What is assessable income and how is it calculated?

Generally assessable is calculated by subtracting business expense from total business income. Assessable includes all income that is specified under Section 11 of the Income Tax Act. Irrespective of their sources and whether received in cash or otherwise, all such income must be included. Chargeable Income of a business is calculated as follows:

Chargeable Income = Gross Income less Deductible expenses less Deductible Allowances.

Normal tax will be assessed on the Chargeable Income of the business.

What is exempt income?

Exempt Income is income that is part of the total gross income of a business but which is not assessable for income tax purposes in any year.

Exempt income is therefore treated as an allowable deduction from the Gross Income of a business to arrive at the Assessable Income. These are outlined under section 16 and 17 of the Income Tax Act. Generally income of Town councils, schools, clubs, religious organizations, sporting bodies, Non-Governmental Organisations and statutory bodies are exempt. These organizations normally do not operate to make profit but rather assist the government in providing services to the community.

Exempt Income includes income from Pension, Redundancy, Dividend, Cash Donation to Approved Charities/Organization and so forth.

Tax rates for sole traders

The tax threshold for sole traders is FJ$9,000 with effect from 1st January, 2008.
Normal tax is levied on Chargeable income (i.e. total income less allowances). There are separate rates of normal tax for resident and non-resident sole-traders.

Rates for other entities

Each company, other than companies to which paragraph (b),  (c) or (d) of Fourth Schedule should apply 31%. This equally applies to Resident and Non-Resident companies.

Mutual insurance companies in respect of life insurance business should apply 30%.

Non-resident or non-mutual insurance companies to the extent that the income of their life insurance businesses is deemed to be mutual under section 37(1) should apply 30%.

Non-resident shipping companies should apply 2%.

The above are stated in the Fourth Schedule of the Income Tax Act (Cap 201). 

What is a taxable benefit?

Taxable benefits include whatevr is provided free by the employer to the employee or persons associated with the employee (e.g. housing, telephone, water etc).

The value of benefits received by an employee from his/her employer is subject to income tax. Employers are required to deduct tax from emoluments specified under Section 79 of the Income Tax Act. If benefit is provided to the employee, tax should be deducted. The value of the benefit should be included with the gross salary and PAYE is to be calculated on the total.

The value of the benefits provided should be separately and clearly shown on the PAYE employee certificate given to the employee at the end of the year:

Common examples of fringe benefits:

• quarters, board or residence.
• private use of motor vehicle.
• private expenses (e.g. electricity, gas, water, telephone) claimed by the business.
• subsidy or discount in interest.
• discount provided by the employer.
• free or subsidized travel.
• excess FNPF.
• entertainment allowance not expended for business purpose.

Tax treatment for partnership

A partnership business is one that is operated by two or more persons who have a common goal of making profits. The partnership business should lodge a return of the business income. Each partner shall be severally and individually liable for lodging a tax return.

The income of the partners from the partnership business for any income year shall be deemed to be the share of income to the partner. Each partner will declare their own income separately for the purpose of this Act.

Tax treatment for companies

Companies are formed by a group of persons called shareholders. There are normally two types of companies, public and private. Private companies have family members as their shareholders. All companies that are incorporated are given a certificate of registration by the company's office.

All companies are required under section 44 of Income Tax Act to lodge income tax returns within three (3) months of the end of their fiscal year.

The year of assessment is the calendar year in which tax is assessed, levied and paid. This is assessed in the case of a company the income derived during the year preceding the year of assessment. Where the fiscal year of a commercial enterprise is other than the calendar year, the calendar year in which more than one-half of the fiscal year falls is deemed to be the year in which the income was derived.

Companies pay tax at the rate of 31% on the net profit (business income less business expenses allowable for taxation purposes) of their business.

Trust/Estate

Trustees or executors are legally appointed to administer the affairs of the Trust or Estate. They shall make tax returns for the trust or estate that they are managing and pay any tax, interest or penalties which are assessed and levied before making any distribution of such property, business or estate. If profit is distributed for any reason the liability for tax remains with the trustee or the executor as the case may be.

Charities/Non-profit organisations

Income from charities and non-profit organisations are usually exempted from income tax in view of their nature of business or service. This shall only apply if the income derived from such business is not distributed for the personal gain of any of the members, proprietors or shareholders.

Some of them act as government agencies to help government in providing social services.

However, charities and non-profit organisations which operate along commercial lines and those that are directly engaged in competition with other similar organisations may not be exempted from income tax.

The type of registration of the organisation will determine the return type to be lodged.

Taxation for non-resident businesses

Non-resident individuals and companies are taxed on income accrued or derived from Fiji . They will be assessed on the world total income in their country of residence and claim a tax credit for the tax paid in Fiji. They are relatively taxed at a higher rate than the resident taxpayers, however non–resident companies are taxed with the same rate as local companies.

Other non-residents who only derive pension income from Fiji are exempt from paying any tax.

How to prepare and lodge tax returns

Returns can be prepared by the business or they can hire the services of a registered tax agent. FIRCA strongly suggests that all return forms must be correctly filled and checked before they are submitted for processing. Returns with minimum or no error are processed faster and save a lot of time.

For sole trader and partners in the case of a partnership, all details in respect of marital, children and FNPF should be completed each year.

If you choose to hire a tax agent to prepare your tax returns, please ensure that the tax agent is registered with the Tax Agents Registration Board. Registered tax agents are authorised to represent tax payers for tax purposes and charge a fee for preparing tax returns.

All return forms are available for downloading from the website.

Preparing returns for non-resident companies

Non- resident companies or businesses file tax returns in Fiji for the income derived or accrued in Fiji. This also applies to non- resident unit trusts and mutual funds operating in Fiji.

For non-resident shipping companies the total amount payable is in respect to all outgoing business, whether freight or passengers.