Fringe Benefit Tax (FBT)
What is a Taxable Fringe Benefit?
Taxable benefits include any non-cash benefits or benefits received in kind that is provided free by the employer to the employee or persons associated with the employee (e.g. housing, telephone, water, etc.).
The value of non-cash fringe benefits received by an employee from his/her employer is subject to fringe benefits tax. It is a final tax on employers and shall not be recovered from the employee.
Who are regarded as employees for Fringe Benefit Tax purposes?
An employee is defined as “an individual engaged in employment”.
Other office holders such as directors, managers and associates (including certain relatives) of the employees are treated as employees for the purpose of the Fringe Benefit Tax.
What is Fringe Benefit Tax?
Fringe Benefits Tax (FBT) is a tax levied at the rate of 20% on the fringe benefit taxable amount (non-cash benefits) of the employer for each quarter, with effect from 1 January, 2012.
The Income Tax Act (Act No. 32 of 2015) and Fringe Benefit Tax Practice Statement are also available from our website.
There are 9 categories of fringe benefits which are listed below:
- a debt waiver fringe benefit.
- a household personnel fringe benefit.
- a housing fringe benefit.
- a loan fringe benefit.
- a meal or refreshment fringe benefit;
- a motor vehicle fringe benefit;
- a private expenditure fringe benefit;
- a property fringe benefit; and
- a residual fringe benefit.
Exempt Fringe Benefits
The following benefits are exempt from Fringe Benefit Tax:
- The value of which is exempt income of the employee;
- in respect of employment if the employment income arising from the employment is exempt income;
- it is so small as to make accounting for it unreasonable or administratively impracticable;
- a meal or refreshment provided in a canteen, cafeteria or dining room operated by or on behalf of an employer solely for the benefit of employees and which is available to all non-casual employees on equal terms; or
- the provision of accommodation or housing to a non-managerial employee in a remote area if—
- the employee’s usual place of employment is in the remote area; and
- it is necessary for the employer to provide the accommodation or housing to the employee in the remote area because—
- the nature of the employer’s business is such that the employee is likely to move frequently from one residential location to another; or
- there is insufficient suitable residential accommodation available in the remote area;
- a fringe benefit provided to an employee of a religious body registered under the Religious Bodies Registration Act (Cap. 68).
Valuation of Fringe Benefits
In general, the value of a benefit should be the fair market value of the benefit at the time it is provided to the employee. The value of a fringe benefit must be reduced by any payment made by the employee for the benefit.
The value of any benefit should be apportioned if the expenditure incurred by an employer is partly for work purposes and partly for the private benefit of an employee.
The tables below highlight how the various categories of fringe benefits are to be valued.
(1) Motor Vehicle Fringe Benefit Valuation
The value of a motor vehicle fringe benefit for a quarter is as follows-
|Engine Capacity||Value for each Quarter|
|1,800cc and <2,000cc||$778|
|2,000cc and above||$958|
|Irrespective of engine capacity, if the cost exceeds $100,000||$958 plus 2.5% of the excess of the cost over $100,000|
If a motor vehicle is provided to an employee partly for private use and partly for use in employment, the value of benefit is reduced by 50% of the value of benefit as per values in above table.
(2) Housing Fringe Benefit Valuation
|Scenario||Value of Housing Fringe Benefit|
|Employer owns the accommodation or housing.||Fair market rent for the accommodation or housing for the quarter; reduced by any payment made by the employee for the accommodation or housing.|
|Employer rents the accommodation or housing.||Total rent paid by the employer for the accommodation or housing for the quarter.|
NB: The provision of accommodation or housing to an executive or manager of a hotel is a housing benefit regardless of where the hotel is located.
(3)Property Fringe Benefit Valuation
|Scenario||Value of Property Fringe Benefit|
|Transfer of Property
If the employer’s business involves the supply of property or services to customers.In any other case.
|The normal selling price of the property or services, reduced by any payment made by the employee to the employer for the property or servicesThe cost to the employer of acquiring the property or services, reduced by any payment made by the employee to the employer for the property or services.|
|Provision of Services
Provision of free or subsidized air travel to an employee by an employer that is an airline operator, travel agent, or tour operator.
|Forty (40%) of the standard economy fare for the flight, reduced by any payment made by the employee to the employer for the flight.|
“Services” include the use of property or the making available of any facility, such as a child care or recreational facility (e.g. access to a gymnasium)
(4)Valuation of Other Fringe Benefits
|Benefit Type||Value of Fringe Benefit|
|Debt Waiver Fringe Benefit||Amount of the debt waived by the employer.|
|Household Personnel Fringe Benefit||Total employment income (salaries/wages) paid by the employer to the household personnel such as housekeeper, driver, gardener, security guard etc., reduced by any payment made by the employee for the benefit.|
Discounted Interest Loan Fringe Benefit Year Rate (%)
|Is the difference between the interest paid by the employee on the loan for the quarter, if any, and the interest that would have been paid by the employee on the loan for the quarter if the loan had been made at the market lending rate for that quarter.|
|Private Expenditure Fringe Benefit||Payment incurred for the particular private expenditure. (e.g. school fees of the employee’s children, utilities bills, non-work related medical expenses, medical insurance premiums, life insurance premiums)|
|Meal and Refreshment Fringe Benefit||Employer’s cost of providing the meal or refreshment to the employee reduced by any amount paid by the employee for the meal or refreshment.|
|Residual Fringe Benefit||Fair market value of the benefit provided less any payment made by the employee to the employer for the benefit.|
- The insurance premiums will only be treated as fringe benefits if the employee is the beneficiary under the policy.
Generally, employers are required to comply with the following:
- Employers are required to register as a Fringe Benefit Tax payer if they are providing such benefits to their employees.
- Employers are required to keep records to support the computation of Fringe Benefit Tax payable including the valuation of fringe benefits.
- Employers will continue to show the value of benefits provided to employees in their Tax Withholding certificate. This should be clearly declared as non-cash benefits.
Who should account for Fringe Benefit Tax?
- an employer providing non-cash benefits to employees;
- each trustee of a trust that provides non-cash benefits to employees;
- each partner in a partnership business that provides non-cash benefits to employees.
Lodging of Fringe Benefit Tax Return
The employer must lodge the quarterly return within one month after the end of the quarter.
Example of Due Dates for lodgment and payments:
|Period Ending||Due Date|
|January-March 2016||30 April 2016|
|April-June 2016||31 July 2016|
|July-September 2016||31 October 2016|
|October-December 2016||31 January 2017|
Payment of Fringe Benefit Tax
This should be paid at the time of lodging of the quarterly return. The due dates for each quarter are 30 April, 31 July, 31 October and 31 January.
Penalties apply for failure to file a Fringe Benefit Tax return or make payment by the due date.
In the case of a failure to file a tax return under which tax is payable, the employer is liable for a late lodgment penalty of 20% of the amount of Fringe Benefit Tax outstanding under the return or in any other case..
In the case of a failure to pay tax by the due date, the employer is liable for a late payment penalty of 25% of the amount of unpaid Fringe Benefit Tax.
An employer who fails to file a fringe benefit tax return is seen to be committing an offence and is liable for a maximum fine of FJ$15,000 or to imprisonment for a term not exceeding 12 months or to both a fine and imprisonment, with effect from 1 January, 2012.
The courts can impose a maximum fine of FJ$15,000 or to imprisonment for a term not exceeding 12 months or to both a fine and imprisonment, with effect from 1 January, 2012, on any of the following offences:
- failure to keep adequate records and accounts relating to the fringe benefits provided to employees;
- failure to allow authorized tax officials from entering the business premises to inspect fringe benefits provided to employees, fringe benefit tax collection or payment records;
- failure to produce any books or records relating to the fringe benefits provided to employees and collection/payment of fringe benefit tax.
Avoidance of Fringe Benefit Tax
In accordance with Section 102 of the Income Tax Act (Act No. 32 of 2015), the Chief Executive Officer may, without prejudice to such validity as it may have in any other respect of for any other purpose, disregard or vary any of the following dealings and make just and proper assessments in the circumstances:
- altering the incidence of Fringe Benefit Tax that is payable or suffered by, or which would otherwise have been payable or suffered by any person;
- relieving any person from any liability that has arisen or which would otherwise have arisen to pay Fringe Benefit Tax or file a Fringe Benefit Tax return;
- evading or avoiding any liability which is imposed or would otherwise have been imposed on any person under the Income Tax Act (Act No. 32 of 2015); or
- hindering or preventing the operation of the Income Tax Act (Act No. 32 of 2015) in any respect.
Fringe Benefit Tax Calculation
Computation of Fringe Benefits Taxable Amount
The fringe benefits taxable amount is computed according to the following formula-
A = the total value of fringe benefits provided by the employer to the employees in the quarter;
r = the Fringe Benefit Tax rate specified in section 5(2)
Total value of fringe benefits provided by an employer for a quarter is $80,000.Calculate the Fringe Benefit Tax payable by the employer for the quarter.
Step 1: Fringe Benefit Tax Taxable Amount = A/ (1-r)
= $80,000/ (1-0.20)
= $80,000/ (0.80)
Step 2: Fringe Benefit Tax Payable = Fringe Benefit Tax Rate * Fringe Benefit Tax Taxable Amount
= 20% * $100,000
All employers are requested to be mindful of the following additional information for compliance purposes.
- Benefits provided to employee form part of their employment income and must be disclosed even if they may not be subject to normal tax.
- Employees will not pay tax again on non-cash benefits provided as this is a final tax paid by the employer.
- The taxable value of the benefits will not be included in employees’ employment income for the purposes of determining PAYE deductions.
- Once a benefit is subject to Fringe Benefit Tax, it is not subject to income tax.
- Fringe Benefit Tax paid is not an allowable expense/deduction to the employer.
- Fringe Benefit Tax is a self-assessment tax; therefore the employer’s Fringe Benefit Tax return will also serve as your notice of Fringe Benefit Tax assessment.
- Fiji nationals employed by Diplomatic and Consular Missions and certain public international organizations that are exempt from tax under a convention or other international agreement will be required to personally account for the tax on those benefits, as is the case with PAYE tax.