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Fiji

30 July 2021

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Fiji Revenue and Customs Service Publishes National Budget Amendments 2021-2022

The Fiji Revenue and Customs Service (FRCS) has published the National Budget Amendments 2021-2022, including a summary of revenue policies and the different bills for the implementation of the budget measures. Some of the main direct tax and tax administration measures are summarized as follows:

  • Any new investment in infrastructure for businesses engaged in the information and communications technology (ICT) sector will be granted a tax holiday and a duty concession package where at least 90% of the income for the investor is derived from the ICT businesses, with the tax holiday duration dependent on the capital investment amount:
    • FJD 2 million to 5 million: 10-year tax holiday
    • FJD 5 million to 10 million: 15-year tax holiday
    • in excess of FJD 10 million: 20-year tax holiday
  • Any new investment in an ICT Park (including data storage services) will be granted a tax holiday and a duty concession package, with the tax holiday duration dependent on the capital investment amount:
    • FJD 10 million to 30 million - 20-year tax holiday
    • in excess of FJD 30 million - 25-year tax holiday
  • Any company investing in network cabling (submarine cable) and associated infrastructure development will be provided a 30-year tax holiday and duty concession package if investing more than FJD 40 million;
  • Hotel investment incentives will be expanded, including:
    • the extension of a 5-year tax holiday for investments more than FJD 2 million in renovations and refurbishments of existing hotels or resorts, which will be for 18 months from 1 August 2021 and can be claimed only once;
    • the addition of a new tier for the tax-holiday incentive for investments in new hotels, providing a 25-year tax holiday for capital investment in excess of FJD 40 million; and
    • an increase in the standard investment allowance from 25% to 50%;
  • Any new investment in the recycling business will be granted a tax holiday and a duty concession package, with the tax holiday duration dependent on the capital investment amount:
    • FJD 250,000 to 500,000: 3-year tax holiday
    • FJD 500,000 to 2 million:  5-year tax holiday
    • FJD 2 million to 5 million: 10- year tax holiday
    • FJD 5 million to 10 million: 15- year tax holiday
    • in excess of FJD 10 million: 20-year tax holiday
  • To encourage investment in the agriculture sector, any new activity in commercial agricultural farming and agro-processing will qualify for income tax exemption based on the following capital investment levels:
    • FJD 100,000 to 250,000: 5-year tax holiday
    • FJD 250,000 to 1,000,000: 10-year tax holiday  
    • FJD 1,000,000 to 2,000,000: 15-year tax holiday  
    • in excess of FJD 2,000,000: 20-year tax holiday  
  • The increase in the Export Income Deduction (EID) to 60% until 2022 in response to COVID-19 will be extended to 31 December 2024, while the agriculture and fisheries sector will qualify for a 90% EID until 31 December 2024;
  • Taxation of the mining sector as stipulated under Part 6 of the Income Tax Act 2015 will be made effective from 1 August 2021;
  • All Unit Trusts will be exempted from Income Tax;
  • A 200% tax deduction will be allowed on the development or upgrade of online shopping websites with integrated payment platforms;
  • A 200% tax deduction will be allowed for investment in fogging machines specifically used for decontamination and sanitizing purposes;
  • The tax exemption on debt forgiveness provided in response to COVID-19 will be extended, with the debt creation period extended from 31 December 2020 to 31 December 2021 and the debt forgiveness period extended from 31 December 2021 to 31 December 2022;
  • The Income Tax Act will be amended to simplify the rules to allow interest income earned to be exempted on income less than FJD 30,000;
  • The scope of the re-organization rules under Section 88 of the Income Tax Act 2015 will be extended to cover partnership structures and the definition of group companies will be expanded to include the transfer of assets between companies that have common shareholders;
  • The 300% deduction allowed on salaries and wages paid to an employee that was quarantined and/or tested positive for COVID-19 will be further extended from 31 December 2020 to 31 December 2022;
  • The tax deduction given to landlords for the amount of reduction of commercial rent will be increased from 100% to 200% and will be further extended until 31 July 2022;
  • The mandatory Fiji National Provident Fund (FNPF) contribution will be increased from 5% to 6%, with employers making contributions exceeding the 6% mandatory FNPF contribution up to 10% allowed a tax deduction of 300% of the excess;
  • Clarifications will be made for the facilitation of refunds by the FRCS of withholding tax collected on professional services fees in accordance with tax treaties (DTAs) and domestic law provisions:
    • withholding tax directly paid by non-residents will be refunded through discussions with the respective competent authorities using the Mutual Agreement Process article in the relevant DTA; and
    • withholding tax paid by Fiji residents on behalf of non-residents will be paid (refunded) using section 33(5) of the Tax Administration Act after verifying documents and assessments;
  • The ability of the FRCS to amend an assessment/tax return will be limited to within 3 years for companies with a gross turnover of less than FJD 1.25 million;
  • Tax Amnesty will be granted to taxpayers with tax arrears, including a waiver of all penalties upon payment of taxes, provided that payment arrangements are made within 3 months from 1 August 2021 and all payments are made before 30 June 2022;
  • Taxpayers will be allowed to use excess credits of VAT, income tax, or any other tax type to offset against customs debt, excluding disputed tax, and will be similarly allowed to use excess customs credits to offset against any tax debt;
  • Legislation on rulings will be implemented from 1 August 2021; and
  • The implementation of the VAT Monitoring System (VMS) as per the Electronic Fiscal Device (EFD) Regulations will be further deferred until 31 December 2023, with businesses required to implement the VMS from 1 January 2024 and a 300% deduction allowed for the cost of voluntary implementation before that date.

The budget also includes several measures regarding indirect tax, including various amendments to the Value Added Tax Act, the Environmental & Climate Adaptation Levy Act, the Customs Tariff Act, the Gambling Turnover Tax Act, and others.

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