Tax policies and reforms
5 July, 2017, 12:00 am
THE 2017/2018 National Budget was announced by the Attorney-General and Minister for Economy on Thursday night.
In the 2017/2018 Budget, Government maintained the attractive tax policies that have successfully grown the Fijian economy and undertaken tax reforms that will incentivise economic growth in targeted sectors and relieve the tax burden on ordinary Fijians to reduce the overall cost of living in Fiji.
Personal income tax: annual income earned below $30,000 will no longer incur income tax, as the minimum income tax threshold has been increased from $16,000 to $30,000.
The following tax incentives have been introduced, extended, restructured or maintained:
All tax free regions and the commercial agriculture, bio-fuel and accelerated depreciation initiatives have been extended from 2018 until 2028.
The bio-fuel incentive has been restructured as follows:
* Investments between $250,000 and $1.0 million are granted a five-year tax holiday;
* Investments between $1.0m and $2.0m are granted a seven-year tax holiday; and
* Investments above $2.0m are granted a 13-year tax holiday.
Environment policy initiatives
The environmental levy will be renamed as the environment and climate adaptation levy (ECAL) and will directly fund environmental protection programs and climate adaptation projects.
The levy has been increased from 6 per cent to 10 per cent.
The 10 per cent ECAL now applies to income earned above $270,000. To fully offset this tax burden, the social responsibility tax has been restructured to reduce the percentage of tax paid at every income bracket by ten percentage points.
The ECAL will now apply to the purchase of luxury cars with engine sizes greater than 3000-cylinder capacity.
The levy will not apply to any vehicle utilised for public transportation, including taxis.
Service turnover tax has been reduced from 10 per cent to 6 per cent.
Super yacht charter fee
The current 12.5 per cent super yacht charter fee will be replaced with a 10 per cent ECAL.
The zero fiscal and import excise duties on the importation of new hybrid motor vehicles will continue.
In recognition that non-hybrid cars are also suitable for taxi operators, the importation of new non-hybrid cars with engine sizes less than 2500 cylinder capacity will attract a 5 per cent fiscal import duty and zero import excise.
New vehicles with more than 2500 cylinder engine capacity will attract a fiscal import duty of 5 per cent and import excise duty of 5 per cent.
These two incentives will apply for all taxi operators for a period of two years.
The fiscal import duty on new parts for motor vehicle is reduced from 15 per cent to 5 per cent.
Similarly, fiscal import duty on new engines for motor vehicles is reduced from 15 per cent to 5 per cent.
The fiscal import duty on batteries and cells used for hybrid vehicles is reduced from 32 per cent to 5 per cent.
The importation of statutory written off vehicles, such as vehicles damaged by flooding or hail, is prohibited.
To assist the thousands of Fijians travelling in rural areas, the fiscal import duty and import excise duty on the importation of new buses (with seating capacity of 16 persons or more) for bus operators with annual turnovers under $1.5m has been reduced to zero for a period of two years.
These bus operators will also enjoy fiscal import duty of 5 per cent and zero import excise duty on the importation of used buses (with seating capacity of 16 persons or more) for the same two-year period.
Government is reforming the duty regime for inter-island passenger and cargo vessel operators to decrease the cost of importing new and used vessels.
The importation of all new and used vessels is now duty free for two years.
The importation of all new and used identifiable fixtures and components of vessels is reduced to zero fiscal import duty.
Health and medical services tax measures
In order to increase the number of Fijians with access to health insurance, employers who provide medical insurance to their employees will be exempt from fringe benefit taxes.
All items imported to Fiji for health promotion programs are exempt from fiscal import duty and import excise duty.
The fiscal import duty on energy bars is reduced from 32 per cent to 5 per cent.
The fiscal import duty on readymade towels is reduced from 32 per cent to 15 per cent.
The fiscal import duty on baby cots and baby shoes will reduce from 32 per cent to 5 per cent.
The fiscal import duty on baby wipes is reduced from 32 per cent to 0 per cent.
The excise tax on cigarettes, tobacco and alcohol will increase by 15 per cent.
The excise tax on sweetened and carbonated drinks will increase by 15 per cent, rising from 30 cents per litre to 35 cents per litre.
Construction tax measures
The fiscal import duty on fabricated steel structures is reduced from 32 per cent to 5 per cent.
The fiscal import duty on insulated (electrical) cables is reduced from 32 per cent to 15 per cent, provided Fijian standards are met.
The fiscal import duty on glues, epoxies, sealer, protective coatings, polishes and creams, and similar appropriations is reduced from 15 per cent to 5 per cent.
The fiscal import duty on steel and aluminium louver frames is reduced from 32 per cent to 5 per cent, while the import excise duty is increased from 0 per cent to 5 per cent.
Fish supplied to PAFCO will be VAT zero-rated and suppliers will be accorded an export income deduction incentive.
Customs Regulation 91 will be amended to require that all vessels that engage in the transhipment of fish pay the fish levy of $450 per tonne.
Mother vessels will be excluded from the levy.
Stamp duty tax measures
Stamp duty payments are eliminated on property transfers through love and affection.
All dividend taxation has been abolished.
The tax of 3 per cent (resident) and 9 per cent (non-resident) will be removed, making all dividend income exempt from taxation.
Any avoidance scheme to abuse these reforms will lead to imposition of severe penalties.
To address the issue of dividend tax applying to the undistributed company profits prior to tax year 2014, a 1 per cent transitional tax will be levied on pre-2014 balances as at 29 June 2017.
There will be a three-month window granted to complete the payment of this transitional tax (until 30 September 2017).
A series of new measures are introduced in the budget to strengthen tax compliance as follows:
* The amnesty (no tax and no penalties) granted for the declaration of foreign assets and income has been renewed. The period will now last from June 30, 2017 to December 31, 2017.
* A general tax amnesty (no penalties) is granted for the registration, lodgment and payments of tax obligations under all tax types. The amnesty is applicable to all taxpayers with a gross turnover under $1.5m. The amnesty period will extend from June 30, 2017 until December 31, 2017.
The FRCA Act will be amended to increase information sharing with the Fiji Commerce Commission to carry out more effective price surveillance, and for FRCA to issue infringement notices to traders who do not pass duty and VAT reductions on to customers.
For more information on the 2017/2018 National Budget please visit the FRCA Website www.frca.org.fj or go to our facebook page www.facebook.com/fijirevcust