Proposed bill not clear

THE proposed Income Tax Bill is not clear whether disbursement cost are also included for charging Withholding Tax, says Fiji National Provident Fund (FNPF) Investment principal legal officer Siteri Saru.

FNPF made a submission to the Standing Committee on Justice, Law and Human Rights on the Income Tax Bill in Suva yesterday.

With the imposition of tax on investment, Ms Saru highlighted FNPF’s dealings with Fiji Revenue and Customs Authority (FRCA) showed a lot of inconsistencies in terms of the application towards fees and disbursement when it came to charging Withholding Tax.

She said Withholding Tax was applicable payment of fees made offshore.

Speaking to committee members, Ms Saru recommended that there was a need to be some clarification in the Bill on those aspects.

For reasoning, she said, the Bill should specify whether disbursement cost would also attract the Withholding Tax.

“In the case of Double Tax arrangement under section 140 for Withholding Tax, which provision will prevail in cases of non-residence?”

She asked whether FRCA could clarify the application of Double Tax Treaty to Withholding Tax.

Ms Saru also highlighted the selection of the method of depreciation for a particular asset should not apply to all depreciable assets, given the differences in classes of assets.

“It is recommended that there be some distinction on the method in accordance to classification of assets.”

She said the depreciation method used in one case should not be applied across all cases of assets. “The taxpayer should be at liberty to select which depreciation method should apply, whether it is diminishing value of straight line.”

She added FNPF currently exempted from paying any Resident Interest Withholding Tax on its interest earning under the current Income Tax Act (Cap 20) at section 17 (26).

In this event, she said FNPF purchase property offshore and leases tenant, the rental income would be subject to foreign income tax.

“So the concern is that since the fund does not submit the Annual Return Summary for its local earning under section 17 (26), the fund will not be entitled to any foreign tax credit.”

Committee chairman Ashneel Sudhakar said if individual or private contractor that comes from offshore and works in the country and the money was paid out; FRCA holds 15 per cent of that money as Withholding Tax.

Ms Saru said they had service providers coming from overseas and fees that were paid to those service providers were exclusive of disbursement.