The Fiji Trade and Investment Board (FTIB) has recently launched a new website and the Government has announced that it is undertaking a review of the foreign investment regime in Fiji.

New FTIB website and review of foreign investment laws

The Fiji Trade and Investment Board (FTIB) has recently launched a new website and the Government has announced that it is undertaking a review of the foreign investment regime in Fiji.

Foreign investment in Fiji is currently governed by the Foreign Investment Act 1999 (Fiji), as amended by the Foreign Investment Amendment Act 2004 (Fiji) (together the Act). The Act lays down the guidelines under which a foreign investor can and must invest in Fiji.

The FTIB is established under the Act and is the Fiji statutory authority that issues foreign investment certificates (FIC). A foreign investor must not engage in an enterprise or be intending to be engaged in carrying on business in a relevant activity in the Fiji Islands (section 3 of the Act refers). A civil penalty of $50,000 is imposed under the Act for those investors carrying on business without a FIC.

In our recent dealings with FTIB we have found that FTIB interprets the provisions of the Act, particularly the concept of ‘carrying on business’ in a very wide manner. It appears to us, although anecdotally, that FTIB’s aim is to capture any foreign activity in Fiji within the ambit of the Act.

Activities such as an overseas holding company that holds a nominal share to satisfy Fiji’s minimum two shareholder requirement under the Companies Act [Cap 247] are also being classified as ‘carrying on business’ in Fiji. This wide interpretation has the potential to catch out many unweary “investors” in Fiji. We recommend that you consider your current Fiji investments, agency relationships, branch office operations, subsidiaries and the like, to ensure legal compliance in Fiji.

Tax concessions and the SPSE Listing Rules

The Government announced in its November 2009 Budget that companies listed on the South Pacific Stock Exchange (SPSE) would have a reduced Fiji corporate tax rate of 20 percent, as opposed to the 28 percent paid by unlisted companies. A new provision in the Income Tax Act (Cap 201) was inserted on 1 January 2010 to give effect to this new rule. The new rule covers the 2010 Fiji tax assessment year and then every subsequent year, and requires that a company is listed on the SPSE for a minimum of 3 years and has a minimum of 40 percent Fiji resident shareholding.

The purpose is to encourage companies to list on the SPSE encouraging participation in the Fiji capital markets. Those corporate directors considering listing on the SPSE should note that the SPSE was established under the Capital Markets Development Authority Act 1996. The previously independent Authority has now become a business unit of the Reserve Bank of Fiji.

Despite that, the SPSE Listing Manual which was enacted in 1979, and largely modelled on the former ASX Listing Rules has not been amended. The aged Listing Manual largely reflects the fact that the first Fiji stock exchange was established in 1979 called the Suva Stock Exchange, which was a wholly owned subsidiary of the Fiji Development Bank. Needless to say that the Listing Manual is out of date and requires careful consideration before any decisions are made regarding SPSE listing in order to qualify for the reduced Fiji corporate tax rate of 20 percent.

This article has been prepared for the general information of clients and contacts of PLN Lawyers Sydney and the affiliated firms of the Pacific Legal Network. While it deals with and comments on the law in specific areas it is not intended nor should it be used, as a substitute for specific legal advice as legal counsel may only be given in response to inquiries regarding particular situations.

PLN News May 2010