Whether it is buying your first home or selling your property, it is always advisable to do your homework first and ensure that you are aware of the taxations involved.
With the two grants being handed out by the Fijian Government - First time home owners along with the first time land owners, there is expected to be a rise in housing and property market. However, before diving straight into it, it is best to understand the legalities and the taxations involved in the process of purchasing your very own property.
Buying your house
Owning your first home is a dream come true for many and it is an item you can check off your bucket list. However, in Fiji it is very important to remember a few things and to always crosscheck to make sure that you are not on the losing side.
For the ready built homes or homes that you are buying off someone, it is always advisable to check before you put pen to paper.
If you are engaging a real estate agent, always ensure that the sales and purchase agreement which has been drawn up has been closely scrutinised by yourself, your lawyer and your accountant. This is to ensure that there are no loopholes or ensure that you do not have to fork out more money then what is stipulated in the Agreement.
In Fiji, when purchasing a property, all arrears owing for the property will be transferred to the new owners and as such, it is important to ensure that when you sign a Sales and Purchase Agreement, this matter is addressed. Always ask to see updated and current utility bills and if dealing with Housing Authority, always ask for a statement from the Authority to see if payments are on time. These simple checks will ensure that you are not left having to dig deeper into your pockets.
Stamp duty is always charged on all legal documents. This is charged on a range of written documents mainly transfer of land leases along with finance and security documents.When you purchase a property from someone, stamp duty is charged at 3% on the amount paid for property whilst 1.75% is charged on the principal sum for loan agreements, mortgages and other security instruments. Transfer between close family members are generally exempt from stamp duty.
Non residents who purchase properties in Fiji are subjected to 10% on the consideration paid for real property whilst 5% stamp duty is paid on the principal amount for mortgage.
Buying your land
Purchasing a plot of land then designing your very own home is a dream for many families. In Fiji, there is a high demand for land especially in urban and peri urban centers around the country.
The Consumer Council of Fiji is calling on those who are buying properties especially land to make sure that the final price given to you is VAT inclusive. The Council says that with another incentive is where Government will refund VAT paid on purchase of or construction of the first family home for first time buyers. As such, it is always advisable to ensure that all dealings are handled with VAT inclusive prices or VIP if you are looking at getting a refund. Under the VAT Decree 1991 a tax is charged and borne by the final consumer of the goods and services and as such, the final price will be a little higher.
Therefore when dealing with real estate agents, always ensure that the final price is VAT inclusive. It will never hurt to ask the Agent to enquire with the vendor for a VAT inclusive price.
Once you have secured the property, now the attention will turn to your home. Use contractors who charge VAT. Always ask that the vendor purchases from a company that is registered and charges VAT as well.
Secondly, always ensure that you keep original receipts as well as all original documents. This is for you to claim your refund and to also ensure that you are following the law and for your references as well.Knowing that as time passes, it may be lost along the way, have an electronic copy or take a picture or scan the receipts and all documents and back it up to ensure that there is no paper lost. All these documents are needed in order to take advantage of the VAT refund currently being offered by the Fijian Government.
Selling your house:
At a point in your life, you will consider selling off your current property in order to buy another that meets your needs or that of your expanding family.
Selling your house is a big step and it is advisable to take into account the various taxes and steps to ensure that the process is smooth for both yourself as the vendor and the purchaser and any parties involved.
Capital Gain Tax
Capital Gain Tax came into effect on the 1st of May 2011 in Fiji and it replaced the Land Sales Tax. This Tax is levied on profits or gains from the disposal of capital assets. It is imposed and collected on self assessment basis and the vendor is liable for the tax.It is calculated on the VAT exclusive price or VEP of the asset being sold.
Disposal when referring to Capital Gains Tax or CGT means the transfer of ownership of an asset from one person to another and is deemed to be made only when the transfer document has been tamped and cleared by the CEO of the Fiji Revenue and Customs Services.
The tax applies on any gains from disposal of taxable assets by Fiji residents whether or not the asset is in Fiji or not however for non-residents, the tax only applies on gains arising from disposal of taxable assets that are Fiji assets.
A Capital Gains Tax return must be filled within one month after the disposal of the capital asset regardless of whether a gain or loss has been made. Payment should be made one month after the disposal of asset. Failure to lodge CGT will see a person liable for penalties. Late lodgement incurs a penalty of 20% on the amount of CGT payable whilst late payment attracts a penalty of 25%.
When you lodge your CGT Return form, ensure that you have all the supporting documents such as the CGT Return Form,copy of the stamped transfer document, CGT Declaration form, copy of previous transfer dealing, copy of stamped agreement made with the real estate agent and copy of the title. The forms will then be dropped off with FRCS for processing.
Dealing with real estate agents
Real Estate agents in Fiji are governed by the Real Estate Agents Act 2006. In this Act, it is stipulated that all agents are to have a trust account and this is where all monies with regards to any real estate transaction will be deposited.
As such, it is important to note this when dealing with an agent or a salesperson. However, if the real estate agent is asking that you deposit money for downpayment into a personal account, be cautious.There has been reports of fraudsters taking money and promising properties and disappearing. There are cases before the Fiji Courts as well as with the Fiji Police Force and there has also been successful prosecutions.
The Real Estate Agents Licensing Board or REALB looks after and issues licenses to real estate agents as well as certifying persons to act as real estate salespersons in the country. Always contact them to ensure that you are dealing with a valid real estate agent and if you are unsure, you can call and ask for their public register.
REALB also handles complaints of fraudsters or bogus agents. They work closely with other Government Bodies and statutory Organisations to catch these people. While commission is still in talks to be regularised, it is very important to read your agreement as once it is signed, it becomes a legal binding document.