COVID-19 Response Budget: A-G Outlines Relief For Business Houses

Mr Sayed-Khaiyum, while announcing the COVID-19 response budget in Parliament last night, announced the following measures.
27 Mar 2020 14:27
COVID-19 Response Budget: A-G Outlines Relief For Business Houses
Attorney General and Minister for Economy Aiyaz Sayed-Khaiyum after the COVID 19 Respond Budget on March 26, 2020. Photo: Ronald Kumar.

Timely assistance has been rolled out for businesses feeling the brunt of the COVID-19 pandemic.

To assist these businesses, Government, through the Attorney-General and Minister for Economy, Aiyaz Sayed-Khaiyum, announced a range of measures to help.

Mr Sayed-Khaiyum, while announcing the COVID-19 response budget in Parliament last night, announced the following measures:

“The Reserve Bank of Fiji (RBF) will re-activate and expand the Natural Disaster Rehabilitation Facility –– which has now been re-named the Disaster Rehabilitation and Containment Facility.

Under the new facility, the RBF will make $60 million worth of loans available to banks at an interest rate of 1 per cent. Banks can then loan these amounts to small and medium-sized businesses and customers at a maximum rate of 5 per cent.

“Low rates mean greater borrowing, giving businesses badly-needed financial resources to ease the pressure of this pandemic, keep their doors open and keep people in their jobs.”

This facility will be made available immediately.

The RBF has already slashed the reduced overnight policy rate to 0.25 per cent to stimulate demand, cut borrowing costs, boost consumption and incentivise investment –– ANZ and HFC have led that charge by announcing lower lending rates across the board.

“We expect lending rates to drop even further in the near future.

“We’re on secure financial footing in providing this stimulus, foreign reserves stand at a high and healthy $2.2 billion, equal to 5.7 months of retained imports.

“We’ll also be rolling out a sweeping package of direct tax reforms and deductions, aimed at bolstering our existing businesses and incentivising new ones to take root,” Mr Sayed-Khaiyum said.

Hotel incentive:

Through the end of 2022, the current, already-generous new hotel investment incentive package, will be made even more attractive to current industry operators and potential investors, affording an income tax holiday of five, seven, or 13 years, depending on the level of capital investment.

Mr Sayed-Khaiyum said: “An investment allowance of 25 per cent will also be allowed to cover construction, renovation, refurbishment and extension of new and existing hotels. So as our tourism industry hits pause, our liquidity is flush, and rates are falling, it would be a prudent opportunity to prepare for the day when hundreds of thousands of visitors return to our shores.”

The Export Income Deduction will be increased from 50 per cent to 60 per cent for three tax years –– 2020, 2021, and 2022.”

Business losses:

Business losses of up to $20,000 will be allowed to be deducted against employment income. So, a person earning $50,000, who also runs or starts a business on the side, can offset the losses of that business against their personal income.

“The certificate of exemption will be reintroduced for the 5 per cent Provisional Tax –– further boosting businesses’ cash flow.

“The rule for advance payment of tax for companies and other taxpayers will be relaxed from the current three payments at a rate of 33.3 per cent to nine payments at a rate of 11.1 per cent. This more flexible and affordable payment schedule will be based on their post-COVID adjusted profits, offering serious financial relief to businesses, sole traders, and partnerships. Penalties on estimated tax will also be removed, with this policy lasting through 31 December 2020.”

Debt forgiveness:

Debt forgiveness by associated companies will not be subject to income tax. This applies to the forgiving of any and all outstanding debt, effective from 1 April 2020 through 31 December 2020.

Also from 1 April through the end of December, thin capitalisation rules will be suspended for local business subsidiaries that rely heavily on borrowings from their parent companies overseas.

Previously, these businesses were limited to a 2:1 debt-to-equity ratio to qualify for tax deductions; by relaxing this threshold, we will further ensure the cost of borrowing is muted for our foreign-controlled businesses to access capital from their parent companies.

Tax deduction:

A 300 per cent tax deduction will be afforded to employers for wages and salary paid to employees, who are self-quarantined, with approval from the Ministry of Health.

“If Family Care Leave is available, this deduction will kick-in once those days expire. For those who are not compensated by their employer during self-quarantine, government will provide $100 in relief.

“A 300 per cent tax deduction will also be offered for any donations that businesses make to the government’s COVID-19 donor fund, a trust to be utilised for any coronavirus assistance, from medical supplies to economic relief. That fund has been generously kick-started by our Pacific vuvale, with the New Zealand Government providing NZD 3million (about FJ$4m) in cash and the Australian Government pitching in AUD1.5 million (about FJ$2.08m) in combined cash and in-kind assistance.”

Employment Taxation Scheme

The Employment Taxation Scheme will be further be incentivised from its current levels. The tax deduction that businesses can claim on their first full-time employee will increase from 200 to 300 per cent. The tax deduction on wages paid for applicable student apprenticeships will also be increased to 300 per cent. And to continue to build an inclusive economy through these tough times, deductions for businesses employing Fijians living with disabilities for three consecutive years will increase from 300 to 400 per cent.

New construction and mortgage relief:

A 100 per cent write-off will also be granted for the construction of new commercial and industrial buildings, provided the appropriate approvals are obtained before the end of the calendar year.

“And to offer serious mortgage relief for our homeowners, we’ll also be reducing stamp duty rates for Fiji resident taxpayers for mortgages from 1.7 per cent to zero per cent. Foreign nationals will see their mortgages’ stamp duty reduced from 5 per cent to 0 per cent.”

“Until we’re past this pandemic, the processing of applications and pending payments under the Film Fiji tax rebate are put on hold. Implementation of the VAT monitoring system will be deferred.”

Added up, these tax measures directly save businesses, exporters and individuals $120 million.

Edited by Ranoba Baoa


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