment level is $2,000,000
• 60% Investment Allowance will apply for refurbishments, renovations and extensions with a minimum capital investment of $500,000
• Duty Concession (Free Fiscal Duty, Free Import Excise & Free VAT) on medical, hospital, surgical, dental goods that are used and imported by the business.
• Recipients of the provisional approval for setting up Ancillary Medical Services shall complete the project within two years from the date the provisional approval was granted
• Loss carried forward of 8 years

ELECTRIC VEHICLES CHARGING STATIONS

The income of any business setting up Electric Vehicle Charging Stations on or after 1st August 2016:

Shall be exempt from tax for a period of 7 years provided that the minimum capital expenditure is $3,000,000. Shall be granted a subsidy up to a maximum of : 

5% of the total capital outlay incurred in the development of electric vehicle charging stations provided that the capital investment level is not less than $3,000,000 and not more than $10,000,000.

7% of the total capital outlay incurred in the development of electric vehicle charging stations provided that the capital expenditure is not less than $10,000,000. 

Loss carried forward of 8 years;

Duty concessions on all capital goods imported will apply.

 RESIDENTIAL HOUSING DEVELOPMENT INCENTIVES

This Incentive is available to companies with: capital investment (including the cost of support infrastructure and overseas consultant fees but excluding the cost of land) over $2,000,000 with at least 20 residential housing units; and the project commences on or after 1 January 2016 and the building is completed within 2 years from the date the provisional approval was granted.

(ii)    Provisional approval is granted after the Minister consults the Minister responsible for Housing.

(iii)    The income of the company: shall be exempt from tax on developer profits from the sale of residential units

shall be granted a subsidy up to a maximum rate of:-

• 5% of the total capital expenditure incurred in the residential housing development provided that the capital expenditure is not less than $2,000,000 and not more than $10,000,000: and
• 7% of the total capital expenditure incurred in the residential housing development provided that the capital expenditure is more than $10,000,000.

(iv)    Duty concession on all capital goods imported will apply.

 OTHER INCENTIVES

Employment Taxation Scheme 

First time employees

• A person carrying on business in Fiji is allowed a 200% deduction for the amount of any salary or wages paid to a qualifying employee between 1 August 2016 and 31 December 2020, provided that the salary or wages paid to the qualifying employee in respect of whom the deduction is claimed must not be less than the minimum wage prescribed by written law for a particular industry or sector.

Work placements

• A person is allowed a deduction for 200% of the amount of any salary or wages paid to a student for employment of the student for a period not exceeding 6 months in a 12-month period before the student’s graduation where the employment forms part of the student’s course requirements of a higher education institution as defined in the Higher Education Promulgation 2008. The deduction is available and can be claimed between 1 August 2016 and 31 December 2020.

Part-time workers

• A person is allowed a deduction for 200% of the amount of any salary or wages paid to a student for employment of the student in an area related to the student’s area of study for a period not exceeding 3 months in a 12-month period. The deduction is available and can be claimed between 1 August 2016 and 31 December 2020.

Persons with disabilities

• A person is allowed a deduction for 300% of the amount of any salary or wages paid to a person with a disability for a consecutive period of 3 years, provided that if the employee is unfairly dismissed, any deduction allowed must be recouped by the CEO. The deduction is available and can be claimed between 1 August 2016 and 31 December 2022.

Employee development

• A person is allowed a deduction for 150% of the amount paid by the person for an employee’s education fees to study during the course of the employee’s employment, provided that the employee is required to work for the person for a minimum of one year upon the completion of the employee’s study. 
• 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. 

Donation of new Computers, Laptops & Tablets

Voluntary Contribution for Disaster Relief 

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

Sports Sponsorship 

A 150% tax deduction is available for cash sponsorship made to the Sports Fund. The minimum threshold for contribution is $50,000. 

Sponsorship of hiring of international Coaches 

A 150% tax deduction was introduced in 2014 for sponsorship between $100,000 and $200,000 towards the hiring of international sporting coaches. 

Cash Contribution towards Housing Projects 

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

Voluntary Contribution for Disaster Relief for FARMERS 

A 200% tax deduction for voluntary contribution of cash donation by taxpayers towards a Farmers Emergency Fund Account for disaster relief was introduced on 1 January 2015. The minimum threshold for contribution is $10,000.

Tax Deduction on Fijian Made Uniforms

Annual tax deduction of 50% is available for the value of Fijian made uniforms supplied by businesses to their staff

 OTHER CUSTOMS CONCESSIONS

Newly introduced concessions                                                                                               Other existing concessions

     OTHER CUSTOMS CONCESSIONS (continued)