This week in Tax Talk, we look at the Employment Taxation Scheme (ETS) and how this can benefit both employer and employees.

What is ETS?

The Employment Taxation Scheme (ETS) encourages Fijian employers and businesses to support the employment of school leavers, tertiary students, people with physical disabilities and promotes the higher education of employees.

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 their employment, provided:
• The person was not previously employed;
• His or her wage is not less than the minimum wage for the industry or sector as per a written law,
•  They were employed on or after August 1, 2016.

What tax rebate will be allowed?

If these conditions are met, the employer is allowed a 200 per cent deduction on salary/wages paid to the new employee.

How long will this incentive in be force?

This incentive is available to employers for the period August 1 to December 31, 2020.

For example:

ACo hires employee, Sami, in Feb 2017. Sami will be paid $15,000.

In its 2017 tax return, ACo will claim the following deductions.

2. Tax rebate on Student Work Placements

An employer is allowed a 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, provided:

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

What qualifies as a higher education institution?

These are educational institutions in Fiji that provide award-conferring post-secondary education, for example:

• Technical and Vocational Education and Training Centres,

• Information Technology Training Centres;

• Secretarial Schools;

• Language Schools;

• Hospitality Training Centres;

• Care-Giving Training Providers;

• Performing Arts and Sports Academies;

• Religious Educational Institutions,

• Colleges and universities.

How long will this incentive in be force?

This incentive is available to employers for the period August 1, 2016 to December 31, 2020.

For example:

BCO employs Jone for eight months in 2017 for $320 per month. Jone is studying mechanical engineering in a recognised vocational institution in Fiji.

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

As Jone is required to work for 4 months in a garage as part of his graduation requirement, BCo can claim a 200 per cent deduction on his 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 a Part Time basis

An employee allowed a 20 per cent deduction for the amount of salary/wages paid to a student who is a part time worker provided:

• The employment is related to the student’s area of study.

• The employee is not a permanent employee pursuing private studies.

What deduction can be claimed?

A deduction is allowed for the wages paid in the first 3 months in a 12-month period.

How long will this incentive be in force?

This incentive is available to employers for the period August 1, 2016 to December 31, 2020.

For example:

FCO is an accounting firm that employs Jane on a part time basis. Jane is an accounting student at the local university.

She works at FCo every morning for four hours. She is paid $500 a month.

Total wages for 2017 were $4000 ($500 x three months).

FCo can claim a 200 per cent deduction on the wages paid in the first 3 months.

4. Tax rebate for employing a Person with Disability

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

The employer’s application for the tax rebate is e supported by a medical certificate explaining the nature of the disability.

How much can be claimed?

The deductible amount applies to the salary/wages paid to the employee from the date of recruitment.

For how long can this claim be made?

The deduction for salary/wages paid can be claimed for three consecutive years.

What happens in the case of an unfair dismissal?

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.

How long will this incentive be in force?

This incentive is available to employers for the period August 1, 2016 to December 31st, 2022.

For example:

EFG Partnership engages Rita, a switchboard operator, in October 2016 and she is paid $500 a month.

Rita is visually impaired. EFG can claim a tax deduction of 300 per cent for three years.

5. Employee Development

How much deduction can the employer claim?

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; or

• for training their employee provided that the training is conducted through a training provider approved by the CEO, during the course of employment.

What are the employee’s obligations?

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.

For example:

HJK Bank requires two employees to undertake banking courses at a local university in 2017.

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

In 2018, six employees undertake similar courses at a local university at a cost of $10,000.

HJK can claim a tax deduction of $15,000 ($10,000 x 150 per cent.

Feedback: maraia.vula@fijisun.com.fj