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Tax Policies 2018/2019 Budget

This weekly feature with Fiji Revenue and Customs Service is for better understanding of our tax policies, how they work and why they are important. Fiji’s nine straight years of
07 Jul 2018 10:00
Tax Policies 2018/2019 Budget
Fiji Revenue and Customs Authority acting chief executive officer Visvanath Das.

This weekly feature with Fiji Revenue and Customs Service is for better understanding of our tax policies, how they work and why they are important.

Fiji’s nine straight years of economic growth have been guided by fair, transparent and competitive revenue policies that have brought taxes on compa­nies to record lows, decreased per­sonal income tax obligations, and lowered the tax burden on Fijian consumers.

Despite those unprecedented tax cuts, government revenue has in­creased due to stronger and more effective tax administration pro­cedures that have given certainty and confidence to Fijian business­es and taxpayers.

Government’s fiscal policy is a powerful tool in ensuring sus­tained positive economic growth by targeting resources to drive economic activity in priority areas across the Fijian economy.

In the year ahead, the Fijian Government will maintain a low, reasonable and equitable tax structure that incentivises private sector investment and responsibly manages government’s spending priorities.

The revenue policies in the 2018-2019 budget are not only designed to sustain Fiji’s economic growth, but also ensure that growth re­mains inclusive, with the benefits shared by all Fijians.

Unless otherwise specified, excise tax, fiscal import duty and import excise duty changes listed below are effective from June 29, 2018, while all other tax changes will be effective from August 1, 2018.

New Tax Incentives           

Government will introduce the following tax incentives to encour­age and support investments and activities in the targeted areas:

To promote the upgrade and mod­ernisation of buildings, the follow­ing incentives will apply for capi­tal investments above $1million (excluding interior furnishings, furniture and fittings):

This development incentive will apply to buildings that are five years or older.

It excludes hotels and apart­ments, as these are covered by the Income Tax (Hotels Incentives) Regulations 2016.

Property owners can claim this incentive only once, and they will receive provisional approval based on plans and a standard allowance granted upon completion of site inspection and audits.

Government will be introduc­ing a 250 per cent tax deduction on expenditure incurred for eligi­ble Fijian companies investing in Research and Development in the sectors of ICT and renewable en­ergy sectors.

Maternity and paternity leaves

In addition to increasing the ma­ternity leave entitlement from 84 days to 98 days, Government will also be introducing five day pa­ternity leave and five day Family Care Leave.

There will be a 150 per cent tax deduction for employers on sala­ries and wages paid to employees during paternity and Family Care Leave.

To encourage training and de­velopment for employees on job, a 150 percent tax deduction will be provided to employers towards the cost of staff training through ac­credited training providers, both local and overseas.

The Accelerated Depreciation Provision will be extended to all greenhouse and nursery build­ings, research labs and pack hous­es.

Any gain made by a resident per­son or resident private company from the sale of any capital asset and/or shares or re-organisation, restructure or amalgamation of a company for the purpose of list­ing on the South Pacific Stock Exchange, which is counted as in­come, will be exempted.

The exemption will also be ex­tended to public companies.

Service Turnover Tax (STT) andEnvironment and Climate Adaptation Levy (ECAL)

The STT and ECAL threshold of $1.25 million, which is currently applied for licensed restaurants, bars, clubs, bistros and coffee shops, will now be aligned to all other prescribed services for the application of STT and ECAL.

This will raise competitiveness of smaller businesses and support their expansion.

In addition, a new provision will be included to take action against those businesses that fall under this threshold but illegally charge for and pocket false ECAL fees.

Health and Medical Services Tax Measures

In support of ongoing efforts to encourage healthy lifestyles in Fiji, combat the spread of non-communicable diseases and pro­long longevity, Government has changed import fiscal duties and local excise as follows:

Reduction of fiscal import duty on apples, grapes, oranges, pears, kiwi fruits, strawberries, apricot, peaches, plum, grapefruit, rasp­berries, cranberries, pomegran­ate, carrots, mixed vegetable, celery, capsicum, mushrooms, as­paragus, leeks, spinach, cauliflow­er, broccoli and brussels sprout from five per cent to zero per cent.

Reduction of fiscal import duty on tea from five per cent to zero per cent.

Impose a higher specific duty rate of $2.00 per litre on imported car­bonated and sweetened drinks.

Increase in local excise and im­port excise duty on cigarettes, to­bacco and alcohol by 15 per cent.

The Medical Investment Incen­tives Regulations will be amended to include hospitals under Public-Private Partnership (PPP) ar­rangements, enabling investors to enjoy the incentives and conces­sions under the medical invest­ment incentives package.

Transportation Tax Measures

Used Motor Vehicles below two years’ old

Previously, used motor vehicles attracted a 32 per cent duty or a specific duty rate based on engine size, whichever was higher.

In the next financial year, the per­centage duty has been decreased to 15 per cent and the specific duty rate has been cut in half, import­ers will still pay the higher of the two amounts.

This will encourage the importa­tion and trade of newer cars, pro­vide more competition in the vehi­cle market and decrease the age of cars on the road in Fiji.

Public Transport

In the 2017-2018 Budget, Govern­ment introduced concessionary duties on taxis, buses and vessels to encourage the development of public transportation in Fiji.

In the 2018-2019 Budget, the pub­lic transport incentive for taxis will be extended to include used normal taxi vehicles that are less than two years old.

These vehicles will attract half the subsisting rate applied on used vehicles less than two years old.

All of the new and existing in­centives to encourage investment in public transport, including the duty regime on taxis, buses and inter-island shipping, have been extended until June, 2021.

To assist inter island shipping companies with cost of repainting their vessels, the Customs Tariff Act will be amended (Concession Code 245) to include marine paints not manufactured or available lo­cally, allowing them to be import­ed at concessionary rates of 15 per cent fiscal import duty, zero im­port excise and nine per cent VAT.

Electric Vehicle (EV) and EV Charging Station

To encourage investments in EVs, Government will introduce a 55 per cent capital deduction for any purchase of EV.

This incentive will be available for the next five years.

Currently, the income of any business setting up Electric Vehi­cle Charging Stations shall be ex­empt from tax for a period of seven years provided the capital invest­ment incurred in the development of electric vehicle charging sta­tions is more than $500,000.

In the 2018-2019 financial year, Government will be reducing this minimum capital investment to $100,000.

Airline Companies

Government will be introducing a new Concession Code in the Cus­toms Tariff Act to lower import tax rates on imported aircraft con­sumables for local Fijian airline companies who service overseas routes.

Environment Policy Initiatives

The plastic bag levy introduced in the 2017-2018 Budget on plas­tic bags at retail outlets that have point-of-sale registers will be in­creased from 10 cents to 20 cents to further discourage the use of plastic bags and promote the use of reusable bags.

Resident Interest Withholding Tax Measures

The current Resident Interest Withholding Tax (RIWT) thresh­old will be increased from $16,000 to $30,000 to be consistent with the individual income tax exemption threshold.

Information and Communications Technology (ICT) Initiative

To make the existing ICT incen­tives more encompassing and stimulate investment in the sector, the definition of ICT in the Income Tax Regulations will be widened to include customer contact centres, engineering and design, research and development, animation and content creation, distance learn­ing, market research, travel ser­vices, finance and accounting ser­vices, human resource services, legal procedure, compliance and risk services and other adminis­trative services.

Other Tax Measures

Introduction of a new Conces­sion Code in the Customs Tariff Act for High-density polyethylene (HDPE) Food Grade Plastic Pallets to be imported at zero fiscal import duty, zero import excise, and nine per cent VAT.

Import fiscal duty on Linear Low Density Polyethylene (LLDPE) Stretch Wraps will be increased from five per cent to 32 per cent to protect local manufacturers.

Creation of a new Concession Code in the Customs Tariff Act for the importation of noodle flavors in bulk with import concessionary rates, zero fiscal import duty, zero import excise, and nine per cent VAT.

Widening the scope of Code 231 of the Customs Tariff Act to be extended to exporters who are not producers or manufacturers.

There will be an increase in import fiscal duty on structural sheeting from five per cent to 32 per cent to protect local manufac­turers.

Tax Administration Reforms

Government will also be under­taking a number of legislative re­forms to streamline the collection of taxes and prepare for a modern­isation of tax collection, manage­ment and usage.

Feedback: maraia.vula@fijisun.com.fj

 

 

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