Forestry Industry

The economic future of Fiji’s forest sector is bright.  Fiji is blessed with a large indigenous or natural forest cover totaling approximately 956,860 hectare (ha).

 

The forest sector is an integral part of the economic sector of Fiji.  Export earnings from forest products rank third, behind the agricultural sectors, which continue to be overtaken by other sectors as has occurred over recent years. Over 50 percent of Fiji’s land cover is made up of native forests. There is about another 5% to 6% land in pine and hardwood plantations. 

 

Softwood plantations, mainly of pine (Pinus caribaea), representing 2.5 percent (46,379 hectares) of the land area, have been established on the leeward and grasslands areas and there is great potential for further plantation expansion. Hardwood plantations of mainly mahogany (Swietania macrophylla), representing 2.9 percent of the land area, have been established on logged over rainforests, mainly on the eastern and central parts of the larger islands. 

 

The estimate is based on the anticipated increase in production of indigenous and pine logs as well as harvesting of mahogany plantations. At present wood products ranks as Fiji’s fifth most important domestic export commodity after sugar, fish, mineral water and garments. Earnings from forestry products are greatly influenced by the price of exports and weather patterns.

 

Fiji has been self-sufficient in most timber products through utilization of its natural forests and plantation resources for more than ten years. Future prospect for the forest industry is bright. The outlook, however, continues to be heavily reliant on the commencement of large-scale utilization of Fiji’s mahogany plantation resource.

 

As regards other timber-related resources, Fiji has extensive coconut palm plantations and more than 30 years of experience in processing and utilizing coconut palm wood from over-aged palms. 

Resource Available
As per the national inventory conducted in 2003 by the Department of Forestry, the Fiji hardwood plantation area is around 40,960ha of production (loggable forests) with an average 3,276,800 cubic metres of available timber. The estimated volume of timber for commercial purposes is approximately 2,941,840 cubic metres.

About 52 percent of Fiji’s total land area is covered by forest, of which indigenous forest accounts for 90 percent (857,530 hectares), hardwood plantations 5.5 percent (52,950 hectares) and softwood plantations 4.5 percent (46,380 hectares). Indigenous forests cover an estimated 514,000 hectares, which has been consistently logged at an annual production rate between 100,000 cubic metres to 150,000 cubic metres.

 

The national annual natural forest log production averaged 125,300 cubic metres per annum between 2004 and 2008. The total log production of natural and pine average around 481,270 cubic metres per annum. The Forestry Department of Fiji’s national target for sustainable harvest of natural forests is 110,000 cubic metres per annum. 

 

Trade
Logs are mainly processed into sawn timber, veneer, plywood, block board, molding, poles and posts, and woodchips with total export volumes averaging 266,000 cubic metres each year. Most of the wood products are sold to Australia and New Zealand, whilst wood chips are sold exclusively to Japan. The American market absorbs approximately 40 percent of all veneer products.

TAX INCENTIVES
 
 Tax Rate Reduction

(i) Investment Allowance

60% deduction for investment allowance can be claimed between 2009 and 2012 (both years inclusive) in respect of qualifying expenditure relating to an agricultural, forestry or marine resource business.
(ii) Accelerated Depreciation

          (a)  Accelerated depreciation for building erected before 2001 has been extended to 2014.

          (b)  20% depreciation for building used for agricultural, commercial or industrial purpose can be written off within any 5 of 8 years.

          (c)  100% write off will be available in the year the expenditure was incurred on water storage facilities and renewable energy plant and                                machineries. This will also be available to new plants and machineries used for manufacturing purposes. 

(iii) Loss Carried Forward

Loss carried forward can be claimed up to 4 years. Loss carried forward by a company is allowed if that entity satisfies the continuity of ownership test or the same business test.

(iv) Dividend Exemption System

        Exemption from tax at the shareholder level is to be based on percentage of dividends subject to tax at the company level.

All goods used as raw materials in the manufacture of approved goods not available locally will attract 3% fiscal duty + 15% VAT, and all raw material used for manufacturing by companies located outside of Viti Levu will attract 0% fiscal duty + 15% VAT.

(vii) Capital Items

Duty rates on capital items (which refer to machinery used in the manufacture of approved goods) will attract 0% fiscal duty + 15% VAT.
(viii) Duty Suspension Scheme

          i.      Specialised machineries directly used for fisheries purposes.  The importation under concession is subject to the condition that a letter                       of approval is issued by Department of Fisheries in relation to goods under concession.

         ii.      For small and micro enterprises (SME’s), Income tax exemption to be applicable to selected sectors with maximum turnover threshold of                  $300,000. 

 

(ix) Incentives available under Tax Free Region Incentive as follows:

 Tax Free Region incentives available to a newly incorporated entity engaged in a new trade, business of manufacture established in the following areas:

            a.   The company has to be newly incorporated entity engaged in a new trade, business or manufacture. 

            b.   The minimum initial level of investment should be $250,000 from January 2010.
Criteria for Grant of License

           a.   The company is a newly incorporated entity engaged in a new trade, business or manufacture

           b.   The minimum initial level of investment should be $250,000 from 1 January 2010.

 

1. The income of any new activity approved and established between 1^st January 2010 to 31 December 2014 shall be exempt from tax as follows:

2. The income of any new activity approved and established from 1st January 2015 shall be exempt from tax for a period of 13 consecutive fiscal years with an initial capital investment of $2,000,000 or more.

 
 Duty Exemption

 Other benefits under the Tax Free Regions

Additional 5 years of income tax exemption is available to any company granted a license and having indigenous i-Taukei landowner equity of at least 25 percent.(x)  Vanua Levu Tax Incentives

(xi)  Manufacturing

100% of the amount of investment as a deduction for investing in food processing as well as forestry. Re-investment will also be allowed for expansion purposes. In order to qualify, the investor should utilize 50% of local produce in its production process.

Employment Taxation Scheme – 150% of the salary and wages paid within 1 January 1997 and 31 December 2012 are tax deductible. The deduction is restricted to salary and wages paid in respect of 12-month period commencing from the date of the appointment of the employee provided he or she has not previously been in full-time paid employment.
OTHER CUSTOMS CONCESSIONS

         (i)  Duty/Customs Concession under Section 10 of the Customs Tariff Act

            (a)   Specialised equipment and machinery

                    Free fiscal duty and import excise duty on specialized Fisheries & Forests equipment and machinery

                    NOTE: (These concessions are already approved by the Minister for Finance.  All they (Importers) need to do is lodge a customs entry for                     clearance for the goods).

              100% Income tax exemption to be applicable to selected sectors with maximum turnover threshold of $300,000.

 Fiscal and Import Duty Excise Changes for PRIME MOVERS & SPECIALISED MOVING MACHINERY.
a)     Machinery used in the manufacture of goodsReduce Fiscal Duty to 0%

b)     New road tractors for semi-trailers of heading 8701 and trailers of heading 8716

 c)     New trucks (goods vehicles) of gross vehicle weight exceeding 3 tonnes

d)     New Special type of vehicles of heading 8705

e)     New trucks (goods vehicles) of gross vehicle weight exceeding 3 tonnes

 (NOTE: No need to apply - customs entry to be lodged with Customs and paid)

In order for your consignment to qualify for an Export License, the following documents are required;

a)      Completed Application form for export- signed and stamped  with company seal and attaché the following documents

b)      Copy of the company registration certificate ( issued by Registrar of Companies)

c)       Purchase Order( issued from buyer-outlining  specifications, unit price and quantity)

d)      Timber Grading and Inspection report issued by a TI after inspection of the consignment for export- appointment for inspection of your consignment before applying  for an export license)

e)      Packing List outlining details of the consignment to be exported

f)       Company invoice showing details, total quantity and value

g)      CITES ( Convention on International Trade in Endangered Species of Wild Fauna & Flora )permit-   if exporting  Native species under CITES-permit is issued by the Department of Energy after a payment of ANNUAL FEES

h)      Customs Entry- to be attached in the next export application submission
Submission of custom entry is mandatory when applying for next export)

1.      Overseas buyer issues Purchase order to local company

2.      Maximum dimension of any piece timber exported should not exceed 300mm x     150mm (12 x 6inch or 72inch sq)

3.      TI stands for Timber Inspector

4.      Original inspection certificate is sent to Quarantine, a copy and original timber Certificate is send to HQ with the following:

                 a. Copy of Purchase Order

                 b. Packing List

                 c. Company Invoice and tally sheet

                 d. CITES Permit if native species

                 e. Custom entry for previous consignmen

5.  Lodged to Department of Forests (processing time is 7 days as stated in the export procedure)       Department of Forest issues export License

Sawn Timber/Plywood/Veneer/Block board/Sandalwood/Raintree

1.      Sawmillers arrange with Overseas buyers

2.      Overseas buyers come up with:

         a.     Dimension

         b.     Species

         c.     Volume required

         d.     Price per (m3 ) And total cost

3.      Receipt of Order by Sawmillers from buyers

4.      Sawmillers fill application form and with copies of  order present it TI and HQ

5.      (TD) grades and once satisfied that all aspects are order then hammer mark sawn timber end

6.      (TI) fills inspection certificate/grading report form with findings and recommendation

7.      Sawmillers send inspection certificate and grading report TI to HQ ( Four Days before Date of loading

8.      The Two Above are sent to HQ to raise export license

9.      The HQ Evaluation information Given:

         a.       Price Per (M3) by specification per species for each destination compared with most prices for same destination

         b.      If Price is below the base price ,export license is not given

         c.       If Price is within or above the range given, the license is processed and the license number is made known to the (TI) responsible

10. It is the responsibility of the (TI) to ensure that the volume specified earlier in the inspection/grading from is exported.

11. It is the exporter’s responsibility to send customs entry copy of the previous export to HQ after the boat leaves the wharf.

1.      Logging

2.      Sawmilling

3.      Treatment plants

4.      Timber processing

5.      Forest Parks

6.      Value-adding

7.      Furniture making

8.      Handicraft

Business Venture in Forestry (Plant management & logging)
A foreign investor must undertake value adding and must have at least $500,000 in owner’s contribution or paid up capital for companies in the form of cash from the operational date, to be fully brought into Fiji within the implementation period.

Investment Approval process include: 

Applications with no foreign interest does not require going through Investment Fiji but goes directly to the Forestry Department.