Proposed Companies Act

The Fiji Government engaged external consultants who are undertaking a review of the Companies Act (Cap.247) (Fj) and the Registration of Business Names Act (Cap.249) (Fj), and related laws and regulation recently conducted stakeholder consultations in Fiji.

We note that the origin of Fiji's company law owes much to the consolidation of English company law in the Companies Act 1862 (UK). It is from this Act that the companies' legislation in most Pacific jurisdictions (and in Australia and New Zealand) is descended. Despite subsequent amending and consolidating acts many of the fundamental features of the 1862 Act have survived down to modern times, which makes this much needed law reform timely.

One of the key changes appears to be the abolition of the mandatory two shareholder rule in Fiji, which often leaves Australian corporates with Fiji subsidiaries coming up with creative ways to structure their Fiji holdings to satisfy this outdated rule.

Now may be a good time to undertake a legal audit so that you are aware of your current Fiji holdings/structure in order to take advantage of any transitional period to ensure compliance with the new companies regime.

Proposed Capital Gains Tax Decree

Unlike Australia, Fiji does not have a specific capital gains tax regime under its current laws. The Fiji tax authority (FRCA) relies on section 11(a) which falls under Part IV Division 1 of the Income Tax Act (Act), when it seeks to calculate the amounts that are to be included in arriving at a taxpayer's total assessable income, when a taxpayer profits from property sales/ or there are speculative gains.

FRCA published a practice note(1) as to how the Commissioner of Inland Revenue (Commissioner) intends to interpret the provisions under section 11(a), and then apply these to an individual taxpayer's circumstances.

The drafting under section 11 of the Act is cumbersome, and it appears that FRCA is now proposing a stand-along capital gains tax decree.

While no taxpayer likes the imposition of a new tax law, it is timely that the cumbersome provisions in the Act are replaced with more modern provisions which reflect the economic realities of a modern developing nation. Stakeholders have been consulted on the proposed decree and we look forward to the final document being made public. 

Footnotes

1. Fiji Islands Revenue & Customs Application of Income Tax Act Section 11(a) to Profits from Property Sales Practice Statement No. 25 (Revised 15/02/08)

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