Provisional Tax

Contract for Service

What is Provisional Tax?

Provisional Tax is a withholding tax on contractual payments and certain other payments for services


  • A commission for the provision of insurance;

  • A commission for the sale of any property, such as books, publications, buildings, land, etc; and
  • A payment under contract for service, including progress payments. 

Who is required to deduct the 5% Provisional Tax (PT)?

A business making a commission payment or payment under a formal contract for services is required to withhold 5% withholding tax (also known as provisional tax).


Provisional Tax Summary Filing

With the implementation of the TPOS, all contractee are required to create a filing obligation before they can submit their returns. Once the filing obligation is created, they can proceed with filing the return.
Conditions for applying PT are:


  • The service provider must be an “independent contractor” for tax purposes.

  • A contract (express or implied) exists.

  • The contract for service is a legitimate one and promotes arm’s length principle, meaning that the contract price between associates must be based on the fair market value.
  • The total payments paid to any one person is more than FJD$1,000 in a tax year.

Certificate of Exemption (COE)

Taxpayers can apply for COE on TPOS, read more about to how to apply on this link. COE certificate will only be issued if compliance checks are in order with tax obligations.

How to Calculate Provisional Tax

Example:

Assume service provider X has a formal contractual agreement with Company Y to provide cleaning services. Service provider X is also registered for VAT and will issue VAT Inclusive invoice of $1150 monthly for cleaning services rendered.

Calculate provisional tax to be withheld by Company Y from the monthly payment.
NB: Company Y must withhold the provisional tax on the VAT exclusive amount.

Step 1: Calculate VAT

VAT = VAT Inclusive Price x Tax Fraction

       = $1150   x   3/23

       = $150

Step 2: Calculate VAT Exclusive Price (VEP)

VEP = VAT Inclusive Price – VAT

       = $1150 – $150

       = $1000

Step 3: Calculate PT

PT = VAT Exclusive Price x 5%

     = $1000 x 5%

     = $50

Threshold for Provisional Tax Deduction

PT should only be withheld by a registered PT payer if the aggregate annual payment during any time of the year exceeds the threshold of FJD$1,000. If the aggregate annual payment is less than the threshold, then PT must not be withheld.
The onus is on the payer to ensure that once the contractual payments to a contractor exceed FJD$1,000, he/ she is required to commence withholding 5% PT from subsequent payments.

Due Date for payment of Provisional Tax withheld

PT withheld by a payer must be remitted to FRCS by the end of the month following the month in which it was deducted from the contractual payment. For example, PT deducted in January 2024 must be remitted to FRCS by the end of February 2024. Failure to comply with filing and payment obligation will incur 20% and 25% penalties under Section 43 & 44 of the Tax Administration Act 2009, respectively.

Contractor’s Provisional Tax Withholding Certificate

The Contractee withholding the PT needs to issue a PT Withholding Certificate to the provider of the service after deducting the 5% Provisional Tax. The Contractee must provide to the Contractor a stamped and signed PT Withholding Certificate. The PT Withholding Certificate is critical documentary evidence to the Contractor showing gross contract payment and the PT deducted.

TPOS Filing

The contractee withholding the 5% PT is required file the PT summary as explained on the manual Click Here.

Last Updated - July 28, 2025

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Provisional Tax

Contract for Service

What is Provisional Tax?

Provisional Tax is a withholding tax on contractual payments and certain other payments for services


  • A commission for the provision of insurance;

  • A commission for the sale of any property, such as books, publications, buildings, land, etc; and
  • A payment under contract for service, including progress payments. 

Who is required to deduct the 5% Provisional Tax (PT)?

A business making a commission payment or payment under a formal contract for services is required to withhold 5% withholding tax (also known as provisional tax).


Provisional Tax Summary Filing

With the implementation of the TPOS, all contractee are required to create a filing obligation before they can submit their returns. Once the filing obligation is created, they can proceed with filing the return.
Conditions for applying PT are:


  • The service provider must be an “independent contractor” for tax purposes.

  • A contract (express or implied) exists.

  • The contract for service is a legitimate one and promotes arm’s length principle, meaning that the contract price between associates must be based on the fair market value.
  • The total payments paid to any one person is more than FJD$1,000 in a tax year.

Certificate of Exemption (COE)

Taxpayers can apply for COE on TPOS, read more about to how to apply on this link. COE certificate will only be issued if compliance checks are in order with tax obligations.

How to Calculate Provisional Tax

Example:

Assume service provider X has a formal contractual agreement with Company Y to provide cleaning services. Service provider X is also registered for VAT and will issue VAT Inclusive invoice of $1150 monthly for cleaning services rendered.

Calculate provisional tax to be withheld by Company Y from the monthly payment.
NB: Company Y must withhold the provisional tax on the VAT exclusive amount.

Step 1: Calculate VAT

VAT = VAT Inclusive Price x Tax Fraction

       = $1150   x   3/23

       = $150

Step 2: Calculate VAT Exclusive Price (VEP)

VEP = VAT Inclusive Price – VAT

       = $1150 – $150

       = $1000

Step 3: Calculate PT

PT = VAT Exclusive Price x 5%

     = $1000 x 5%

     = $50

Threshold for Provisional Tax Deduction

PT should only be withheld by a registered PT payer if the aggregate annual payment during any time of the year exceeds the threshold of FJD$1,000. If the aggregate annual payment is less than the threshold, then PT must not be withheld.
The onus is on the payer to ensure that once the contractual payments to a contractor exceed FJD$1,000, he/ she is required to commence withholding 5% PT from subsequent payments.

Due Date for payment of Provisional Tax withheld

PT withheld by a payer must be remitted to FRCS by the end of the month following the month in which it was deducted from the contractual payment. For example, PT deducted in January 2024 must be remitted to FRCS by the end of February 2024. Failure to comply with filing and payment obligation will incur 20% and 25% penalties under Section 43 & 44 of the Tax Administration Act 2009, respectively.

Contractor’s Provisional Tax Withholding Certificate

The Contractee withholding the PT needs to issue a PT Withholding Certificate to the provider of the service after deducting the 5% Provisional Tax. The Contractee must provide to the Contractor a stamped and signed PT Withholding Certificate. The PT Withholding Certificate is critical documentary evidence to the Contractor showing gross contract payment and the PT deducted.

TPOS Filing

The contractee withholding the 5% PT is required file the PT summary as explained on the manual Click Here.

Last Updated - July 28, 2025

Back to Top