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Tax deductions For Employers through The Employment Taxation Scheme (ETS)

The Employment Taxation Scheme (ETS) is a tax rebate incentive for employers and businesses that employ first time employees, disabled persons and students. The Employment Taxation Scheme encourages Fiji business­es
20 Oct 2018 10:30
Tax deductions For Employers through The Employment Taxation Scheme (ETS)
Fiji Revenue and Customs Service chief executive officer Visvanath Das

The Employment Taxation Scheme (ETS) is a tax rebate incentive for employers and businesses that employ first time employees, disabled persons and students.

The Employment Taxation Scheme encourages Fiji business­es to support the employment of school leavers, tertiary students, persons with physical disabilities and the promotion of higher edu­cation for employees, through par­ticipation in the Scheme.

Eligible employers can claim de­ductions ranging from 150 per cent to 300 per cent of the amount of salary, wages and education fees if the necessary conditions are met.

Interested employers can regis­ter by completing the application form and submitting it to Revenue and Customs.

1.Tax rebate for employing First Time Employees

Employers will be allowed a tax deduction for wages paid to a first full time employee in the first 12 months of employment, provided the person was not previously em­ployed.

The employee’s pay must not be less than the minimum wage for the industry or sector.

The employer is allowed 200 per cent deduction on salary/wages paid to the new employees who are employed on or after 1st August 2016.

This incentive is available to em­ployers from 1st August 2016 to 31st December, 2020.

Example 1 – ACo hires another employee (Sami) in Feb 2017. Sami will be paid $15,000.

In its 2017 tax return, ACo will claim the following deductions: (See Table 1)

2.Tax rebate on Work Placements for students

An employer is allowed 200 per cent deduction on the amount of salary/wages paid in the first six months of employment, to a stu­dent on a work placement.

The employment must be part of the student’s graduation require­ment in a learning program set by a higher education institute.

Higher education institution in­cludes an educational institution in Fiji that provides award-confer­ring post-secondary education; ex­ample, Technical and Vocational Education and Training centres, information technology centres, secretariat schools, language schools, hospitality training cen­tres, care-giving training provid­ers, performing arts and sports academies, religious educational institutions, colleges and universi­ties.

This incentive is available in the period 1 August 2016 – 31 Decem­ber 2020.

Example 2 – Wages paid to employee on work placement

BCo employs Jone for eight months in 2017 for $320 per month. Jone is studying mechanical engi­neering in a recognised vocational institution in Fiji. He is required to work for 4 months in a garage as part of his graduation require­ment.

Total wages for the period of employment was $2560 ($320 x 8 months).

BCo can claim a 200 per cent de­duction on total wages paid in the first 6 months.

a.Wages for 6 months ($320 x 6 months) = $1920

b.Deduction allowed = $3840 ($1920 x 200 per cent)

3.Tax rebate for employing

students on Part Time basis

An employee allowed a 200 per cent deduction for the amount of salary/wages paid to a student who is a part time worker and the employment must be related to the student’s area of study.

It does not apply to permanent employees pursuing private stud­ies.

A deduction is allowed for the wages paid in the first three months in a 12-month period.

The incentive is available in the period 1 August 2016 – 31 Decem­ber 2020.

Example 3 – Wages paid to part time worker.

FCo an accounting firm employs Jane an accounting student at lo­cal university on a part time basis. Jane works at FCo every morning for four hours. She is paid $500 a month. Total wages for 2017 was $4000 ($500 x 8 months).

FCo can claim a 200 per cent de­duction on the wages paid in the first threemonths.

4.Tax rebate for employing a Person with Disability

An employer is allowed a 300% tax deduction for the amount of wages and salaries paid to an em­ployee with physical disabilities recruited from August 1, 2016.

The employer’s application for the tax rebate must be supported by a medical certificate explain­ing the nature of the disability. The salary/wages deductible is the amount paid from the date of recruitment and the deduction for salary/wages paid can be claimed for three consecutive years.

If an employee is unfairly dis­missed (as determined in a court of law), the employer will be taxed on the amount of incentive al­lowed as a deduction.

This incentive is available from 1st August 2016 to 31st December 2022.

Example 4 – Wages paid to disa­bled person

EFG Partnership engages Rita, a switch board operator, in October 2016 and was paid $500 a month. Rita is visually impaired. EFG can claim a tax deduction of 300 per cent for three years.

 

If Rita is unfairly dismissed, any amount above the ordinary claimable expense will be recouped as follows- (See table 4)

  1. Employee Development

An employer is allowed a 150 per cent tax deduction on the amount spent by an em­ployer on an employee’s formal education fees (tuition fees) to study in a tertiary insti­tution, during the course of employment.

The employee must be required to work for the employer for a minimum period of one year upon completion of studies.

This applies to education that will result in the issue of a certificate, diploma degree etc. to the employee.

 

It does not apply to usual work benefits that employers may undertake to up- skill their staff such as attendance at workshops, group training etc.

The deduction will be allowed on expense incurred on or after August 1, 2016 till De­cember 31st, 2020.

Example 5 – Employee development expense

HJK Bank requires two employees to under­take banking courses at a local university.

In 2017, the cost of education was $8000. In its tax return for 2016, HJK can claim a tax deduction of $12,000 ($8,000 x 150 per cent)

In 2018, the education cost for six employees was $10,000. HJK can claim a tax deduction of $15,000 ($10,000 x 150per cent)

Employers interested in the ETS can check whether they meet the requirements before applying for registration by writing to info@frcs.org.fj or call 3243000 for more informa­tion.



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