Fiji slashes taxes and duties for businesses

The announcement of Fiji’s 2020 – 2021 Covid Response Budget on 1st August 2020, signaled the biggest ever tax cut in modern day. The Fiji Government chose to make Fiji’s tax system even more attractive and there has been very positive response from businesses and investors alike.

Fiji particularly is aiming to keep the economy afloat during this recession. With a third of Fijis workforce under reduced hours or being laid off and the other two thirds facing a bleak future as trade and travel restrictions continue to limit economic activities, the Government of the day has taken this bold step to try and rejuvenate the economy and position Fiji as the “business hub” of the Pacific.

Duties

  • Customs Duties were reduced by up to 80% and even eliminated on many items.
  • Stamp duties eliminated.

Taxes

VAT remained at 9% however other taxes were drastically reduced to set a solid platform for the new “normal”. For instance:

  • Service Turnover Tax has been removed
  • The Environment and Climate Adaptation Levy (ECAL) portion of the Social Responsibility Tax (SRT) is reduced to 5% with the threshold for SRT and ECAL set at $270,000. This restructure will greatly benefit many small businesses that fall below the SRT and ECAL threshold.
  • Landlords for commercial spaces were given an incentive to reduce rental charges whereby Government announced a tax reduction for landlords relating to commercial rents.
  • The Income tax threshold remained the same however, the Government adjusted the conditions for the advance payment of tax for businesses to nine installments in comparison to the old requirement of three installments. This adjustment will give some breathing space for businesses who are not having favorable cash flows.

Policy adjustments

Further to this, Government also made some policy adjustments in relation to Debt Forgiveness, Thin Capitalization, Depreciation write off and Accelerated depreciation.

  • Additional relief was provided to businesses by reducing the mandatory FNPF contribution from 10% to 5%.
  • A tax deduction is now allowed to the employer for Fringe Benefit Tax.

Investing in Fiji

Acknowledging Fiji’s ever growing population and the need for more robust health care facilities, the Government adjusted the current capital investment threshold for Private Hospitals and Ancillary Medical Investment Incentive to FJD$2.5 million for the construction of new hospitals and FJD$0.5 million for hospital renovation, refurbishment and extension.

Investments over FJD$2.5 million obtain 7 year tax free status and in excess of FJD$10 million receive 20 year tax free concession. Duty concessions also granted.

A new incentive package will be introduced for investment in the business of sub-division of lots for residential or commercial purpose.

Amendments to policies regarding Capital Gains tax, Non- resident Withholding Tax, Airport departure tax and other taxation measures were also announced in the Budget. To view more regarding these tax and customs reforms plus other revenue measures announced in the 2020-2021 Budget please follow this link https://www.frcs.org.fj/wp-content/uploads/2020/07/2020-2021-National-Budget-Summary-of-Revenue-Policies.pdf

Contact the friendly team at HLB Mann Judd Fiji should you wish to learn more about investing in Fiji.