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Kiribati

Country Name: Republic of Kiribati
Currency: Australian Dollar (AUD)
Primary Tax Authority: Ministry of Finance and Economic Development
Key Legislation:

  • Income Tax Act
  • Value Added Tax (VAT) Act
  • Customs Ordinance
  • Companies Act

Fiscal Authority Allocation

Centralized Fiscal System:
Kiribati operates a centralized tax system. The Ministry of Finance and Economic Development is responsible for administering and collecting taxes, including corporate income tax (CIT), personal income tax (PIT), and VAT. Local governments have limited taxing authority, and most revenue collection is managed centrally.

Corporate Income Tax (CIT)

Standard Rate: 30%
Kiribati imposes a corporate income tax rate of 30% on the net taxable income of resident companies. Non-resident companies are taxed on Kiribati-sourced income.

Corporate Forms and Taxation:

  1. Corporation (Company): The standard corporate form in Kiribati, subject to the 30% CIT rate.
  2. Foreign Branches: Branches of foreign companies operating in Kiribati are taxed at the same CIT rate on Kiribati-sourced income.

Exemptions and Incentives:

  • Investment Incentives: The government offers tax exemptions or reductions for companies investing in sectors like fisheries, tourism, and infrastructure. Tax holidays or reduced rates may apply for a limited period.
  • Tax Holidays: Newly established businesses in priority sectors may qualify for a tax holiday of up to five years.

Goods and Services Tax (GST) / Value-Added Tax (VAT)

Standard Rate: 12.5%
Kiribati applies a VAT rate of 12.5% on most goods and services. VAT is levied on the sale of goods, provision of services, and imports.

Exemptions:
Certain goods and services, including basic food items, healthcare, and education, are exempt from VAT. Exports are zero-rated, allowing businesses to reclaim VAT paid on inputs used to produce exported goods.

Personal Income Tax (PIT)

Progressive Rates:
Kiribati applies progressive personal income tax rates as follows:

  • Up to AUD 10,000: 15%
  • AUD 10,001 to AUD 30,000: 25%
  • Above AUD 30,000: 30%

Dividends:
Dividends paid to residents and non-residents are subject to a 15% withholding tax.

Additional Mandatory Contributions

Social Security Contributions:
Employers and employees must contribute to the Kiribati Provident Fund (KPF), which provides pensions and other social benefits.

  • Employer Contribution: 7.5% of gross salary.
  • Employee Contribution: 7.5% of gross salary.

Withholding Taxes

  • Dividends: 15%
  • Interest: 10%
  • Royalties: 15%
    Withholding tax rates may be reduced under Kiribati’s double taxation agreements (DTAs).

Transfer Pricing Rules

Kiribati does not have formal transfer pricing regulations. However, related-party transactions are expected to be conducted at arm’s length in line with international norms.

Special Tax Regimes

  • Investment in Fisheries: Kiribati’s economy is heavily dependent on its vast maritime resources. The government offers tax incentives, including tax holidays and VAT exemptions, to companies engaged in the fishing industry and fish processing activities.
  • Tourism Development Incentives: The government promotes investment in the tourism sector through tax incentives, including reduced CIT rates, VAT exemptions, and import duty reductions on tourism-related infrastructure and equipment.
  • Infrastructure Development: Companies investing in public infrastructure projects may qualify for CIT reductions, customs duty exemptions, and VAT waivers.

Other Taxes

  • Customs Duties: Import duties are levied on goods brought into Kiribati, with rates ranging from 5% to 20%, depending on the type of goods. Basic commodities like food and essential goods are often exempt or subject to lower rates.
  • Excise Taxes: Excise duties are levied on certain products, including alcohol, tobacco, and fuel.
  • Property Tax: There is no nationwide property tax in Kiribati, but land leases may be subject to nominal fees or duties.

Double Taxation Agreements (DTAs)

Kiribati has signed a few double taxation agreements with neighboring countries such as Australia and New Zealand. These agreements help reduce withholding taxes on dividends, interest, and royalties, and prevent double taxation of cross-border income.

Local Taxes

Local governments in Kiribati have limited authority to impose taxes. All major taxes, including VAT, CIT, and PIT, are centrally managed by the Ministry of Finance and Economic Development.

Compliance and Reporting

Annual Filing:
Corporate tax returns must be filed by March 31st of the following tax year. Personal income tax returns are due by the same date. The tax year in Kiribati follows the calendar year.

Penalties for Late Filing:
Penalties for non-compliance or late filing include interest on overdue taxes and fines. Interest on unpaid taxes is generally set at 1% per month, with additional penalties for significant delays.

Recent Developments

Fisheries and Maritime Economy:
Kiribati’s economy relies heavily on the fishing industry, and the government is promoting investment in sustainable fisheries and maritime infrastructure. Tax incentives, including customs duty exemptions and VAT reductions, are available for companies engaged in fish processing, export, and sustainable fisheries.

Tourism Development:
The government has identified tourism as a key sector for economic diversification. Tax holidays and CIT reductions are available for developers and operators of hotels, resorts, and tourism-related services.

Climate Resilience and Renewable Energy:
Kiribati is vulnerable to the effects of climate change, and the government has introduced incentives to promote investment in renewable energy and climate-resilient infrastructure. Companies investing in solar, wind, and other renewable energy projects may qualify for tax breaks and VAT exemptions on equipment.

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