The Fijian government introduced the Environmental Levy (“EL”) via the Environment Levy Act 2015 (“the Act”) and the EL came into effect from 1 January 2016.
The EL generally applies to tourism and hospitality sector – a detailed list of businesses to which the EL applies is set out in the Schedule to the Act. The EL is levied at 6% on turnover of the businesses prescribed by the Environment Levy Act and is required to be billed to the customers.
The Act itself does not state the purpose for which EL is levied or how the EL collected by Fiji’s tax authority (Fiji Revenue and Customs Authority) is to be applied. The imposition of the EL has remained controversial with the tourism and hospitality sector with operators complaining about erosion of their competitiveness with their international competitors due to higher prices payable by the consumer.
Any business, to which the Act applies, is required to register immediately for the EL. Businesses must complete EL registration 30 days prior to the commencement of the business. The Act sets how the EL is to be applied, collected and paid to the tax authority. The Act also contains penal provisions for non-compliance.
Whilst the EL is charged to the consumer, it has the effect of increasing the overall cost of goods and services provided in the highly competitive tourism and hospitality sector. Apart from EL, services providers are also required to levy VAT (9%) and Service Turnover Tax (10%) bringing the overall tax paid by the consumer to 25% of the value of the service or good.
Investors and particularly those who want to invest in the tourism and hospitality sectors of Fiji should determine whether or not the EL would apply to their business or not. This is necessary for compliance with the Act but is equally important for businesses to properly develop costing models for their goods and services that would be provided by the business in a very competitive environment.
Fiji has proven to be a great investment destination for investors wanting to invest in the tourism and hospitality sector however getting the right advice is highly recommended.