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:
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:
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:
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.
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.”
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.”
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