1. DEDUCTIONS & EXEMPTIONS Lecturer: Arvin Ajay Sami
LAW 601 – TAXATION LAW
DEDUCTIONS
&
EXEMPTIONS
Lecturer: Arvin Ajay Sami
5/11/2017

2. Overview PAYE Deductions: Chargeable income or taxable income
Individuals
Business
Chargeable income or taxable income
5/11/2017

3. PAYE
Pay As You Earn (PAYE) is a system for the collection of tax monies from taxpayers deriving income from employment
Two essential features:
Payments made to CIR throughout tax year as income from employment is derived
Payments remitted by employer rather than employee

4. PAYE (cont’d) Advantages of the system:
State receives tax revenue attributable to employment income as a steady stream throughout the year
State is preserved from potential large bad debt where workers fail to budget for a single year end tax payment
CIR deals only with employers, ie. much smaller group of persons rather than employees

5. PAYE (cont’d)
Employers to register with CIR for PAYE purpose prior to carrying on trade, etc. under regulation 3
Information will be used by employer in determining quantum of employee’s PAYE deduction
Employees with more than one job, files a declaration with one employer only (ie. one who pays greater income) reg.4(1)(d)

6. PAYE (cont’d) PAYE deduction
Actual sum to be deducted by an employer is determined by reference to tax tables
Figure relied on in using tax tables is employee’s taxable emoluments for relevant pay period
Tax tables prepared by CIR and amended every time there is a change in tax rates or tax brackets applicable to individuals
Table states the sum (expressed in dollars and cents) to be deducted from a given value of taxable emoluments

7. PAYE (cont’d)
Different tables apply dependent on whether salary or wage are paid weekly, fortnightly or monthly
Table serve two objectives:
They provide a simple means for employer to determine the sum to be deducted
Tables aim to ensure the aggregate deduction for the year will approximately as closely as possible the assessed tax liability for the year
5/11/2017

8. PAYE (cont’d)
Sums deducted by an employer pursuant to the regulations must be remitted to the CIR by the 15th of the following month (reg.12)
Employer provides employee annual certificate of deduction detailing aggregate emoluments and PAYE deductions for the year
Employee utilises certificate of deduction in making his annual return. Only when the employee has other sources of income apart from full – time employment.

9. Deduction – Resident Individual
A resident’s chargeable income is total income for the year less any available deductions

10. Tax on income Income Tax Act Cap 201 imposes a number of taxes
First, there is a general tax on income
When people talk about income tax it is usually normal tax which they have in mind
Second, there are a number of specific taxes, each imposes a tax on a single specific form of income eg. Interest, dividends or royalties

11. Normal tax
Normal tax is levied by s.7 of the ITA on the ‘chargeable income’ of individuals (s.7(1)(a)) and companies (s.7(1)(b))
s.7(1)( c )(d) and (e), Mutual insurance companies, non-resident insurance companies and non-resident shipping companies constitute special cases
s.7 does not provide details on tax rates
Rates of normal tax are set out in Schedule 4
s.7(3) provides the link to schedule 4
Normal tax is levied for the year of assessment

12. Chargeable income Taxable income or chargeable income:
Normal tax is levied on a person’s ‘chargeable income’
Or more strictly speaking, levied on a person with regard to their chargeable income
The ITA provides five different accounts of chargeable income as follows:

13. Chargeable income (cont’d)
The ITA provides 5 different accounts of chargeable income as follows:
s. 24,
category of taxpayer: resident individual,
definition of chargeable income: total income for the year derived in Fiji or elsewhere less deductions

14. Chargeable income (cont’d)
s.31
category of taxpayer: non- resident individual,
definition of chargeable income: total income for the year derived in Fiji less deductions in s.31
s.32(a)
category of taxpayer: resident company,
definition of chargeable income: total income for the year derived in Fiji or elsewhere

15. Chargeable income (cont’d)
s.32(b)
category of taxpayer: non- resident company,
definition of chargeable income: total income for the year derived in Fiji
s.33
category of taxpayer: deceased estate, trust or settlement,
definition of chargeable income – total income for the year

16. Chargeable income (cont’d)
For each class of taxpayer, except deceased estates, trusts and settlements chargeable income is defined with reference to three elements:
Total income
Income period
Geographic source

17. Total income Major concept introduced in s.11
It concerns the forms of receipts (eg. salary, interest, etc.) and expenses (eg. repairs and maintenance) that enter into the calculation of a person’s overall net income

18. Income period This is a year
For a company or individual operating as a sole trader or partner this may be other than a calendar year (s.51(2), s.52, s.53)

19. Geographic source of income
For a non-resident (company or individual), this is Fiji sourced income
For a resident (company or individual), this is worldwide income
There is no geographic reference in the chargeable income definition for deceased estates, trusts and settlements