LAW 601 – TAXATION LAW
DEDUCTIONS
&
EXEMPTIONS
Lecturer: Arvin Ajay Sami
31/07/2017
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Overview
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PAYE
Deductions:
Individuals
 Business
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Chargeable income or taxable income
31/07/2017
2
PAYE
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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
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PAYE (cont’d)
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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
PAYE (cont’d)
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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)
PAYE (cont’d)
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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
PAYE (cont’d)
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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
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31/07/2017
7
PAYE (cont’d)
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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.
Deduction – Resident
Individual
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A resident’s chargeable income is
total income for the year less any
available deductions
Tax on income
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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
Normal tax
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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
Chargeable income
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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:
Chargeable income
(cont’d)
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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
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Chargeable income
(cont’d)
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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
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s.32(a)
category of taxpayer: resident company,
 definition of chargeable income: total income for
the year derived in Fiji or elsewhere
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Chargeable income
(cont’d)
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s.32(b)
category of taxpayer: non- resident company,
 definition of chargeable income: total income for
the year derived in Fiji
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s.33
category of taxpayer: deceased estate, trust or
settlement,
 definition of chargeable income – total income for
the year
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Chargeable income
(cont’d)
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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
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Total income
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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
Income period
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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)
Geographic source of
income
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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