Fiji is the latest international tax jurisdiction to propose an extension of its VAT system to bring the sales of cross-border digital services into scope.

The sales of such digital services, or remote services as they are referred to in the Fiji VAT Bill that is before Parliament, look set to trigger VAT registration obligations for affected digital service suppliers and electronic marketplaces.

Fiji is following the path of its Oceania neighbours Australia and New Zealand in this regard. Australia and New Zealand have amended their Goods and Services Tax (GST) rules in the past number of years to bring such online digital sales into the scope of their taxation systems. Fiji is now proposing to do likewise if the VAT Bill is passed into law.

Here are some headline details:

• Tax authority:  Fiji Revenue & Customs Service (FCRS)
• VAT rate:  9%
• Threshold: FJD$300,000 (circa £106,000, €125,000, or USD$137,000)

Fiji’s definition of remote services

Fiji’s VAT bill defines “remote services” as services where, at the time of the supply of the services, there is no necessary connection between:

1. The place where the services are physically performed; and
2. The location of the recipient of the services

A recipient of a supply of the above-defined remote services is treated as a resident of Fiji if at least two of the following factors support that conclusion:

1. The recipient’s billing address;
2. The internet protocol (IP) address of the device used by the recipient or another geolocation method;
3. The recipient’s bank details, including the account that the recipient uses for payment or the billing address held by the bank;
4. The mobile country code of the international mobile subscriber identity stored on the subscriber identity module card used by the recipient;
5. The location of the recipient’s fixed land line through which the service is supplied to the recipient;
6. Any other commercially relevant information.

Fiji’s VAT Bill is proposing to use the pieces of evidence that have become common in other international implementations of such rules on taxing the cross-border supply of digital (remote) services. One of the first tax jurisdictions to list such pieces of evidence was the European Union (EU) back in 2015 and other jurisdictions have taken their lead from this.

Fiji’s electronic marketplace definition

As is becoming more and more common, Fiji also includes a definition of an “electronic marketplace” in its VAT Bill. Again this is an attempt to future-proof potential legislation as the means for selling digital services evolve.

In Fiji’s VAT Bill an ‘electronic marketplace’ means “a website, internet portal, gateway, store, distribution platform, or other similar platform that is operated electronically through which an underlying supplier makes a supply of remote services electronically through another person (the operator of the marketplace) to a third person (the recipient), but does not include a marketplace that solely processes payments.”

Background to Fiji VAT Bill

This news comes at a time when Fiji is seeking to improve its overall VAT take, a common reason for jurisdictions to amend their rules when it comes to taxing cross-border digital sales.

A recent report from Fiji’s Reserve Bank stated that the growth in net VAT collections remained relatively lower in 2019 compared to 2018. One of the reasons for this slowdown was the “stalling of large construction projects and a decline in job advertisements in the country.”