Fringe Benefit Tax

Business & Self-Employed

 

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 

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:

• a debt waiver fringe benefit.
• a household personnel fringe benefit.
• a housing fringe benefit.
• a loan fringe benefit.
• a meal or refreshment fringe benefit;
• a motor vehicle fringe benefit;
• a private expenditure fringe benefit;
• a property fringe benefit; and
• a residual fringe benefit.

Exempt Fringe Benefits

The following benefits are exempt from Fringe Benefit Tax:

• scholarship provided by an employer that is exempt under Section 17(19) of the Income Tax Act.
• Cost of passages of an employee that is deductible from the employee’s chargeable income under Section 17(33) of the Income Tax Act.
• Fringe benefits provided to a member of the State’s armed forces in respect of employment giving rise to income that is exempt under Section 17(14),(15) and (16) of the Income Tax Act.
• Occasional departmental or celebratory lunches or dinner, refreshments provided at training courses, occasional cocktail parties or firm picnics, or one-off private use of a car.
• A meal or refreshment provided in a canteen, cafeteria, or dining room (referred to below as an “eating facility”) operated by or on behalf of an employer solely for the benefit of employees and which is available to all non-casual employees on equal terms
• The provision of accommodation or housing to an employee in a remote area (i.e. an area that is fifteen kilometers, or more, from a town or city centre, and includes on board a vessel when not berthed.) This is subject to the fact that the employee’s usual place of employment is in the remote area and it is necessary for the employer to provide accommodation or housing in the remote area.
• An allowance related to private expenditure (which is included in the emoluments of an employee) and that is subjected to normal income tax.
• A contribution by an employer for the benefit of an employee to the Fiji National Provident Fund or a superannuation fund, superannuation scheme, pension or provident fund, or a retirement plan, including excess FNPF contributions.
• A benefit provided under an employee share scheme as defined in section 21D of the Income Tax Actand that is subjected to normal income 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-

Engine Capacity	Value for each Quarter (VEP Amount $FJ)
Under 1,800cc	$656
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

Scenario	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.

 

Note:
The determination of the value of a housing fringe benefit is subject to the following ceilings:

Housing Type	Value of Housing Fringe Benefit
Unfurnished Accommodation	Maximum Quarterly value of the benefit is 1/9th of the emoluments paid to the employee for the quarter.
Furnished Accommodation	Maximum Quarterly value of the benefit is 1/8th of the emoluments paid to the employee for the quarter.

 

(3)Property Fringe Benefit Valuation

Scenario	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.

 

Note:
“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

Benefit Type	Value of Fringe Benefit
Debt Waiver Fringe Benefit	Amount of the debt waived by the employer.
Household Personnel Fringe Benefit	Total emoluments 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 be reduced to the extent that the employee uses the loan funds to derive amounts included in total income. (e.g. loan partly  used for the purpose of acquiring a property which is used to derive rental 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.

 

Note:

1. The insurance premiums will only be treated as fringe benefits if the employee is the beneficiary under the policy.
2. A meal or refreshment provided in a canteen, cafeteria, or dining room operated by or on behalf of an employer solely for the benefit of employees and which is available to all non-casual employees on equal terms is an exempt fringe benefit under section 7(d) Fringe Benefit Tax Decree. While such a benefit is still a fringe benefit under section 13, the value of the benefit is not to be taken into account in determining the fringe benefits taxable amount.

Employer Obligations

Generally, employers are required to comply with the following:

• Employers are required to register as a Fringe Benefit Tax payer if they are providing such benefits to their employees.
• Employers are required to keep records to support the computation of Fringe Benefit Tax payable including the valuation of fringe benefits.
• Employers will continue to show the value of benefits provided to employees in their certificate of earnings. This should be clearly declared as non-cash benefits.

Who should account for Fringe Benefit Tax?

• an employer providing non-cash benefits to employees;
• each trustee of a trust that provides non-cash benefits to employees;
• each partner in a partnership business that provides non-cash benefits to employees.

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 2012	30 April 2012
April-June 2012	31 July 2012
July-September 2012	31 October 2012
October-December 2012	1 January 2013

 

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

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.

Offences

An employer who fails to file a fringe benefit tax return is seen to be committing an offence and is liable for a minimum fine of FJ$10,000 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 minimum 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:

• failure to keep adequate records and accounts relating to the fringe benefits provided to employees;
• failure to allow authorized tax officials from entering the business premises to inspect fringe benefits provided to employees, fringe benefit tax collection or payment records;
• failure to produce any books or records relating to the fringe benefits provided to employees and collection/payment of fringe benefit tax.

Anti-Avoidance Provision

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:

• altering the incidence of Fringe Benefit Tax that is payable or suffered by, or which would otherwise have been payable or suffered by any person;
• relieving any person from any liability that has arisen or which would otherwise have arisen to pay Fringe Benefit Tax or file a Fringe Benefit Tax return;
• evading or avoiding any liability which is imposed or would otherwise have been imposed on any person under the Fringe Benefit Tax Decree; or
• hindering or preventing the operation of the Fringe Benefit Tax Decree in any respect.

Fringe Benefit Tax Calculation

Computation of Fringe Benefits Taxable Amount

The fringe benefits taxable amount is computed according to the following formula-

A/ (1-r)

Where-

A = the total value of fringe benefits provided by the employer to the employees in the quarter;
and

r   = the Fringe Benefit Tax rate specified in section 5(2)

Example:

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)
= $100,000

Step 2: Fringe Benefit Tax Payable = Fringe Benefit Tax Rate * Fringe Benefit Tax Taxable Amount
= 20% * $100,000
= $20,000

Additional Information:

All employers are requested to be mindful of the following additional information for compliance purposes.

• Benefits provided to employee form part of their emoluments and must be disclosed even if they may not be subject to normal tax.
• Employees will not pay tax again on non-cash benefits provided as this is a final tax paid by the employer.
• The taxable value of the benefits will not be included in employees’ emoluments for the purposes of determining PAYE deductions.
• Once a benefit is subject to Fringe Benefit Tax, it is not subject to normal tax.
• Fringe Benefit Tax paid is not an allowable expense/deduction to the employer.
• Fringe Benefit Tax is a self-assessment tax; therefore the employer’s Fringe Benefit Tax return will also serve as your notice of Fringe Benefit Tax assessment.
• Fiji nationals employed by Diplomatic and Consular Missions and certain public international organizations that are exempt from tax under a convention or other international agreement will be required to personally account for the tax on those benefits, as is the case with PAYE tax.

Further information

For more information,Contact Us or alternatively by email: (tepu@frca.org.fj, cectaxquerysuv@frca.org.)fj or info@frca.org.fj)

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