ACC402 - Foundation Accounting Topic 2 - INCOME TAX FOR SALARY AND WAGE EARNERS Week 4 lecture 1

What is income tax?? --- who pays tax ? What incomes’………… are tax??? Personal Income tax is an Obligations of salary and wage earners in fiji.. A person who is required to pay tax on personal income earned such as salary, wages and other emoluments must lodge a return of income  IRS200 - Salary & Wage Earners Return  by 31 March each year.

Registration – Salary and Wage Earners Who should get registered for income tax purposes? Under our tax laws, salary and wage earners are required to lodge returns of income or information. For this reason, they need to be registered for income tax purposes.  Those who should be registered and file returns are: individuals earning income from employment individuals that receive income from business/investments Every person must have a Tax Identification Number (TIN). How Do I Register? * fill in form IRS001

For Personal Income Tax – Salary & Wage Earners What is the income tax threshold? The income tax threshold for resident individuals as of 1 January, 2012 is FJ$15,600, and now upgraded to $16, 000. What does this mean ? Tax liability is zero.. What about the non- residents???

This is done in one of the following ways : PERSONAL INCOME TAX- Wage and Salary Earners: Employers have a legal obligation to deduct PAYE as now the final tax from their employees’ weekly wages or salaries .The amount deducted is used by the government to pay for public services. Most individuals pay tax in advance before submitting their tax returns. This is done in one of the following ways : PAYE tax deductions made by their employers Provisional tax paid by the business people.

As of 2013 PAYE deductions as as final tax obligations made to govt. If the tax that has been paid is greater than the amount of tax assessed, a refund was be made to the tax payer… as of 2012 returns. However If the tax that has been paid is less than the amount of tax assessed, a tax payer will be required to pay the amount due to Fiji Revenue and Customs Authority As of 2013 PAYE deductions as as final tax obligations made to govt.

IRS200; S Form (formally known as P25) is used by the PAYE taxpayers to claim for a refund or tax payable. This needs to be submitted before 31st March of each year to Fiji Revenue and Customs Authority

TAXPAYER FILE NUMBER Every taxpayer / Individual has a tax file number (TIN) What incomes are taxed….s11.(FITA) There are three main categories of incomes of individuals, namely: income from employment. income from property. income from business/investments.

Income from employment For taxpayers that receive income from employment, their total income will include income from emoluments. This includes: salary, wages, overtime, bonus, remuneration. gratuities. the estimated annual  total of any quarters or board or residence. the estimated annual  total of any other allowance granted in respect of employment (in cash or kind). commission, or other amounts for services. directors’ or management fees. retiring allowances or pension, accruing in, derived from or received in Fiji. All incomes are subject to tax, however, some payments are exempt from tax. Special provisions for exemptions are available in the Income tax Act Revised 30th August 2012.

Emoluments does not include any salary or share of profits arising from a trade, business, profession or vocation carried on by any person either by himself or in partnership with any other persons. An employee who also receives income from business or share of estate/ partnership must lodge a business return – IRS202(Form B)…. Income other than wage and salary

Income from business/investments This includes the following: interest received from savings and term deposits with financial institutions under the Banking Act. interest received from loans/money lending whether licensed or not. dividends received from shares/investments.

Income from property This includes the following: rental/lease income (excluding native lease), whether derived individually, through a Real Estate Agent or the government.

Deductions / allowances / rebates No allowances… as from 2013

How are you taxed currently .. CHARGEABLE INCOME / TAXABLE INCOME Is the differences between the total income and prescribed allowance TOTAL INCOME – ALLOWANCE AND REBATE = CHARGEABLE INCOME Normal tax rates * chargeable income = income tax liability.

Tax Rates For calculating NORMAL TAX Normal tax is levied on Chargeable income ( i.e. Total income less exemption and allowances). There are separate rates of normal tax for resident and non-resident individuals. INCOME tax table is use to calculate the normal tax – the amount of tax that is levied upon the chargeable income. Each year income tax rate rates and allowances are subjected to change .

Residents & non-residents – S2 FITA A person is regarded as a resident if his/her permanent home or place of residence is in Fiji. If a person is not normally a resident in Fiji , he/she may be regarded as a resident if he/she has actually been in Fiji , continuously or regularly during more than one-half of the income year. He/she must satisfy the Chief Executive Officer that he/she will take up residency in Fiji. Residents are taxed on their worldwide income (all sources) . A resident individual  for income tax purposes is a person (other than a company) who resides in Fiji , is domiciled in Fiji or has been in Fiji for more than half of the income year Non-residents are taxed only on their income derived or earned in Fiji.

Relief from Double Taxation for our residents Double taxation of residents is avoided by allowing credits for foreign tax paid on income derived from countries with which Fiji has tax treaties. Fiji allows unilateral relief from double tax on income from non-treaty counties, provided the income has been subject to tax in that other country. Fiji has entered into agreements for the avoidance of double tax with the countries …UK, Fiji & UAE, NZ, PNG, Japan, Australia, Malaysia, Korea, and Singapore.  

Social Responsibility Levy 2013 RESIDENTS TAX RATES Chargeable Income ($) Tax Payable ($) Social Responsibility Levy 0-16000 Nil 16,001 – 22,000 7% of excess over $16,000 22,001 – 50,000 420 + 18% of excess over $22,000 50,001 – 270,000 5,460 + 20% of excess over $50,000 270,001 – 300,000 49,460 + 20% of excess over $270,000 23% of excess over $270,000 300,001 – 350,000 55,460 + 20% of excess over $300,000 6,900 + 24% of excess over $300,000 350,001 – 400,000 65,460 + 20% of excess over $350,000 18,900 + 25% of excess over $350,000 400,001 – 450,000 75,460 + 20% of excess over $400,000 31,400 + 26% of the excess over $400,000 450,001 – 500,000 85,460 + 20% of excess over $450,000 44,400 + 27% of the excess over $450,000 500,001 – 1,000,000 95,460 + 20% of excess over $500,000 57,900 + 28% of the excess over $500,000 1,000,001 + 195,460 + 20% of excess over $1,000,000 197,900 + 29% of the excess over $1,000,000

2013 NON RESIDENTS TAX RATES Chargeable Income ($) Tax Payable ($) Social Responsibility Levy 0-16000 20% of excess of $0 16,001 – 22,000 3,200 + 20% of excess over $16,000 22,001 – 50,000 4,400 + 20% of excess over $22,000 50,001 – 270,000 10,000 + 20% of excess over $50,000 270,001 – 300,000 54,000 + 20% of excess over $270,000 23% of excess over $270,000 300,001 – 350,000 60,000 + 20% of excess over $300,000 6,900 + 24% of excess over $300,000 350,001 – 400,000 70,000 + 20% of excess over $350,000 18,900 + 25% of excess over $350,000 400,001 – 450,000 80,000 + 20% of excess over $400,000 31,400 + 26% of the excess over $400,000 450,001 – 500,000 90,000 + 20% of excess over $450,000 44,400 + 27% of the excess over $450,000 500,001 – 1,000,000 100,000 + 20% of excess over $500,000 57,900 + 28% of the excess over $500,000 1,000,001 + 200,000 + 20% of excess over $1,000,000 197,900 + 29% of the excess over $1,000,000

Tax Refundable / Payable calculations IF the PAYE tax paid is greater than Normal tax = Tax Refundable IF the PAYE tax paid is less than Normal Tax = Tax Payable

Test yourself Calculate PAYE for the following wage or salary earners(primary employment) A base salary of $12,600 A weekly wage of $230 A base salary of $256000 A base fortnightly income of $800.00

Format :

END of Lecture ……. Thank You all.