The COVID19 Revenue Policies

The COVID-19 Response Revenue Policies have been designed to stimulate the Fijian economy in the wake of the global spread of the coronavirus disease. The Policies are targeted towards businesses and the taxpaying community to mitigate losses that would be sustained during the COVID-19. The revenue policies also complement other measures introduced by the Fijian Government to assist Fijians in dealing with the COVID-19 situation in Fiji.

 

No duty and VAT on importation of medical products

To ensure adequate supply of health and medical care products, fiscal duty on items which are essential in the containment and treatment of COVID-19 has been reduced. In addition, for ease of doing business and reducing the red tapes to encourage companies, entities and individuals to import the required items, there is also an exemption of Import Value Added Tax (VAT) on the importation of goods related to COVID-19.

Medical items that will attract zero customs duty and import VAT exemption includes hand sanitizers and antibacterial hand wash, gloves (surgical, medical, knitted, crocheted with plastic coating), masks, disposable hair nets, disinfectant wipes, tissue papers, face shield, medical goggles and spectacles (used in the lab and medical facilities), plastic garments for surgical and medical use, protective garments of textiles or rubberized textiles, long sleeve medical gowns, scanners and cameras used in medical examination, ethanol for companies involved in hand sanitizer production, disinfectants, vaccinations and medicaments ,air purifier, boots specifically used in medical environment, hospital beds, hydrogen peroxide; paper bed sheets; thermometers; medical equipment under chapter 90 of the customs tariff.

 

300% tax deduction

A 300% tax deduction will be allowed to employers for wages/ salary paid to employees who are quarantined and approved by Ministry of Health and Medical Services.

 

Employment taxation scheme

Employment Taxation Scheme which provides attractive tax deductions for employee cost has been extended by 3 years to 2023 and has been further incentivised. Tax deduction on wages paid on first full- time employee has been increased from 200% to 300%. Tax deduction on wages paid for work placements in the related area of study up to 6 months in a year before graduation, as part of the course requirements has been increased from 200% to 300%. Tax deduction on wages paid to students employed on a part-time basis (in the related area of study up to 3 months in a 12-month period) has been increased from 200% to 300%. Tax deduction on wages paid in the employment of disabled people employed for 3 consecutive years has been further increased from 300% to 400%.

 

New Investment initiatives

The COVID-19 Response revenue policies also encourages new investment activities which in turn will create jobs. In this regard, the following policies have been introduced. A new hotel investment incentive package has been introduced that will provide attractive tax holiday as well as investment allowance to both existing and new hotels.

 

Short Life Investment Package (SLIP)

Income tax exemption for the construction of new hotels based on the following capital investment levels.

Capital Investment ($)Tax Holiday
$250,000 – $1,000,0005 Years
$1,000,000 – $2,000,0007 Years
More than $2,000,00013 Years

 

Standard Allowance

An Investment allowance of 25% will be allowed on the capital expenditure incurred for the construction, renovation, refurbishment and extension. This applies to new and existing hotels.

The new Hotel Investment Incentive Package, will be applicable from 1 April, 2020 to 31 December 2022.

 

Waiver of lodgement penalty

FRCS will provide waiver of late lodgement penalties for all tax returns and other documents. The penalty waiver is applicable from 31 March, 2020 to 31 December, 2020. Taxpayers are encouraged to contact their nearest FRCS office for more information.

 

Debt forgiveness and thin capitalization rule

Debt Forgiveness will not be subjected to income tax. This applies strictly to any debt taken prior to the COVID-19 response budget announcement. In the current economic climate there would be increased write-offs and debt forgiveness situations and this particular policy will avoid tax burdens from such situations.

Thin Capitalization rules has been suspended for borrowings undertaken up to 31 December, 2020 to allow full interest deductions for related party borrowings.

 

Stamp Duty

Stamp duty on Mortgages has been removed. The stamp duty rate for foreigners has reduced from 5% to 0%, while the current rate for Fiji resident taxpayers for mortgages has been reduced from 1.75% to 0%. Furthermore, the $10 Stamp Duty on air waybills for any goods, merchandise, or effects exported from Fiji has been removed.

 

Depreciation

Accelerated Depreciation has been expanded to include construction of all types of industrial and commercial buildings. 100% write-off will be allowed and approval process will be streamlined. Small fixed assets purchased for business purpose up to $10,000 to be depreciated at 100%.

 

Contribution to the COVID-19 Fund

A 300% tax deduction will be available for donation made to the COVID-19 Fund.

 

Export Income Deduction Incentive

The Export Income Deduction (EID) has been increased from 50% to 60% for the tax years 2020, 2021 and 2022.

 

Business losses

Business losses of up to $20,000 will be allowed to be deducted against employment income to compute the chargeable income and the overall tax position of the personal income taxpayers.

Provisional Tax

Certificate of exemption has been reintroduced for the provisional tax system however, the 5% provisional tax rate will remain.

 

Tax deduction for reduction of commercial rent

A tax deduction will be accorded to landlords for reduction of commercial rent. The reduction refers to the rent payable after 01 April 2020 to 31 December 2020. The deduction will only apply to existing rental contracts. Landlord will have to provide record of rental income received for the past 6 months.

 

Deferment of VAT Monitoring System (VMS)

The implementation of the VAT Monitoring System as captured in the Electronic Fiscal Device (EFD) Regulations has been deferred to 1 January 2021. The VAT Monitoring System will be applicable on gross turnover of more than $100,000. The taxpayers who voluntarily register for VAT (that is, those presently below $100,000) will not be captured in VMS. The policy will assist small businesses in mitigating financial costs.

 

For more information, please email us on info@frcs.org.fj