Tax Guide for US Expats Living and Working in Fiji
Who Is Liable For Income Taxes in Fiji
Fiji residents are subject to tax on worldwide income. Nonresidents are subject to tax on Fiji-source income only.
A resident is defined as a person who resides in Fiji and includes a person who meets either of the following conditions:
- His or her domicile is located in Fiji.
- He or she is present in Fiji continuously or intermittently during more than one-half of the income year. However, this does not apply if the tax authorities are satisfied that the person’s usual place of abode is outside Fiji and that the person does not intend to take up residence in Fiji.
Income subject to tax
Employment income. Taxable income includes all wages, salaries, directors’ fees and compensation, as well as the estimated value of other benefits provided by an employer, including accommodation and housing, employer-provided vehicles, free overseas travel and discounts for goods and services.
Education allowances provided by employers to the children of their local and expatriate employees are taxable to the employees for income tax purposes.
Self-employment and business income. Resident individuals are subject to tax on worldwide business income. Nonresident individuals are taxed on Fiji-source income only.
Taxable income is determined based on the accounting profit shown in the annual financial statements, adjusted for taxable and nontaxable items.
Investment income. Dividends paid by publicly listed companies and those paid by other companies out of profits that have been subject to tax are tax-exempt to the recipient. Dividends paid by unlisted companies out of profits that have not been subject to tax are taxable as ordinary income. Dividends paid from realized capital gains are totally tax-exempt. Interest income is taxable at the rates.
Dividends, interest, royalties and know-how fees paid to nonresidents are subject to the final withholding taxes.
Capital gains. A 10% capital gains tax is effective from 1 May 2011. The tax is imposed on all capital gains on the sale of capital assets, except for exempt capital gains. The following gains are the only gains that are exempt:
- Gains less than FJD 20,000 made by a resident individual or Fiji citizen
- Gains derived from the sale of the principal place of residence of a resident individual or Fiji citizen, if the residence has been the individual’s principal place of residence wholly or principally over the period during which the residence has been owned by the individual
- Gains derived from the sale of shares listed on the South Pacific Stock Exchange
- Gains derived from the sale of capital assets used solely to earn exempt income.
The capital gain is computed by deducting the cost of the capital asset at the time of disposal from the consideration received.
Before the introduction of the capital gains tax, the only tax imposed on capital gains was land sales tax, which was imposed at a maximum rate of 30%, on the sale of certain undeveloped land. Land sales tax is repealed, effective from 1 May 2011.
Deductions
Deductible expenses. If a lump-sum entertainment allowance is paid by an employer, an employee must justify the amount spent for business entertainment. The allowance is taxable to the extent that it is not fully justified.
Personal deductions and allowances. The following personal allowances are deductible in determining income subject to tax.
Business deductions. In general, all expenses incurred in producing taxable income are deductible, with the exception of expenses of a capital, private or domestic nature. Depreciation of fixed assets used in the production of taxable income is allowed at rates set by the tax authorities.
Relief for losses. Losses incurred in any trade or business may be offset against an individual’s taxable income from other sources in the same year. To the extent that it is not fully offset, a loss may be carried forward for the next eight years unless the business that gave rise to the loss is discontinued, sold or changed substantially in nature. Losses incurred in agricultural pursuits may be carried forward indefinitely. No monetary limits are imposed on the amount of losses for carryforward or offset purposes.
B. Other taxes
Fiji does not impose tax on property, net worth, inheritances or gifts.
C. Social security
Although Fiji imposes no social security taxes, all employers must contribute an amount equal to at least 8% of the gross earnings of all regular employees to the Fiji National Provident Fund.
Total contributions must equal a minimum of 16% (theoretically, an equal contribution of 8% each from an employer and an employee), but an employee need not contribute or may contribute a smaller amount if an employer contributes the difference on his or her behalf. Contributions of up to 30% are allowed; however, amounts in excess of 16% are taxable to the employee.
On retirement, the fund provides either a lump-sum payment equal to total contributions made plus accrued interest or a pension based on the amount of total contributions made plus accrued interest.
To learn more about the history, culture, economy and other information about Fiji
We have been preparing US income tax returns for US Citizens and permanent residents living in Fiji for over 15 years. As a US Citizen or permanent resident (green card holder) you are required to file a US return each year regardless of the fact that you file and pay taxes in your residence country. The expatriate earned income exemption ($100,800 for 2015) can only be claimed if you file a timely tax return. It is not automatic if you fail to file.
We have scores of clients located in Fiji and know how to integrate your US taxes into the local income taxes you pay. Any income tax you pay there can be claimed as a dollar for dollar credit against the tax on your US return on the same income.
As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end. (You cannot file using the Fiji tax fiscal year for US tax purposes). You must pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.
There are other forms which must be filed if you have foreign bank or financial accounts; foreign investment company; or own 10% or more of a foreign corporation or foreign partnership. If you do not file these forms or file them late, the IRS can impose penalties of $10,000 or more per form. These penalties are due regardless of whether you owe income taxes or not.
There are certain times you may wish to make elections with respect to your Fiji Corporation or Investment Company which will give you US tax benefits. There are other situations where forming a US corporation to receive your business income may be more advantageous than using a corporation in your resident country. We can help you with these decisions.
If you are self-employed while working in Fiji, you will have to pay US self-employment taxes (social security). If you are a bona-fide employee you do not have to worry about paying US social security on your wages earned in Fiji.
We have helped hundreds of expats around the world catch up because they have failed to file US returns for many years. Unfortunately, unlike India, Canada, UK, etc. you must also file so long as you are a US citizen or resident. You can if you follow proper IRS and State Department procedures surrender your US Citizenship and therefore cut off your obligation to pay US taxes in the future. You must surrender that Citizenship for non-tax avoidance reasons and then can usually not return to the US for more than 30 days per year for the subsequent ten years.
Let us help you with your US tax returns, US tax planning and other US tax and legal concerns. Download our expat tax questionnaire or request a request a consultation by phone, skype or email