System to monitor sale of goods

THE Value Added Tax (VAT) monitoring system is an initiative to monitor the sale of all goods and services on which VAT is charged.

Under the current tax law all persons whose annual gross sales exceeds $F100,000 are required to register and account for VAT based on their registered taxable period which is either monthly, quarterly or annually.

A person or business can register voluntarily as well if the sales turnover is below the VAT threshold.

VAT is trust money collected by all registered person(s) in Fiji on behalf of the government and therefore should be correctly accounted to the tax office.

Some registered businesses have been charging VAT but unfortunately have not been correctly declaring the amount of VAT collected.

Members of the public who are aware or suspicious of such acts can report this to Fiji Revenue and Customs Service (FRCS) and be guaranteed utmost confidentiality under the organisation’s whistleblower policy.

The Tax Compliance Improvement Strategy of the FRCS (which is a public document that can be downloaded from the website www.frcs.org.fj) outlines the high risk areas by industry profile for non-lodgment of taxes.

FRCS is proactively encouraging all industry sectors and businesses who are unclear on any revenue matters, be it Customs or tax in nature to engage with the service to avoid unnecessary penalty fees.

The VAT Monitoring System (VMS) was launched in 2017 and so far, the Fiji Revenue and Customs Service (FRCS) has accredited 12 vendors to supply the electronic fiscal device (EFD)/VAT monitoring system (VMS) to the Fijian market.

The full details of these suppliers can be downloaded from our website via https://www.frcs.org.fj/our-services/vat-monitoring-system-vms/accredited-pos-esdc/

Transition to EFD/VMS laws and implementation

The roll out of the VMS system is being done in phases and there are no extensions to the deadline for implementation for each of the roll out phases.

The first phase of roll out was for supermarkets and pharmacies which was concluded on February 28, 2018.

As such, five businesses have completed the implementation process and have begun issuing fiscal receipts to their customers.

The second phase of the roll out includes hardware companies, accounting firms, medical centres, travel agencies and law firms and will conclude on June 30, 2018.

FRCS wishes to advise businesses that penalties will apply for non-compliance.

Hence to avoid penalties, businesses must ensure that the following two requirements are met. These include:

1. registering and cleansing their data through the MyInfo portal; and

2. collecting their secure element (smartcards) from the FRCS office nearest to them.

A free point of sale (POS) application that is compatible with smart phones and tablets has been developed which can be used by small businesses for this purpose and meets the requirements of the VMS EFD regulations.

However, the function of the application is limited to accounting for business needs.

Fiscal receipts

To assist Fijians, FRCS has developed a receipt verificator for customers, which they can download from PlayStore on any android phone.

Through this verificator, customers can identify if the provider of the goods or service whom they have purchased from is compliant with the VMS — EFD regulations.

A Quick Response (QR) Code at the bottom of the receipt can be scanned by the customer.

Once the code is scanned, it will open the verification website link and a copy of the receipt will be displayed.

How will the EFD actually work?

Once a sale is made, the point of sale (POS) sends the transaction data to the sales data controller (SDC).

The SDC includes a secure element that formats the data into a fiscal invoice, attaches a digital signature and transmits this back to the POS. At this point, the receipt can be printed.

While this process is ongoing, the SDC is also sending fiscal data to the FRCS system.

Taxpayers and customers can log onto the system to verify the receipt information that is being captured.

The entire process is very quick and should not affect printing of receipts for customers.

How does Revenue and Customs control the EFD?

The EFD is audited by FRCS using special methods like receipt signature verification, remote audit and copying sales data stored in the E-SDC.

Digital certificates are issued for each EFD and authenticates the EFD when it links to the FRCS system.

It contains the public and private key that will create, produce and verify the digital signature of the EFD.

The certificate must be renewed annually for continued operation.

The objective of the VMS is to have efficient and reliable software to encourage voluntary tax compliance and at the same time, collect the much needed revenue for the government.

The VMS software which will be linked to the taxpayers POS will provide real time data to FRCS on total company sales and the amount of VAT or any other tax collected.

There is a significant leakage of revenue in Fiji’s tax system and an emerging black economy which is estimated at $716 million annually.

Investigations have confirmed that there are licensed businesses that are involved in unethical practices such as having additional cash registers, over claiming of expenses in financial statements and falsifying sales data, which are not in the company’s books of records.

The VMS will minimise such fraudulent activities.

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