SECTION A : MULTIPLE CHOICE (1 marks each, 15 marks in total)

Answer All the questions:

1.   International double taxation is caused by:

a.   Only Residence clash

b.   Only Source clash

c.   Can be both residence and source clash

d.   Permanent Establishment and Residence Clash

2.   Which of the following is correct:

a.   Dividend is currently taxed at a rate of 15% in Fiji

b.   Dividend is currently taxed a rate of 10% in Fiji

c.   Dividend is currently a final tax and is taxed at 0% in Fiji

d.   Dividend system currently allows for a deduction at shareholder level

3.   Which of the following is TRUE:

a.   Worldwide income tax system is about taxing of worldwide income at non-resident tax rates only

b.   Worldwide income tax system requires both the resident and non-resident taxpayers to declare their incomes on worldwide basis and pay tax at resident tax rates only

with credits allowed to resident taxpayers for income tax paid offshore

c.   Worldwide income tax system requires resident taxpayers to declare their income on worldwide basis and non-resident taxpayers on incomes derived from country of source and all these incomes are taxed on the rates that applies for both the category of taxpayers and with credits allowed to resident taxpayers for income tax paid offshore.

d.   Worldwide income tax system requires non-resident taxpayers to meet the 183 days rule to be taxed.

4.   Which of the following is TRUE:

a.   Partnership  entity  has  to  file  income  tax  return  and  pay  income  tax  on  the

partnership income                                                                                                     b.   Partnership entity files the income tax return but partners declare their share of

income in their own return and pay tax accordingly

c.   Partnership pay tax whilst partners only file return only

d.  None of the above applies

5.   Which of the following is CORRECT:

a.   If a foreign company has a Permanent Establishment (PE) status in Fiji then that foreign company must be taxed at the withholding tax rates on all of its income

b.   If a foreign company has as PE status in Fiji, then that company must pay income

tax in Fiji on its worldwide income.                                                                           c.   If a foreign company has as PE status in Fiji then that company must pay income

tax in Fiji on its Fiji sourced income attributable to that PE.

d.   PE rules states which companies should pay withholding tax only.

6.   Which of the following is TRUE:

a.   Income Tax Act 2015 provides for three types of different depreciation methods to calculate depreciation expense.

b.   3 year Loss carry backward is allowed under long term contract provision.

c.   Foreign Tax credit provisions as provided for under Fiji’s Income Tax only deals with Double Tax Agreement (DTA) countries.

d.   Income Tax Act doesn’t provide tax deductible for Fringe Benefits.

7.   Which of the following is INCORRECT:

a.   Income Tax Act 2015 defines Income to also include unidentified deposits;

b.   Income Tax Act 2015 provides transfer Pricing methods that can be used to

undertake a transfer audit

c.   Income Tax Act 2015 provides for tax deductibility for business intangibles

d.   Income Tax Act 2015 contains Thin Capitalization rules that provides interest deductibility rules based on a Debt to Equity ratio of 2:1

8.   Which of the following is INCORRECT:

a.   Interest income earned in Fiji is final tax

b.   Interest income earned offshore is not a final tax

c.   Dividend income is taxed and a deduction is allowed to taxpayers

d.   Per diem paid to employees for official travel is not taxed

9.   Which of the following is CORRECT:

a.   Current tax law allows for 8 years of loss carry forward

b.   Current tax laws allow for 6 years of loss carry forward

c.   Grouping of losses is allowed in Fiji

d.   Loss carry backward is allowed for all taxpayers for all activities in Fiji

10. Which of the following is strictly CORRECT:

a.   Tax disputes between two DTA partners can be solved through Mutual Agreement

Procedure article

b.   Tax  disputes between two DTA partners  can be  solved through Exchange  of Information article

c.   Tax disputes between two DTA partners can only be solved through Compulsory Arbitration

d.   Tax  disputes between the two DTA partners  can  only be  solved through the provisions contained in the domestic tax laws of each country

11. Which of the following is INCORRECT for Social Responsibility Tax:

a.   It is a tax on income for personal income taxpayers whose income exceeds $270,000

b.   It ensures that the personal income tax system maintains progressivity in an era of tax cuts

c.   It was always implemented using incremental system whereby only additional

dollar earned above $270,000 was taxed

d.   It does not apply to corporate entities.

12. Which of the following is STRICTLY TRUE for tax policy making:

a.   Tax policy requires a balance between tax effectiveness and tax efficiency supported by neutrality

b.   Tax policy requires a balance between economic efficiency and vertical equity and supported by simple administration

c.   Tax policy requires balance between economic efficiency and simplicity supported by horizontal equity

d.   Tax policy requires a balance between economic efficiency and equity which is

then supported by simplicity

13. Which of the following is not true on PAYE As A Final Tax:

a.   Employee will have to obtain employer tax declaration code from tax office in Fiji so that correct rate of tax can be applied by the employer

b.   Employer will have to obtain employee tax declaration code from employees to calculate correct PAYE Tax

c.   Tax office in Fiji is required by law to provide employee declaration code to employees so that PAYE tax can be correctly calculated by the employer

14. Which of the following is strictly true for income tax self-assessment in Fiji:

a.   Income tax self-assessment regime has not yet been legislated in Fiji;

b.   Income tax  self-assessment regime will  give  freedom to  income taxpayers to calculate income taxes themselves and pay after 30 days when their returns are accepted by the tax office in Fiji

c.   Income tax self-assessment will in effect be a situation where taxpayers return will be their assessment

d.   Income tax self-assessment only applies to corporate taxpayers in Fiji

15. Which of the following is true for Comparable Uncontrolled Price (CUP) Method:

a.   Under CUP method, prices a recomputed by looking price on another product of another independent enterprise.

b.   Under CUP method, prices of other associated enterprises are compared with that of another associated enterprise

c.   Under CUP method, prices of transaction between two independent enterprises are compared with that of that between two associated enterprises.

d.   CUP is a profits method of transfer pricing

SECTION B: APPLICATION QUESTIONS (10 marks each, 20 marks in total) Answer All the Questions

a.   An Australian company is providing Information Technology (IT) Services to a local university in Fiji. The IT services includes the development of a new system to manage students records. The project will involve deployment of Australian employees to the local university by that Australian company. The University will provide an office space for these employees for the duration of the development of the system that should be  for  2  years.  Explain  the  Fiji  tax position  of the  (i)  Australian  company;  (ii) employees of the Australian Company involved in the development of the IT system.

Suggested Answers (i)

(i)        Australian company will have to pay income tax in Fiji                                      (ii)       Permanent Establishment rules applies                                                                (iii)      Tax Treaty allows for application of income tax as it is consistent with PE rules

Suggested Answers (ii)                                                                                                    (i)        Employees will be taxed at resident rates as they are in country for more than

183 days.

(ii)       Domestic Income tax rules applies

b.   A Chinese company has been engaged to build a bridge in Fiji and the contract period is less than 3 years. About 75 workers has been brought from China to construct this bridge and after three years, these workers will go back to China. Explain the correct tax position of the employee and the 75 foreign employees.

Suggested Answers

(i)        Temporary residency rules apply

(ii)       Workers area under employment contract for 3 years

(iii)      Income Tax Act applies

(iv)      Resident tax rates applies.

SECTION C : ESSAY (15 Marks in total)

Answer the following question.