2014 FIJI

TAX AND CUSTOMS INCENTIVES

 CONTENTS

   2001-2014 Investment Package  

• A foreign company that establishes/relocates its Headquarters 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.                                                                                                                            

    2001-2014 Investment Package  

• 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 for building erected before 2001 has been extended to 2014. 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 will only be allowed if the Commissioner of Inland Revenue is satisfied that the export earnings will be remitted to Fiji.
  • 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.

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 capital items (which refer to machinery used for converting / processing raw materials) will attract 0% fiscal duty + 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 exportation.
• 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 Export Council, which is a private sector led organization.
• Zero fiscal duty on New Machinery and Equipment that are directly related to the production process.

• 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.

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

Hotel Industry Incentives

STANDARD ALLOWANCE (CONT’D)

• 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.

NEW SHORT LIFE INVESTMENT PACKAGE

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

• 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.
  • 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.

BACKPACKER OPERATIONS

• Income tax exemptions 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                                                                                  INCOME TAX EXEMPTION

• 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.

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

• • The income of any new activity in commercial agricultural farming and agro-processing approved and established from 1 January 2010 to 31 December 2014 shall be exempt from tax for 10 consecutive fiscal years with a capital investment of $2,000,000 or more.

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

• Agriculture and Fishing (Sugarcane Farmers; Coconuts; Rice; Ginger; Yaqona; Fishing; Raising Livestock; Vegetable; dalo, cassava and other root crops production; farming and Bee keeping).
• 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 peoples).

 Tax Free Region (TFR) 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 (Form 6) 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 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.

Duty Exemption

Import duty exemption on the importation of raw materials, machinery and equipment (including parts 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                                                                                  

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.

Manufacturers Incentives

FOOD PROCESSING & FORESTRY

RENEWABLE ENERGY PROJECTS AND POWER CO-GENERATION

-    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.

• 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.

Other Incentives

SHIPPING COMPANIES                                                                                       UNIT TRUST COMPANIES

Maritime Shipping

-    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.

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                                                         FOREIGN CURRENCY ACCOUNT SCHEME

• 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.
      • 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 by an employer 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 - 150% tax deduction for voluntary contribution of cash donation by  businesses towards a Disaster Relief Fund. The threshold will range from a minimum contribution of $10,000 to a maximum contribution of $100,000.

•       Sports Sponsorship -  150% tax deduction for sports sponsorship with a minimum cash sponsorship of  $50,000.

• Sponsorship of hiring of international Coaches – 150% tax deduction for sponsorship between $100,000 and $200,000 towards the hiring of international sporting coaches.

• Cash Contribution towards Housing Projects - 150% tax deduction 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.

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