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Employer obligations

Wednesday, February 28, 2018

THE Fiji Revenue & Customs Service (FRCS) continues to work in partnership with stakeholders, businesses, companies, non-profit bodies and the public through effective awareness programs.

The ongoing awareness program by FRCS aims to ultimately maximise voluntary compliance. The service continues to create awareness on tax and Customs related topics to assist taxpayers to better understand their obligations with respect to Customs and taxation matters.

In this week's article we look at the tax obligation of an employer and why they are required to separately register for tax purposes to ensure that they are in compliance with the law and requirements.

Employer registration for tax purposes

All employers are required to be registered in FRCS for tax purposes.

This basically means that where individuals are being employed by a particular employer — it is the duty of the employer to ensure that they are registered as an employer with FRCS.

For sole trader businesses, they are required to complete section A and E of the application for TIN registration of salary/wage earners/sole trader business form (IRS001).

For non-individuals such as partnership, company, non-profit bodies, they are required to complete section A and D of the application for new or changes to registration of companies, partnerships, trust or estate (IRS003).

The registration as an employer then provides legal authority to deduct applicable taxes from the income of employees that are required to pay tax.

Taxes such as pay as you earn (PAYE), social responsibility tax (SRT), environment and climate adaptation levy (ECAL) are deducted from employment income.

FRCS has noted the increasing number of employers that are not registered as an employer with the tax office despite the fact that they employ people.

Non-deduction of taxes will become an offence by the employer.

On the other hand, there are employers who continue to deduct taxes and not remitting to FRCS — this is equally an offence as the taxes deducted become trust funds!

Fiji Revenue & Customs Service will ensure that employers are penalised for not remitting taxes that have been deducted from the income of employees.

Fiji Revenue & Customs Service urges all employers to ensure that proper registrations are done with FRCS at the point of becoming an employer.

Employee tax code declaration

Employers must ensure that all employees complete an employee tax code declaration form and submitted for the employers record.

This includes both new and existing employees.

For new employees, employers must ensure that the employee tax code declaration form is completed by the employee at the point of entry to employment.

Employers must ensure that all employees declare their correct tax code for tax purposes.

Where employees have only one or primary source of employment then employer must ensure that employees declare this by ticking code "P" on the form.

Employees who have more than one source of employment will declare code "P" in his first or primary employment and code "S" for their secondary employment.

Employer obligation on tax withheld from employment income

The principal duty of employers when withholding tax such as PAYE, SRT and ECAL is to ensure that they deduct the "CORRECT" amount of tax on the income of the employee.

This is the number one responsibility of any employer that is required to withhold PAYE from employment income. This is in line with having PAYE as a final tax.

Fiji Revenue & Customs Service wants to urge employers to ensure that they deduct the correct amount of PAYE, SRT and ECAL at all times.

Employers of high income


Employers are required to register for social responsibility tax (SRT) with FRCS if an employee is paid an annual salary that exceeds $270,000 per annum.

Social responsibility tax is levied on the excess income of $270,000 hence employers are urged to ensure that correct SRT deductions are made.

Employers are also required to deduct ECAL at the rate of 10 per cent from employees who earn above $270,000 per annum.

ECAL was introduced in the 2017/2018 national budget announcement and came into effect from August 1, 2017.

SRT and ECAL are parallel taxes that are applied together at different rates on the excess amount of $270,000.00.

Employers providing non-cash benefits to employees

All employers that provide non-cash benefits to its employees are required to register for fringe benefit tax purposes.

Non-cash benefits are those benefits provided by the employer for the employee's personal use.

Non-cash benefits include; motor vehicle, house, mobile phone, utility bills, school fees etc.

These are some of the common non-cash benefits that are provided by employers to its employees.

Non-cash benefits provided by the employer to the employee is subject to 20 per cent fringe benefit tax (FBT) and is payable by the employer.

In other words, although it is a benefit to the employee — the employer is liable to pay fringe benefit tax on the value of the benefit.

Fiji Revenue & Customs Service has noted that some employers provide non-cash benefits to their employees but are not paying fringe benefit tax at all.

This is a concern to the tax office and FRCS urges all employers providing non-cash benefits to their employees to correctly account for FBT and ensure that payments are made accordingly before the due date.

Employers that provide non-cash benefits to employees are required to file FBT returns and pay FBT within one month after the end of the quarter.

Employers must also understand that cash benefits paid directly to employee income is subject to normal PAYE tax.

Employer monthly schedules

All employers are required to lodge an employer monthly schedule, even if they do not pay wages in a particular month or the wages paid to employees do not attract PAYE final tax because all their employees' incomes are below the tax threshold of $30,000.

This is a mandatory requirement for ALL employers to submit to FRCS and employers must ensure that EMS files are lodged monthly.

Employers must provide FRCS with their correct employees' details in the employer monthly summary.

Failing to provide the correct details is a serious offence and can result in the employer being prosecuted and penalised in accordance with the Tax Administration Act 2009.

All employers that have outstanding EMS for the past years are encouraged and urged to ensure that past years EMS are filed correctly to FRCS.

Late lodgment of EMS made by the employer will be subject to 20 per cent late lodgment penalty on the outstanding tax amount.

A $1 a day penalty is then applied thereafter for every day of default in lodgment.

* To be continued next week

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