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Understand What The Fringe Benefit Tax Is

There are many people, who when taking up a job, are given additional benefits/allowances in addition to their salary. This is known as a fringe benefit. It is important that
11 Jul 2015 09:23
Understand What The Fringe Benefit Tax Is

There are many people, who when taking up a job, are given additional benefits/allowances in addition to their salary. This is known as a fringe benefit.

It is important that everyone understands that some of these fringe benefits are subject to tax in Fiji.

The Fringe Benefit Tax came into effect in Fiji on January 1, 2012. Taxable benefits include any non-cash benefits or benefits received in kind that is provided free by the employer to the employee or persons associated with the employee. These may include housing, telephone, water, etc.

The value of non-cash fringe benefits received by an employee from his/her employer is subject to fringe benefits tax.

It is a final tax on employers and shall not be recovered from the employee.

Indeed this is quite a complex issue, especially for those who may not have a finance or taxation background.

Our special interview with the Fiji Revenue and Customs Authority chief executive, Jitoko Tikolevu, this week focuses on the Fringe Benefit Tax.

We hope after reading this column, our readers would have a much better understanding of what this tax is all about.

Sun Interview with the Chief Executive of the Fiji Revenue and Customs Authority.
Please explain about Fringe Benefit Tax and policy intension?
FBT was introduced on January 1, 2012.  The policy intention was to assist Fijians financially.  The introduction of FBT followed on from the reduction in the tax rate for employees from 31% to 20%.
Where is FBT applicable?
FBT is applicable where the employer provides benefits in kind or non-cash benefits to an employee.
FBT is applicable on any value of benefit provided, irrespective of the employee’s salary.

How do we identify Fringe Benefit?
A benefit is normally provided by the employer to an employee as a form of acknowledgement, appreciation, enticement, retention etc. FBT is imposed on an employer when benefits are provided to such persons.

Who pays for the FBT, the employer or the employee?
The FBT is paid by the employer and not the employee.   The tax burden that used to be paid by the employee is now being paid by the employer.
In cases where employees have to pay Value of a fringe benefit is reduced by any payment made by the employee.

What is the FBT rate and how do you determine the value of the benefit?
The FBT rate is 20% and the tax payable is computed by applying the rate to the employer‘s fringe benefit taxable amount for a quarter.
Value of a benefit should be the fair market value of an asset, item of property, service, or benefit provided at a particular time is the value that the asset, property, service or benefit would ordinarily fetch in the open market at that time.
So if the employer decides to pay cash instead of providing non-cash benefit?
Where an employer provides cash benefits, the employees will be liable to pay PAYE if the total cash benefit and salary exceeds $16,000.
Are NGOs exempt from FBT?
No.  Whilst these organisations may be exempt from Income Tax, it is not exempt from FBT for its employees unless specifically exempted under the FBT Decree.

Is there any organisation exempted from paying FBT? 
Since it is not possible to impose FBT on employers such as diplomatic and consular missions and certain public international organisations that are exempt from tax under a convention or other international agreement Fiji nationals employed in such organisations will be required to pay PAYE on those benefits.

Are the meals and hotel accommodation provided for employees attending meetings or workshop subject to FBT?
No, FBT does not apply where the such services is provided in relation to work.

What types of benefits are exempted from FBT? 
– A meal or refreshment provided in a canteen, cafeteria, or dining room
– The provision of accommodation or housing in a remote area or fifteen or more kilometers from a town or city centre
– The provision of meals, refreshment or accommodation to a fisher by the employer on any vessel
– The provision of a fringe benefit to an employee of a religious body registered under the Religious Bodies Registration Act (Cap 68)

Is the FBT a deductible expense for employers?
No, it is a self- assessment return and the tax payable is not a deductible expense for the employer.

Note: 
If you have any tax topics which you would like to be explained by the Fiji Revenue and Customs Authority, do send an email to:
rachnal@fijisun.com.fj



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