Investment incentives are available to investors in the Fiji Islands to stimulate investment growth, employment and export creation.

The incentives highlighted in this document were revised in accordance to the revised budget for 2007 provided by the Interim Government.

1. INCOME TAX

The corporate income tax rate for resident and non-resident companies is currently maintained at 31% except for the following companies that enjoy the following tax rates:

Mutual insurance companies in respect of life insurance business	30%
Non-resident or non-mutual insurance companies to the extent thta the income of their life insurance businesses is deemed to be mutual	30%
Non-resident shipping companies	2%

Income Tax on individual's payable for the year 2007 are as follows:

Income	Resident	Non resident
Up to $8,840	Nil	20% of excess over $0
$8,841 to $10,000	15% of excess obver $8,840	$1,768 + 25% of excess over $8,840
$10,001 to $20,000	$174 + 25% of excess over $10,000	$2,058 + 30% of excess over $10,000
Greater than 20,000	$2,674 + 31% of excess over $20,000	$5,058 + 31% excess over $20,000

2. NO WITHOLDING TAX ON DIVIDENDS

No withholding tax is payable on dividends provided these are distributed to the shareholders after a company’s profits are fully taxed at corporate levels.

3. EXPORT INCOME DEDUCTION

“Export income” means net profits derived by a taxpayer from the business of exporting goods and services but excludes re-exports. All enterprises involved in exports are allowed deductions from total income for taxation purposes as follows:

Year of Assessment	Percentage of Export Income Deducted
2001 and 2002	100%
2003 and 2004	75%
2005 and 2006	50%
2007	50%
2008	25%
2009 and thereafter	0%

4. INVESTMENT ALLOWANCES

A business entity or taxpayer may claim as a deduction investment allowance of 40% on the purchase of capital assets of not less than $50,000 per annum.  The capital assets do not include land, buildings, passenger motor vehicle or trading stock.  Such investment allowance can be claimed between 2001 and 2008 (both years inclusive) for the expenditures incurred during this period.

In addition, interest on loans for projects implemented under the Cotonou Agreement will be exempt from tax.

Activities eligible for claiming investment allowance is made available to the following:

i.) Agricultural, Forestry and Marine Resources business where substantial transformation of the natural resources is carried out. 

• Natural resources mean unprocessed or raw natural produce, including timber, wholly derived in or from Fiji.
• Substantial transformation means the process applied to the natural resources, which result in a product having a different classification under the Harmonised System (HS) codes from that of the raw materials. Substantial transformation does not include repackaging and rebottling and logging of timber.

ii.) A Rural Manufacturing Business carried out on a location not less than 25 km from the General Post Office (GPO) in Suva, Lautoka, Nadi, Nausori or Navua.

• Manufacturing means any activity included under the major Division 3 of the Fiji Standard Industrial Classification (FSIC) codes.

iii.) Information Technology Business means any business providing services specifically based on utilising information technology, and delivered by making use of open networks and telecommunications, including the following: call centres - ticketing, ordering and reservation service; database records and list management; data entry and processing; website development and management; software programming and design; tele-medicine; internet service provision.

Retailing or wholesaling of information technology products, and the sale, care, repair or service of any items are excluded

5. GENEROUS DEPRECIATION ALLOWANCE

To simplify and enhance the system of depreciable assets, the following rules have been introduced for assets acquired after January 1, 1998:

• Assets acquired are subject to one of the seven standard depreciation rates (i.e. 2.5%, 5%, 10%, 15%, 20%, 33.33% or 50%.
• Accelerated depreciation for buildings constructed before 31 December 2010at the rate of 20% per annum. 20% depreciation is allowed for building used for agriculture, commercial and industrial purposes can be written off within any 5 to 8 years.
• 100% write off will be available in the year the expenditure was incurred on water storage facilities and renewable energy plant and machineries.

6. CARRY FORWARD OF LOSSES

Tax losses incurred in any year may be set off against profits earned during the next succeeding eight years [8]. Loss carry forward by a company can now be allowed subject to the continuity test or the same business test.

7. DUTY CONCESSIONS

Duty rates currently applicable to imports are subject to 4 bands; 0%, 3%, 15% and 27%.  On certain cases where an anomalous may be occurring, the Minister for Finance and National Planning has special powers to further reduce the duty rates.  The following are some of the concessionary duty rates applicable to business ventures:  

I.  Production Inputs (raw materials)
• Goods imported in primary form for manufacturing purposes, which require further processing qualifies for a concessionary duty rate of 3% fiscal plus 12.5% VAT.
• Other types of goods imported for mixing/blending/assembly operations qualify for intermediary duty rates i.e. half the normal duty rates.
• Packaging materials not available locally qualify for 3% fiscal duty plus 12.5% VAT

II. Capital Items
• Duty rates on capital items (which refer to machinery used for converting/processing raw materials) will attract 3% fiscal duty + 12.5% VAT.

III. Construction Material for Factory Buildings
• Most construction material which, refers basically to building materials not available locally, are duty rated at 3% fiscal. If the goods are available locally then 27% fiscal duty applies.

IV. Duty-free inputs for exports
• All inputs, components and accessories imported for utilisation in production of a final product for export are exempt from payment of any duty under the new Duty Suspension Scheme (DSS) or are eligible for drawback of duty under the Industrial Drawback Regulation.
• The Duty Suspension Scheme or DSS would enable exporters to have access to inputs without having to pay for duties upfront. Imported goods are conditionally relieved from payment of fiscal duty and VAT on the basis that such goods will be substantially transformed through manufacturing or processing and subsequent exportation.
• The scheme would entitle exporters to import duty free an amount equal to the proportion of approved imported inputs required to produce exports. This is called Entitled Proportion (EP) 
• The scheme is administered by the Exporters Club (refer to  www.exportersclub-fiji.com for details) 

V. Import Duties on Computer & Accessories
• To facilitate growth in IT business and IT education, imports of Computer Equipment and Accessories (hardware) are exempted from both fiscal and excise duty.
• Software attracts 3% fiscal duty + 12.5% VAT.

8. INDUSTRY SPECIFIC INCENTIVES

The specific industry incentives are as follows:

A.  Tourism Related Investments

 Standard Allowance
• Investment allowance (in addition to the ordinary depreciation) of 55% of total capital expenditure is allowed as a deduction  provided there is no shift of tax revenue to other countries.
• Allowance is applicable to building of new hotel including renovations, refurbishments or extension of existing hotel
• Investment allowance can only be written off against the income of the hotel business or income from the hotel premises.
• International Retiree Facilities can also enjoy 55% Investment allowance

Short Life Investment Package (SLIP)
• Short life investment” refers to a project for the building of a new hotel with a minimum capital investment not less than $40m (FULL SLIP) and capital investments between $10m and $40m (HALF SLIP) (Exclusive of the cost of land but include the cost of support infrastructure and overseas consultant fees)
• Application for either SLIP or the 55% Investment allowance must be submitted to the Minister of Tourism, prior to construction and in either cases building should be completed prior to 31st December 2008.
• Investors can either enjoy 55% Investment Allowance or Short Life Investment Package [SLIP].
• Short Life Investment Package (SLIP) is also available for retirement facilities and hospital resorts

Concessions available under the Hotels Aid Act (both SLIP and Standard Allowance)  are as follows:
i) Carry forward losses up to 13 years;
ii) On granting provisional approval, capital plant and machinery (excluding furniture and motor vehicles) imported on or before 31st December 2008 that is used in carrying out of the SLIP; shall be exempted from all duties.
iii) Exemption of corporate tax on profits for 20 years (FULL SLIP) for capital investments exceeding $40 million;
iv) Exemption of corporate tax on profits for 10 years (HALF SLIP) for capital investments exceeding $10 million but less than $40 million;
v) A claim of special deprecation allowance in each of the fifteen years immediately succeeding the year of income in which capital expenditure has been incurred in the project, excluding land;
vi) The tourist plant will be allowed to generate its own electricity and sell the excess to the Fiji Electricity Authority.

Other Incentives:
i. Exemption from Hotel Developer Profits - Profits derived from subdivision and sale of land to be exempted from tax until 31st December 2008.
Developer profits refer to the profits derived from hotel development including income gained from the subdivision of land and property.
ii. Tourist vessel investment allowance of 55 per cent of the cost;
iii. A 3% tax (VEP) is levied on the turnover of hotels.
Hotel Turnover means the cost of accommodation, refreshment and other charges that would appear on a hotel guest’s bill 

 Projects that are operational also qualify for concessionary duty rates under Code 235 of the Customs Tariff Act, which is specifically for Hotel and Resort development;

Particulars of Code 235 of the Customs Tariff Act	Concessionary Fiscal Duty	VAT
Building materials, Furnishing and fitting, equipment including front office equipment, room amenities, kitchen and dinning room equipment and utensils (Provided that the hotel/project is registered as a hotel or a resort, and is approved by the Comptroller)	10%	12.5%
Specialised boats and vessels including water sports equipment not available locally  (Written submission required to comptroller)	10%	12.5%
Heavy Plant and machinery for resort project development work provided such plant and machinery is re-exported after completion of the project. (Comptroller written approval required)	5%	12.5%

B. Mining Industries (New)

• Loss carry forward of 8 years
• Export tax of 3 percent on gold
• Duty free importation of capital plant and equipment except hand tools of a kind of a general purpose item for two years from the date of approval
• 31 % corporate income tax rates
• Royalties based on the price of gold
• 20% Accelerated depreciation allowance

C. Film Making and audio-visual Incentives

Income Tax Deduction

• 150% deduction for capital expenditure on an F1 audio visual productio
• 125% deduction for capital expenditure on an F2 audio visual production

Income Tax Exemptions

• Net income from an F1 production is exempted until taxpayer has received a 60% return on capital expended. Thereafter, net income will be fully taxed at the marginal rate
• Net income from an F2 production is exempted until taxpayer has received a 50% return on capital expended. Thereafter, net income will be fully taxed at the marginal rate

Brief description of FI and F2
F1 and F2 production status can be obtained by meeting various conditions.

• An F1 production must be made wholly or substantially in Fiji and contain significant local content.
• An F2 audio visual production can be obtained if the production entity has secured distribution for the production in at least 2 significant international markets and a guaranteed minimum return on investment is achieved, etc.

Studio City Zone Concessions
• A licensed audio-visual producer is exempt from the payment of income tax (except for withholding tax) on any income derived from the production activity carried on in the zone.
• An approved individual who derives income from work in audio-visual production including fees, wages, royalties, profits, etc; and any income earned from sports performances including prize money, performance fees and endorsements is exempt from tax.

Film Tax Rebates
• A 15% rebate or credit on production costs spent in Fiji is available to audio-visual producers. 
• The maximum allowance the government grants is $3.75m.

For further information, please email the Fiji Audio Visual Commission favc@fijiaudiovisual.org.fj, Website: www.fijiaudiovisual.com

D. ICT/IT Incentives

Companies Set Up Within the ICT Temporary Studio City Zone
• A 10 - year tax holiday is available to companies under the sixth schedule of the Income Tax Act to set up soft ware development and ICT call centres in any of the ICT Economic Free Zone as prescribed by the government.
• So far government has approved two (2) studio city zones in Suva

• ATH - The site is located in Riffle Range, Vatuwaqa, 
• USP – is site is located in Statham Street in Vatuwaqa.

• Subsequent to the 2007 Budget Address, the Kalabo Tax Free Zones was declared an ICT Zone with a 10 years tax holiday under the following criteria;

• The ICT business must be located in the Kalabo ICT Economic Free Zone
• Business employs 50 or more employees for any 6 months within the income.
• 60% of its sales is exported
• Business to operate in the zone from 1/1/07 – 31/12/2016

 Companies Set Up Outside the ICT Temporary Studio City Zone
• Tax incentives to attract setting up of ICT Industries outside the Zone includes:

• 80% Income Tax exemption for businesses employing 101 or more employees
• 60% Income Tax exemption for businesses employing more than 60-100 employees
• 40% Income Tax exemption for businesses employing more than 10-59 employees
• The above incentives are available for the period between 1/1/06 – 31/12/2012.
  As according to Section 21C of the Income Tax Act “information technology business” includes call centres, ticketing, ordering and reservations services; data base, records, and list management, data entry and processing, web site development and management, software programming and design, tele-medicine services, internet service provision BUT excludes the retailing or wholesaling of information technology products and the sale, care, repair or service of any item.

E. Ship Building Industry

Companies involved in boat/vessel building qualify for free fiscal duty + 12.5% VAT on all imports of boat building materials including fixtures, fitting and components and approved raw materials.

F. Fishing Industry

• Companies involved in offshore long line tuna fishing venture are eligible for the following fiscal duty concessions under section 10 of the Customs Tariff Act;

(i)   10% fiscal duty plus VAT on fishing boats imported for the purposes of commercial fishing;
(ii) 3% fiscal duty plus VAT on specialised fishing gear & equipment;
(iii) 3% fiscal duty plus VAT on Fish baits; and
(iv)  A rebate of 8 cents per litre plus VAT on ADO (Automotive Diesel Oil/Fuel)

• Furthermore a 200% deduction on capital expenditure for a period of 5 years wef 2006 for all investors engaged in fisheries activity.

H. Agriculture

• A 200% deduction on capital expenditure is available for all investors engaged in agriculture and fisheries activity for a period of 5 years wef 2006. The capital expenditure is allowed for capital investment on primary industries only.  
• The activities and capital goods under this incentive will include items under the paragraph 32 of Part V of the Depreciation Schedule. It includes allowance in respect of land improvement such as the destruction of weed or plant growth detrimental to the land and allowance in respect of buildings such as cost of any irrigation scheme.
• The incentives will be available to all tax payers not enjoying other concessions under the Income Tax Act.

G. New Investment or re-investment for Food Processing and Forestry (Value Adding)

• Food processing and forestry may claim 100% as a deduction on the amount spent on capital investment. The deduction is available for those new business engaged in value adding process
• Re-investment for expansion purposes will also be allowed such deduction.
• In order to qualify the investor should utilize 50% of local produce (inclusive of raw materials, labour etc) in its production process.

H. Logging and Saw-milling Operations

Companies involved in logging and saw-milling operation qualify for 5% fiscal duty plus VAT on the importation of all saw-milling and logging equipments including skidders, dozers and logging trucks provided the equipments/ automobiles are equipped with bolsters and perforated trays.

I. Bus Body Building Industry

• New chassis fitted with engines for bus body building purposes and for replacement of old engines does not attract any fiscal duty except for VAT. 
• Identifiable fixtures and components carry low 5% duty + 12.5% VAT.
• A rebate of 18 cents per litre on ADO (Automotive Diesel Oil)

J. Small and Micro Enterprises (SME’s)

For Small and Micro Enterprises (SME’s), income tax exemption will be available to certain sectors with a maximum turnover threshold of $200,000.00. These sectors include the following:

• Agriculture and Fishing
  (Sugarcane farmers, Coconuts, Rice, Ginger, Yaqona, Fishing, raising livestock, vegetable farming and Bee keeping)
• Tourism
  (Sea cruise and river tour operators, sea tour operators)
• Community & social services
  (Amusement, recreation services, traditional handicraft producers (not “middlemen” or “agents”))

9.  OTHER INCENTIVES AVAILABLE

I). Double Taxation Agreement
• As an additional inducement, Fiji has negotiated double taxation agreements with the United Kingdom, Japan, New Zealand, Australia, Korea, Malaysia, Papua New Guinea and Singapore under which exemptions or tax concessions granted by the Fiji government are not negated by an imposition of tax in the country of residence of the investor. 
• Negotiations are currently underway to pursue new DTAs with India and the USA. Domestic legislation in respect of what constitutes a royalty will be revised to be consistent with double tax treaty legislation.

II). Pension earned by Non-Residents
Income earned from offshore by Non-residents in the form of pension will not be subject to tax.

III). Employment Taxation Scheme
A 150% income tax deduction is available to employers for providing employment to first time employees for the period of 12 months will remain effective until 31st December 2008. (150% deduction under the Employment Taxation Scheme is only allowable if an employer employs an employee for at least 12 months)

IV). South Pacific Stock Exchange (Listing Costs)
A 150% income tax deduction is available for costs associated with listing on the South Pacific Stock Exchange.

V). Tax Deduction through Donations
• A 200% income tax deduction is available for contributions over $100,000 made to Government for Sports development in general. 
• A 150% income tax deduction of up to $50,000 and duty exemption will be made available to companies that purchase and donate motor vehicles to the Fiji Police Force.

10. Incentives Available for the Northern Island (Vanua Levu) Under the “Look North Policy”

The incentives are applicable to the following person:

• New Businesses in Vanua Levu that is for the sectors specified in the legislation and 
• Existing businesses in Vanua Levu, provided that there is an increased sales by 25% or more than 5 new persons re employed from 2006.

Specific industries being targeted include:
(a) Information Communication and Technology;
(b) Agriculture; 
(c) Forestry; 
(d) Mining; 
(e) Manufacturing (Textile, Clothing and Footwear (TCF), Timber manufacturing; Fishery manufacturing; or Ship building and maintenance works)

TAX INCENTIVES

1) 300% tax deduction on Capital Expenditure
• The investment threshold is $40,000 in fixed assets.  Capital expenditure does not include land, buildings, passenger vehicle or trading stock.
•  Period of this incentive is from 01/01/2006 to 31/12/2010 (5 years).

2) 200% Employment Taxation Scheme
• 200% tax deduction for all first time employees for the first 12 months. (150% tax deduction is allowable for businesses in other parts of Fiji)
• The deduction will provide tax benefit to the investor and the more persons being employed, the more tax benefit the investor will receive. Period of incentive is between 1st January 2006 and 31st December 2008.

3) 100% Export Income Deduction
100% Export Income Deductions from 1 July 2005 to 31 December 2010 is available for all exporters. To ensure that this policy is WTO compliant, it is important that exportable commodities are substantially transformed.

DUTY CONCESSIONS

4) Zero Duty on Capital Goods
Duty free importation of capital, plant and machinery is available exclusively for Vanua Levu.

5) Zero Duty on Raw Material
Importation of raw material used for manufacturing is duty free.

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