Fiji has introduced a capital gains tax ("CGT") on disposals of capital assets. The Capital Gains Tax Decree 2011 (Fiji) ("CGT Decree") comes into force from 1 May 2011 and applies to capital gains arising on the disposal of capital assets on or after that date.
A person liable for CGT in respect of a capital asset disposal must file a capital gains tax return ("CGT Return") within 30 days after the disposal of the capital asset. The CGT is payable at the same time of filing the CGT Return.The rate of CGT payable is 10% which is applied against the capital gain arising on disposal. Non-resident individuals, companies, trusts and partnerships will be caught under Fiji's CGT regime if the capital asset being disposed is a "Fiji Asset" as defined under section 2 of the CGT Decree ("Fiji Asset") unless the capital gain is "an exempt capital gain" under section 7 of the CGT Decree.
When does a Disposal of a Capital Asset Occur?
Generally a person makes a disposal at the time the person parts with the ownership of the asset. For example when the capital asset is sold, exchanged or transferred.
Computation of the Capital Gain
Broadly, the capital gain made by a person on the disposal of a capital asset is the consideration received less the cost of the asset at the time of disposal. A capital loss on another asset cannot be applied against a capital gain made on another asset: section 10(2) of the CGT Decree.
We set out below a few CGT scenarios.
Example 1: Capital gain made on disposal of shares in a company listed on the South Pacific Stock Exchange by a non resident company ("Company A"). Company A is not subject to CGT. This is an exempt capital gain under section 7 (1)(c) of the CGT Decree.
Example 2: Capital gain made on the disposal of shares issued in an unlisted Fiji company where the shares issued in the unlisted Fiji company are held by a non-resident company ("Company B") .Company B is subject to CGT under section 6(3) of the CGT Decree. Even though Company B is a non-resident, CGT is payable because the shares are issued in a Fiji Asset.
Example 3: Capital gain made on the disposal of a Fijian holiday house by Company B. Company B is subject to CGT because the asset satisfies the definition of a Fiji Asset.
Example 4: Capital Gain made on disposal of a Fiji resident's principal place of residence in Fiji. Generally, a Fiji resident is not subject to CGT on the disposal because the capital gain is exempt from CGT under section 7(1)(b) of the CGT Decree.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
