Value Added Tax

Business & Self-Employed

Value Added Tax (VAT) is a tax on spending that is levied on the supply of goods and services in Fiji at the rate of 15%, with effect from 1 January, 2011.

Previous Years tax rates

YEAR	RATES	TAX FRACTION
2010	12.5 %	1/9
2009	12.5 %	1/9
2008	12.5 %	1/9
2007	12.5 %	1/9

The tax is collected on behalf of the Government by businesses and organizations which have been registered with the Taxation Division.

Basic operation of VAT system

• Adapt your accounting system.
• Collect the VAT on your sales of goods and services.
• Calculate the VAT you collect (or that you are obligated to collect), and the VAT you paid (or owe) during your reporting period.
• Lodge your return, when required.
• claim your VAT refund, or pay your remittance on due dates

Adapting your accounting system

Once you register, you should start preparing your accounting records to accommodate VAT. To support your VAT charges and input tax credit claims, you must keep tax invoices and other accounting records for at least seven (7) years, and make them available to Audit/Compliance auditors, when requested.

Collecting the VAT

The rules governing value, place and time of supply are:

• value of supply made:  this determines the VAT which should be collected & remitted to the Revenue Collection Division
• place of supply:  this determines whether a supply is subject to VAT at a standard rate (15%), zero rate, or whether the supply is not subject to VAT
• time of supply:   this determines when the liability to VAT occurs

Where most transactions will be at arm’s length (i.e. buyer and seller are not connected, and time of sale will be quite clear).  In these instances, the value of supply will be the price paid; the place of supply will be where the item sold is situated; while the tax liability will arise at the earlier of invoicing, payment, or delivery.

If a person is registered on a payments basis VAT will be remitted once payment is made or received, regardless of the tax liability.

Calculating VAT refunds or payments

As a VAT registered person, you are responsible for filing VAT returns on which you will report: 

• The amount of VAT you have collected, or you have invoiced, from your customers during each reporting period.
• The amount of VAT you paid, or owe, on business purchases made during the same period, and
• The difference between these two amounts (payable/refund).

You claim input tax credits for the VAT paid, or owing, on:

• Purchases directly related to the taxable products or services you supply to customers.
• Other items (overhead or indirect expenses) bought or rented for your business (e.g. electricity, office supplies etc.).

Lodging returns, payments and refunds

Every registered person must “…on or before the last day of the month following the last day of every taxable period, without notice or demand furnish to the Chief Executive Officer a VAT return…” (Section 33 of VAT Decree)

Example:

Monthly VAT Returns

Month Ending	Due Date for Lodgement
31 August 2012	30 September 2012
31 July 2012	31 August 2012
30 June 2012	31 July 2012

 

3 Monthly VAT Returns

Period  Ending	Due Date for Lodgement
July – September  2012	31 October 2012
April – June 2012	31 July  2012
January – March 2012	30 April 2012

 

Yearly VAT Returns

Year Ending	Due Date for Lodgement
31 December 2012	31 January 2013
31 December 2011	31 January 2012
31 December 2010	31 January 2012

 

Payment must be accompanied with your VAT return if payable and be received by the returns due date.

You are to mail your VAT return to the Taxation Division (Customer Service Centre) office in Suva, Lautoka, Labasa, Savusavu and Rakiraki.

For more information, click on “How VAT Works”.

VAT Reverse Charges

What it is and when it is charged?

A charge applied to a recipient on the value of supplies received from overseas at the rate of 15%, with effect from 1 January, 2011. Supplies are taxable through the reverse charge provision. Section 21(2) of the VAT Decree.

Examples of services subject to VAT reverse charges:

• The filing, prosecution, granting, maintenance, transfer, assignment, licensing or enforcement, of intellectual property rights, including patents, designs, trademarks, copyrights, know-how, confidential information, trade secrets or similar rights.
• Advertising services.
• Services of consultants, engineers, consultancy bureaus, lawyers, accountants, and other similar services, data processing and provision of information. etc.  (S.14-Second Schedule of the VAT Decree.

Who should account for it and when?

The recipient of the service is required to calculate the output tax on the value of the service and pay the relevant output tax to FRCA. The recipient is treated as the supplier of the service and is also entitled to claim an input credit for the amount paid in the VAT Return.

When should it be accounted for?

The recipient should account for the VAT reverse charges at the time the service is paid for to prevent any unnecessary delay in the issue of related tax clearance.

VAT penalties

The following penalties apply under the Tax Administration Decree

• Late payment penalties – 25% of any tax remaining unpaid.
• An additional 5% for every month of default on the balance of the unpaid tax.
• Late lodgment penalties – 20% of any tax remaining unpaid.
• An additional 5% for every month of default on the balance of the unpaid tax.
• Omitted VAT income penalties – a 75% of the omitted amount would be the penalty charged, whether arising from understatement of sales or overstating of expenses.
• Penal tax (evasion or fraud) – A person who knowingly or recklessly makes a false or misleading statement is liable to a fine up to $25,000 or imprisonment for a term not exceeding 24 months or both, with effect from 1st January, 2012.

Further information:

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

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