Fiji has various industry specific tax concessions, available under the 2017 to 2018 Budget, designed to encourage economic growth and much needed investment in certain sectors.

In this update we look at the tax incentives available in the tourism sector, particularly in hotel investment, and set out a brief outline of what tax benefits investors in this sector could enjoy.

Hotel Investment Tax Incentives Regulation

The Income Tax (Hotel investment Incentives) Regulation came into force on 1 January 2016 and makes two types of tax incentives available to investors interested in investing in Hotel and Tourism Industry in Fiji.

Types of Incentives Available

There are two types of incentives available:

1. The Standard Allowance (“SA”); and
2. The Short Life Investment Package (“SLIP”).

In brief, these incentives may be differentiated as follows:

• The Standard Allowance applies to any level of capital investment in a hotel project, in accordance with the following parameters
• exempts an amount of taxable income equal to 25% of the total capital expenditure in the hotel investment project, from the investor’s taxable income provided that there is no shift of tax revenue to other countries
• provides the investor the right to carry forward losses for the next 4 years in succession and set those off against the total income of the hotel business or the total income derived from the hotel premises
• provides that the project must be completed within 24 months from the date of provisional approval is granted by the Minister
• a provisional approval may be granted based on a sketch plan showing in sufficient detail the site and layout of the proposed hotel or extension and the amenities (i.e. an approved and certified plan is not required at this stage).

• The Short Life Investment Package only applies to capital investment in a hotel project over FJ$7 million, and in accordance with the following parameters:
• exempts from import duty, all “capital goods” imported within twenty four months from the date of provisional approval of the SLIP
• on the condition that the investor must establish that the imported capital goods cannot be produced locally in Fiji
• provides that, upon final approval from the Minister, all profits derived from the operation of the hotel are exempt from tax for a period or 10 years, for an investor who applied prior to 01 January 2017 or for a period or 4 years, for an investor who applied after 01 January 2017
• provides the investor the right to carry forward losses for the next 4 years in succession and set those off against the total income of the hotel business or the total income derived from the hotel premises
• provides that all these benefits are subject to the investor company’s shareholders remaining “substantially the same” as the shareholders of the investor company when the provisional approval was granted
• provides that the 24 month time frame can be extended by the Minister if the investor can establish that any delay is due to unforeseen circumstances or some other act beyond the investor’s control.

The tax incentives are granted in two stages. A provisional approval is first granted to the investor and upon completion of the project a final approval may be granted.

It is important to note that an applicant cannot apply for both incentives.

What Projects Qualify?

To qualify for Standard Allowance, the investor must either:

• build a new hotel
• extend an existing hotel or any refurbishment and renovation thereof
• buy units in a hotel or in an integrated tourism development.

To qualify for Short Life Investment Package:

• the project must have a capital investment of over FJ$7m
• the project must have commenced after 01 January 2009
• the capital investment includes the cost of support infrastructure and overseas consultant fees but excludes the cost of land
• the project must not be for renovations
• the project must be completed within 24 months from the date of grant of the provisional approval (unless the timeline is extended by the Minster).

Interesting Definitions to Note

“Refurbishment and Renovations” means any substantial construction works which has the effect of restoring the hotel building to a sound and new state; or reconstructs, remodels, alters, upgrades or augments the interior of an existing hotel building so as to form new rooms or alter the sizes of existing rooms.

“Island Resort” means any resort that is separated by 15km or more of sea from Viti Levu.

“Integrated tourism development” means the development of a hotel and the subdivision and sale of residential lots, including the development of jetties, moorings, recreational facilities and other amenities.

“Hotel” means any premises in which accommodation is supplied to or is available to be supplied to persons in exchange for money or other valuable consideration, which includes a villa for resort purposes; a retirement resort.

For further information please contact: Atu Siwatibau: atu@sas.com.fj; Artika Prasad: artika@sas.com.fj; or Seini Tinaikoro: seini@sas.com.fj

Please note:

This commercial law update is provided for general information purposes only and it is not, and should not be relied on as, legal advice.