Capital Gains Tax (CGT)
(Replaced Land Sales Tax with effect from 1 May, 2011)
What it is?
Capital Gains Tax (CGT) is a tax that is levied on profits or gains realized on the disposal of capital assets, at the rate of 10%, with effect from 1 May, 2011.
Capital Gains Tax is imposed and collected on a self-assessment basis and the vendor is liable for the tax. It is computed on the VAT Exclusive Price (VEP) of the capital asset. It does not apply to trading stock or assets that are not listed in the Income Tax Act 2015.
Disposal includes any transaction whereby ownership of an asset is transferred from one person
to another. For CGT purposes, a transfer is deemed to be made once the transfer document is
stamped and cleared by Chief Executive Officer.
Who it applies to?
The tax applies on gains arising from disposal of taxable assets, by Fiji residents, irrespective of whether the asset is located in Fiji or not. Resident persons can claim foreign tax credit in
relation to disposal of foreign capital assets if tax was paid offshore. However, for non-residents the tax only applies on gains arising from disposal of taxable assets that are Fiji assets.
The person who is required to comply with the requirements of the Income Tax Act 2015 should first of
all obtain a Taxpayer Identification Number (TIN). Registration forms are also available from any FRCS Customer Service Centre.
Assets that are subject to CGT
The following are the capital assets that attract capital gains tax upon disposal but subject to exemption and deferral provisions, as provided for in the Income Tax Act 2015:
- Real property, structural improvement or an interest in real property
- Vessels of over 100 tonnes e.g. ship
- Ship and Boats
- A membership interest in a company, security or other financial asset
- Intangible assets e.g. goodwill
- An interest in a partnership or trust
- An airplane, helicopter or other aircraft
- An option, right or other interest in an asset but does not include trading stock, depreciable asset or a business intangible
Exempt Capital Gains
- a capital gain made by a resident individual or Fiji citizen that does not exceed FJD$30,000;
- a capital gain made by a resident individual or a Fiji Citizen on disposal of either the individual’s first residential property or principal place of residence;
- a capital gain made by a person on the disposal of shares listed on the South Pacific Stock Exchange;
- a capital gain made on disposal of an asset that is used solely to derive exempt income;
- any gain made by a person on the disposal of an interest in a company which is a trust, approved as a managed investment scheme under the Companies Act and includes a unit trust to which section 743 of the Companies Act applies;
- a capital gain made by a resident individual or a Fiji Citizen on disposal of his or her interest in a family home, provided that the disposal of the interest is by way of transfer to an existing joint tenant or tenant in common;
- a capital gain made by a resident person from the sale of shares where a private company goes through re-organisation, restructure or amalgamation for the purposes of listing or as part of a listing process on the South Pacific Stock Exchange, provided that—
(i) the private company is listed on the South Pacific Stock Exchange within 24 months from the date of commencement of re-organisation, restructure or amalgamation; and
(ii) where the private company is not listed with the South Pacific Stock Exchange in accordance with sub-paragraph (i), the gain from the re-organisation, restructure or amalgamation of the private company shall be taxable under this Act;
- a capital gain made by the trustee or beneficiary of a deceased estate on the disposal of an asset forming part of the estate that, if the gain had been made by the deceased on a disposal of the asset immediately before death, the gain would be an exempt capital gain to the deceased, but only when the asset is disposed of by the trustee or beneficiary within 2 years after the death of the deceased or within such further time as the CEO allows.
Deferral of recognition of capital gain
For the purpose of Capital Gains Tax, no capital gain is taken to arise on the disposal of Capital Assets
by the transferor in any of the following cases:
- Disposal of an asset between spouses (including partners in a de-facto relationship) as part of a divorce settlement or under an agreement to live apart.
- Disposal of an asset by reason of the transmission of the asset on the death of a person to an executor or beneficiary of the person’s estate.
- Transfer of a principal place of residence, first residential property, an interest in a capital asset, or shares in a company, by reason of love and affection between spouses (also includes the de-facto relationship), siblings, parents to children and vice versa, and grandchildren to grandparents and vice versa.
- Disposal of an asset by reason of loss, destruction or compulsory acquisition of the (referred to as the “replaced asset”) if the consideration for the disposal is reinvested by the recipient in an asset of a like kind (referred to as a “replacement asset”) within one year of the disposal or within such further period as the CEO allows.
However, the transferee may be liable for Capital Gains Tax should it be disposed at a gain at a later date.
No Gain or Loss on Re-Organization
- a) a resident individual (referred to as the “transferor”) disposes of an asset, with or without liability not in excess of the cost of the asset or, in the case of a depreciable asset, written down value, to a resident company (referred to as the “transferee”) and the transferee is wholly owned by the transferor; or
- b) a resident company (referred to as the “transferor company”), disposes of an asset, with or without any liability not in excess of the cost of the asset or written down value in the case of a depreciable asset, to another resident company (referred to as the “transferee company”) and the transferor company is a group company in relation to the transferee company,
- no gain or loss is taken to arise on disposal of the asset;
- the transferee or transferee company is treated as acquiring an asset of the same character as the asset disposed of by the transferor or transferor company; and
- the transferee or transferee company’s cost on acquisition of the asset is equal to the transferor or transferor company’s cost of the asset or, in the case of a depreciable asset, written down value at the time of disposal.
Accounting for Capital Gains Tax
A Capital Gains Tax return must be filed within one month after the disposal of the capital asset regardless of gain or loss made except for disposal of shares listed on the South Pacific Stock Exchange (SPSE).
The related Capital Gains Tax payment should be made within one month after the disposal of the capital asset.
Failure to lodge CGT returns and make necessary payments will render you liable for penalties. Capital Gains Tax returns lodged late will attract late lodgment penalty of 20% on the amount of CGT payable. Capital Gains Tax paid late will attract late payment penalty of 25% on the amount of CGT payable.
Lodging of Capital Gains Tax Return & Supporting Documents
It is mandatory for the solicitor, accountant or the vendor to lodge the following documents with FRCS to facilitate the processing and issuance of a Capital Gains Tax certificate.
The following documents shall be lodged together with the Capital Gains Tax return.
|Capital Gains Tax CHECKLIST|
|1||Capital Gains Tax declaration form (IRS 228)|
|2||Capital Gains Tax return form (IRS 230)|
|ADDITIONAL INFORMATION THAT MAY BE REQUIRED|
|3||Breakdown and evidence of capital improvements|
|4||Written confirmation of the vendor’s address as opposed to the location of the property|
|5||Passport and visa of the vendor if they are residing overseas|
|6||Valuation report for non-arm’s length transaction and selling of commercial property below the acquisition cost|
|7||Evidence of the source of fund if major structural improvement is done on the property|
|8||Loan offer from the bank if the property is under mortgagee sale|
|9||Sale and purchase agreement|
Refer to the following Standard Interpretation Guidelines for more information:
- SIG 2020 – 31 Income Tax Act 2015- Disposal of Real Property Outside of Taxable Activity
- SIG 2020 – 32 Income Tax Act 2015 – Section 88 – Re-Organization
The application and Capital Gains Tax return is to be lodged with the assessing officers located at the Customer Service Centre in Suva & Lautoka. Capital Gains Tax returns can also be lodged in other FRCS offices. Both Suva and Lautoka office process CGT.
For more information please email email@example.com