What is a Taxable Fringe Benefit?
Taxable benefits include any non-cash benefits or benefits received in kind that is provided free by the employer to the employee or persons associated with the employee (e.g. housing, telephone, water, etc.).
The value of non-cash fringe benefits received by an employee from his/her employer is subject to fringe benefits tax. It is a final tax on employers and shall not be recovered from the employee.
Who are regarded as employees for Fringe Benefit Tax purposes?
An employee is defined as “an individual engaged in employment”.
Other office holders such as directors, managers and associates (including certain relatives) of the employees are treated as employees for the purpose of the Fringe Benefit Tax Decree 2012; Act No.6 of 2014 An Act to Amend the Fringe Benefit Tax Decree 2012- 15th December 2014.
What is Fringe Benefit Tax?
Fringe Benefits Tax (FBT) is a tax levied at the rate of 20% on the fringe benefit taxable amount (non-cash benefits) of the employer for each quarter, with effect from 1 January, 2012.
The 2012 Fringe Benefit Tax Decree and Fringe Benefit Tax Practice Statement are also available from our website.
There are 9 categories of fringe benefits under the Decree which are listed below:
Exempt Fringe Benefits
The following benefits are exempt from Fringe Benefit Tax:
Valuation of Fringe Benefits
In general, the value of a benefit should be the fair market value of the benefit at the time it is provided to the employee. The value of a fringe benefit must be reduced by any payment made by the employee for the benefit.
The value of any benefit should be apportioned if the expenditure incurred by an employer is partly for work purposes and partly for the private benefit of an employee.
The tables below highlight how the various categories of fringe benefits are to be valued.
(1) Motor Vehicle Fringe Benefit Valuation
The value of a motor vehicle fringe benefit for a quarter is as follows-
Value for each Quarter (VEP Amount $FJ)
|1,800cc and <2,000cc||$778|
|2,000cc and above||$958|
|Irrespective of engine capacity, if the cost exceeds $100,000||$958 plus 2.5% of the excess of the cost over $100,000|
(2) Housing Fringe Benefit Valuation
Value of Housing Fringe Benefit
|Employer owns the accommodation or housing.||Fair market rent for the accommodation or housing for the quarter; reduced by any payment made by the employee for the accommodation or housing.|
|Employer rents the accommodation or housing.||Total rent paid by the employer for the accommodation or housing for the quarter.|
The determination of the value of a housing fringe benefit is subject to the following ceilings:
Value of Housing Fringe Benefit
|Unfurnished Accommodation||Maximum Quarterly value of the benefit is 1/9th of the employment income paid to the employee for the quarter.|
|Furnished Accommodation||Maximum Quarterly value of the benefit is 1/8th of the employment income paid to the employee for the quarter.|
(3)Property Fringe Benefit Valuation
Value of Property Fringe Benefit
|Transfer of Property
If the employer’s business involves the supply of property or services to customers.
In any other case.
|The normal selling price of the property or services, reduced by any payment made by the employee to the employer for the property or services
The cost to the employer of acquiring the property or services, reduced by any payment made by the employee to the employer for the property or services.
|Provision of Services
Provision of free or subsidized air travel to an employee by an employer that is an airline operator, travel agent, or tour operator.
|Forty (40%) of the standard economy fare for the flight, reduced by any payment made by the employee to the employer for the flight.|
“Services” is defined in subsection (4) of Fringe Benefit Tax Decree to include the use of property or the making available of any facility, such as a child care or recreational facility (e.g. access to a gymnasium)
(4)Valuation of Other Fringe Benefits
Value of Fringe Benefit
|Debt Waiver Fringe Benefit||Amount of the debt waived by the employer.|
|Household Personnel Fringe Benefit||Total employment income paid by the employer to the household personnel, reduced by any contribution made by the employee for the benefit.|
|Loan Fringe Benefit||Difference between the interest that would have been paid if the loan was made at the market lending rate for the quarter and the actual interest (if any) paid by the employee. This should not be reduced to the extent that the employee uses the loan funds to derive amounts included in total income.|
|Private Expenditure Fringe Benefit||Payment incurred for the particular private expenditure. (e.g. school fees of the employee’s children, utilities bills, non-work related medical expenses, medical insurance premiums, life insurance premiums)|
|Meal and Refreshment Fringe Benefit||Employer’s cost of providing the meal or refreshment to the employee reduced by any amount paid by the employee for the meal or refreshment.|
|Residual Fringe Benefit||Fair market value of the benefit provided less any payment made by the employee to the employer for the benefit.|
Generally, employers are required to comply with the following:
Who should account for Fringe Benefit Tax?
Lodging of Fringe Benefit Tax Return
The employer must lodge the quarterly return within one month after the end of the quarter.
Example of Due Dates for lodgment and payments:
|Period Ending||Due Date|
|January-March 2014||30 April 2014|
|April-June 2014||31 July 2014|
|July-September 2014||31 October 2014|
|October-December 2014||1 January 2015|
Payment of Fringe Benefit Tax
This should be paid at the time of lodging of the quarterly return. The due dates for each quarter are 30 April, 31 July, 31 October and 31 January.
Penalties apply for failure to file a Fringe Benefit Tax return or make payment by the due date.
In the case of a failure to file a tax return under which tax is payable, the employer is liable for a late lodgment penalty of 20% of the amount of Fringe Benefit Tax outstanding under the return or in any other case..
In the case of a failure to pay tax by the due date, the employer is liable for a late payment penalty of 25% of the amount of unpaid Fringe Benefit Tax.
An employer who fails to file a fringe benefit tax return is seen to be committing an offence and is liable for a maximum fine of FJ$15,000 or to imprisonment for a term not exceeding 12 months or to both a fine and imprisonment, with effect from 1 January, 2012.
The courts can impose a maximum fine of FJ$15,000 or to imprisonment for a term not exceeding 12 months or to both a fine and imprisonment, with effect from 1 January, 2012, on any of the following offences:
Avoidance of Fringe Benefit Tax
In accordance with Section 18 of the Fringe Benefit Tax Decree, the Chief Executive Officer may, without prejudice to such validity as it may have in any other respect of for any other purpose, disregard or vary any of the following dealings and make just and proper assessments in the circumstances:
Fringe Benefit Tax Calculation
Computation of Fringe Benefits Taxable Amount
The fringe benefits taxable amount is computed according to the following formula-
A = the total value of fringe benefits provided by the employer to the employees in the quarter;
r = the Fringe Benefit Tax rate specified in section 5(2)
Total value of fringe benefits provided by an employer for a quarter is $80,000.Calculate the Fringe Benefit Tax payable by the employer for the quarter.
Step 1: Fringe Benefit Tax Taxable Amount = A/ (1-r)
= $80,000/ (1-0.20)
= $80,000/ (0.80)
Step 2: Fringe Benefit Tax Payable = Fringe Benefit Tax Rate * Fringe Benefit Tax Taxable Amount
= 20% * $100,000
All employers are requested to be mindful of the following additional information for compliance purposes.
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