Property Investment in Fiji and the South Pacific Islands
Fiji is a Republic with more than 300 islands and a population of around 900,000 and is often sought after by foreign investors looking for commercial opportunity in the South Pacific.
At our recent Australian / New Zealand / South Pacific MSI Global Alliance meeting in Denarau Island, Fiji, discussions focused on the framework, rules and regulations for property investment including tax implications and compliance. Investment Fiji, a statutory organisation operating independently as the marketing arm of the Fiji Government to facilitate and stimulate increased foreign investments, insists there are many collaboration opportunities for Australian investors to partner with Fiji and the other south pacific islands in property investment and green space development.
In Fiji there are three types of land tenure; Freehold, Native or State (Crown). 90% of Fijian land is Native Title owned by indigenous Fijians, known as i Taukei. This native land is communally owned. All leases and dealings for native land are administered by the i Taukei Land Trust Board (TLTB), with rental charges and premiums equally distributed between all living members of each landowning unit (known as mataqali).
South Australia’s own Torrens titles system has been adopted by Fiji and the regulation of land ownership and dealings are applied through the Land Transfer Act 1971. The administration of Fiji’s land is conducted by the Registrar of Titles via lawyers who carry out conveyancing duties on behalf of their clients making the legal process of purchasing Freehold land in Fiji quite similar to that of buying in Australia.
Freehold tenure is the only land available for outright purchase or investment by foreigners or foreign entities in Fiji. Freehold land in Fiji only makes up 8% of all land.
Fiji’s Land Sales (Amendment) Act 2014 sets out the latest provisions for non-resident Freehold owners. Under the amended Act, the term resident refers to Fiji citizens, companies with a controlling interest that is held by a Fiji citizen or Fiji citizens and trustees of a trust estate who is a Fiji citizen and whose beneficial entitlement is over 15%. Those who are not Fijian citizens as defined by the act will pay stamp duty at a rate of 10% of the purchase price, by contrast locals pay 3%.
The Foreign Investment Act (FIA) 1999 and The Foreign Investment (Amendment) Act 2004 set the guidelines for achieving investment approvals. A foreign investor will need to apply for and obtain approval from multiple departments including Investment Fiji who are the body responsible for the ultimate approval and foreign investment registration.
Foreigners (non-residents) who purchase Freehold residential land must construct a dwelling at a minimum cost of FJD $250,000, within two years from the date of the sale of the vacant land and there are large penalties that apply for non compliance. Residential Freehold land located within municipal boundaries (towns or cities) cannot be purchased by foreigners unless the property is a strata title or a residential dwelling within integrated tourism developments, such as Denarau Island.
While there are restrictions around residential foreign ownership in Fiji, investing Foreigners should find Fiji very much open for business when it comes to purchasing commercial interests such as acquiring hotel operations that are licensed under the Hotel and Guest Houses Act (Amendment) 2006.
Similarly, the sale, transfer or lease of State or Freehold to foreigners appears to be allowed quite freely for industrial or commercial purposes. Foreigners can lease or purchase State and Freehold land and pass the titles to immediate family members by succession. There are rules in place for leasing Freehold land to Foreigners with lease terms not exceeding 5 years although options for further renewal rights are common and legally binding.
Regardless of whether it is on Freehold or Native Title land a foreign investor who wants to engage in the construction industry must have at least $1million in owner’s contribution (or paid up capital for companies) in the form of cash from the operational date to be fully brought within Fiji in the implementation period. While $5 million in owner’s contribution or paid up capital for companies is required for real estate development. Projects requiring financial capital below $2.5 million will have 12 months to implement the project with threshold above $2.5 million having 18 months.
It is clear from listening to the Fijian commentary that the preferred method of the government for Foreigners investing in Fiji is by joint venture partnership with local developers. Applications to FIRC that are based on these joint ventures are usually fast tracked through approval and the Investment Fiji website links to current joint venture business opportunities that are investor ready including construction and hotel development opportunities such as a proposed holiday Inn Hotel project in Denarau Island and tourism and development opportunities from small scale eco lodges to large scale resorts. The locals are looking for foreign parties to assist in funding and also project management and in some cases even overall management of the completed project.
There are also various tax incentives that are available for investors. For example almost all of north western Vitilevu and all of Vanua Levu (the main islands) are tax free zones for new businesses and depending on the nature of business a tax holiday in excess of 10 years may be enjoyed. Certain business sectors also have further preferential tax benefits.
While the native title land that comprises most of the country cannot be sold to a Foreigner there is opportunity to enter into various arrangements with the TLTB. The Minister confirms the board is open to many investment structures and particularly encourages joint venture agreements between investors and landowning units to empower landowners to participate in the decision making process of development projects on i Taukei land and empower them to take risks and enable them to also share the direct benefits which includes capital injections and capacity building. This land cannot be transferred in fee simple but can be offered to purchasers by way of long term (99 year) leases.
Johnston Withers Lawyers, Head of Conveyancing, Gemma Wallace spoke about investments concerning native title land with a local indigenous Fijian. The man, who is a resort bar tender, described his home village in Tailveu which is part of the 90% of Fijian land administered by the TLTB. Tailveu is the birth village of George Speight, infamous for his lead in the coup d’état that overthrew Fiji’s elected government in 2000. Many of the village people backed Speight believing his diatribe that a Fijian-Indian Prime Minister would bring about major land reformation policies that would see native title land reverting to the Crown and Freehold. The local man’s village has around 500 native residents some of those who believe the current Government Fiji first has a similar, albeit more passive, agenda. The local explains that village life under the administration of TLTB is said to be consultative and fair but often decisions relating to leases, construction and commercial policy do not align with the native vision for the village. He acknowledges agricultural activities and businesses operating in the village by locals should and do attract usual taxation rules and that native landholders have an ability to conduct business on their land. However he states the TLTB and government work together to form agreements on leases, construction projects and commercial operations with special terms and taxation incentives to Foreign investors that the village people are not privy to. He feels as if the consultation with the traditional village owners is restrained when it comes to the foreign deals.
The 2019 World Bank working paper report on doing business in Fiji highlights some issues with the process for Foreign investment and business and it seems the systems are not necessarily as transparent as Investment Fiji would have a Foreign investor think. Our partner MSI Global Alliance firm AP Legal say there is new legislation in the pipeline that will make investing in property in Fiji an easier process and will remove the transparency roadblocks. Johnston Withers Lawyers look forward to working in the future with AP Legal in gaining an understanding of the investment reforms and how they will apply to any of our Australian clients looking to invest in property in Fiji.
In the meantime if you are looking to invest in property in Fiji ensure the agent you are dealing with is registered with Fiji’s Real Estate Agents Licensing Board, this is a statutory body in Fiji responsible for licensing real estate agents and sales people to conduct real property transactions. You should also seek the early advice of local lawyers such as our MSI partners, AP Legal located in Suva but with knowledge and access to assist in transactions across Fiji and the South Pacific Islands. You can start by speaking to Gemma Wallace who will be able to assist you with the relevant contacts.