VANUATU: OFFSHORE LEGAL AND TAX REGIMES

Vanuatu Offshore Legal and Tax Regimes

Since there is no direct corporate taxation in Vanuatu, 'offshore' status does not have a direct tax advantage, but, rather, gives better confidentiality and less bureaucracy. For a company to be 'offshore' ie an exempted company or an International Company, it must not conduct more than the essential minimum of business in the jurisdiction.

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Vanuatu Tax Treatment of Offshore Operations

In Vanuatu there is no income or corporation tax, no capital gains tax, no sales tax (this has been replaced by a value added tax), and no withholding tax. Companies and partnerships pay annual fees to the Government depending on their nature and capitalisation. Registration fees dependent on authorised capital are described in Forms of Company; license fees dependent on sector are described in Domestic Corporate Taxes; licence fees for financial institutions are given in Offshore Business Sectors.

International Companies however are exempt from licensing and the associated fees.

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Vanuatu Taxation of Foreign Employees of Offshore Operations

This section refers to the taxation of foreign employees in Vanuatu. See Domestic Personal Taxes for the general principles of individual taxation in Vanuatu, which also apply to the resident employees of non-resident entities. There is in fact no distinction between the employees of resident or non-resident operations. In any event there is no income tax, capital gains tax or payroll taxation.

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Vanuatu Exchange Control

There are no exchange controls in Vanuatu. Bank accounts may be in any currency, and international transfers are free of all controls.

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Vanuatu Offshore Activities

Generally, the forms of company and partnership described above which are those used for offshore operations are allowed to trade freely from Vanuatu with external partners, but must limit their dealings on the island to activities in direct support of their international operations. They may operate bank accounts, use professional services, and hold shares and other securities (but not in local companies).

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Vanuatu Employment and Residence

Employment and residence by non-Vanuatu citizens requires permits. These are normally given to skilled workers or to those who have substantial funds to invest. Applications for residency permits are normally made concurrently with work permits. A residency permit is required by anyone who stays in Vanuatu for longer than 4 months in any one year.

Retirement residency permits are given to persons demonstrating local net worth of $104,000 and a monthly minimum income of $3,000 (for a married couple).

Residency Permit Fees are levied at the following rates based on the term of the permit:

• 1 Year VT20,000;
• 3 Years VT90,000;
• 5 Years VT130,000;
• 10 Years VT230,000;
• 15 Years VT330,000

For all permits greater than one year's duration there is an initial processing fee of VT50,000, which includes the first year's residence fee, and an annual fee of VT20,000. All fees are payable in advance and are not refundable.

Prior to the issue of a residency permit, a repatriation bond must be lodged with a local bank.

This usually takes the form of a blocked deposit, with the bank certifying to the immigration authority that it holds a repatriation bond equivalent to airfare to the country in which the applicant has citizenship, or its nearest territory.

Investors are required to obtain from a local trading bank proof of their level of investment in Vanuatu. This level of investment will need to vary from Vt5 million (US$50,000) to VT100 million (US$ 1,000,000) depending upon the length of permit requested.

A Work Permit or an exemption from the need to hold a work permit is required by all non-citizens before a residency permit will be issued, except in circumstances where no active investment in any Vanuatu based business is being contemplated.

A work permit may be granted for an expatriate to be employed on a contract by an employer in an occupation where there are no suitably qualified Ni-Vanuatu available. However, in order to prove that this is the case, there is a requirement for the position to have been advertised locally for at least two weeks, and for employers to explain why any application by a citizen has been refused.

Labour Department fees for a work permit are VT50,000 per person per annum. An exemption from the requirement to hold a work permit may be obtained for self-employed persons engaged in business which has necessitated a minimum investment of VT5 million. However, exemption is not automatic, and all expatriate investors have to complete the work permit application form.

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