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Vanuatu Tax Haven

Since time began, Vanuatu has levied no income or capital gains taxes on profits. Some businessman before 1971 had made good profits in Vanuatu, formerly jointly administered by a French/British Condominium government, taking advantage of what was then a fiscal paradise with no formal structure.

The British Government created corporate and other legislation in 1971, which corporate and other legislation in 1971, which developed into a legal framework for a tax haven with the elements of secrecy for “exempted” private companies (those that did not do business in Vanuatu), possibly because the British saw this as a means by which the heavily aid-funded country could become more self-sufficient economically.

Background

Vanuatu, formerly known as the New Hebrides, is an independent nation and member of the Commonwealth. Prior to independence in 1980, the English and French legal system governed the foreign inhabitants that resided in Vanuatu while native New Hebrideans were governed by a code of native law interpreted by “native courts”.

This condominium form of government was made even more bizarre when in 1914 the Anglo-French protocol provided that the joint court of the island would be made up of one British, one French and a third judge to be appointed by the King of Spain. As fate would have it, from 1931 to 1975 there was no King of Spain, so the British and French judges took turns as presiding judges. They also decided to share the salary of the vacant judge’s office.

There were rumors that Vanuatu would relinquish its no-tax haven status after independence (there were never any laws offering guarantees against future imposition of taxes), but Vanuatu’s new Constitution states that until otherwise provided by Parliament, preindependence British and French laws shall continue to prevail. The Companies Act, Bank Regulation and the Trust Companies Regulation form the statutory framework for which common-law decisions are based.



Geography

Vanuatu is an archipelago of 80 tropical islands lying 1,100 miles east of Australia and 500 miles west of Fiji. The topography is varied, with heavily forested, rugged mountains and high plateaus inland, and rolling hills and terraces on the coast. The 250,000 square miles of territorial waters surrounding the 80 islands are regarded as an important resource for future development. The arable soil and climate is ideal for the development of livestock husbandry. There are several active volcanoes on the islands.



Port-Vila – The Capital

The port city of Vila (population 25,000) is the capital of Vanuatu. It is both charming and primitive. Ninety percent of the people of Vanuatu are dark skinned Melanesians. Asians, Polynesians, and Europeans make up the rest of the population. French, English and Bislama (the national language – a Pidgin English) are the official languages. Christianity is the major religion. Vanuatu’s national anthem is “Yumi, Yumi, Yumi” (we, we, we).



Transportation and Communications

From the capital city of Port Vila a businessman can fly direct to Australia, New Zealand, Fiji, New Caledonia, Nauru (another no-tax haven) and the Solomon Islands. There connecting flights to other parts of the world can be arranged with no trouble.

Twenty-four hour telecommunications in the form of telephone, facsimile, telex, and telegraph via satellite keep Vanuatu in touch with the rest of the world. Domestic and international postal services are reliable and courier services are available.



Over 1,000 Corporations in Vanuatu

Vanuatu’s growth has not been as dramatic as that of the British Virgin Islands where today over 60,000 IBCs have been registered. By mid-1988, only three major banks were servicing the island, but these were all major prime banks. Accounting firms now number seven, and include KPMG Peat Marwick, Coopers & Lybrand and Price Waterhouse.

Today there are well over 1,000 companies doing business in Vanuatu. The British administration there has always nurtured Vanuatu’s tax haven status. Laws continue to be drafted and enacted to attract offshore banks, captive insurance companies and exempt corporations.

Vanuatu’s corporate laws were extracted from the British type, as enacted in the New Hebrides Companies Regulation of 1971 and changed by the Queen’s Regulation. Companies can be exempt or ordinary, but most offshore investors choose the exempt type company.



New IBC Act

Vanuatu has recently enacted its own International Business Companies (IBC) Act. The new laws complement existing legislation controlling formation of exempted companies, banks, insurance companies and trust companies.

Exempted company names can now be reserved by telephone, and the Registrar provides for same day incorporation service for private exempted companies.

Vanuatu’s new IBC Act has been modeled after the International Business Companies Acts already in place in the Bahamas and the BVI. One copy of the Memorandum and Articles of Association are lodged with the government and kept on file.

Exempt companies no longer have to file audited annual reports and provide the full name and home address of each beneficial owner as a pre-clearance to incorporation. Instead, an annual certification is lodged with the annual $300 registration fee.

Any improper disclosure of any financial information to outsiders is subject to criminal prosecution. Like other no-tax havens, Vanuatu relies on strict bank secrecy to attract business.

Some advantages of incorporating a company in Vanuatu include:

  • A professional infrastructure that is experienced
  • During Vanuatu’s working day, you can communicate using the latest communication systems and technologies with Europe and across the Pacific to Los Angeles and New York.
  • Vanuatu’s business law is published in French and English.
  • Exempted (offshore) companies can be incorporated within a day.
  • Vanuatu has not had a drug trafficking or money-laundering problem.
  • Vanuatu was the first tax haven to introduce legislation for the reconciliation of companies into or from Vanuatu.
  • Bearer shares or warrants are available.
  • The shipping registry is based on the Liberian model and charges, thus costs are modest.
  • Exempted banks can be formed with a limited amount of costs. It is estimated that there are over 200 private banks officially registered in Vanuatu.
  • There are no death or succession duties.
  • There are no tax treaties for the exchange of financial information with other nations.
  • New legislation is being planned that will provide for
  1. Increased confidentiality.
  2. Delimit the perpetuity period of trusts;
  3. Introduce asset protection trust legislation;
  4. Reduce annual registration costs for exempt companies to US$300.
  5. Create a new category of company (the IBC) to replace the existing exempt company legislation.



Costs to Incorporate

The costs of forming an exempt company in Vanuatu is about US$1,600. Annual maintenance costs, including government fees, director’s meetings, and office space might run $1,500 per year additional.



Vanuatu’s Trust and Trustee Fees

Trusts can be formed in this common-law jurisdiction. Trust statutes are styled after UK legislation as in force January 1, 1961, and modified by the New Hebrides Perpetuities and Accumulations Regulations, 1974. Trust can be formed for up to 80 years.

Trusts can be established quickly and are normally completed on the day the settlement is received. Special purpose irrevocable and revocable (grantor) trusts may be set up in Vanuatu.

At present there is no requirement to register the trust deeds with the Vanuatu government. A stamp duty is assessable on each instrument of settlement at a rate of 0.5%, with a minimum duty being equivalent to US$75. It is normal for the initial settlement to be under US$15,000 so the minimum stamp duty applies.

Further transfers, if made without an instrument (i.e., cash), to a Vanuatu trust require no further duty. Additional settlements made be instrument where the instrument itself does not come under the jurisdiction of Vanuatu are not subject to stamp duty, but such instruments may not be admissible in court if it were needed as evidence, unless it was brought into the jurisdiction and the stamp duty paid at that time.

Normally, the minimum annual trustee fee charged in Vanuatu is between US$400 and US$500, but if the trust holds as its sole asset the shares of a limited liability company administered by the trustee, than that fee is reduced to an even lower level. Typically, the annual trustee charges are on a sliding scale such as:

0.4% on the first US$250,000

0.2% on the next US$250,000

0.15% on the next US$500.000

0.1% on the next US$1,000,000

In addition, the trustees may, depending on the value of the trust, charges for the time spent in carrying out their trusteeship and for the accounting work in keeping the books of the trust.



Exempt Insurance Companies

Exempt insurance companies or Captive Insurance companies can be formed under New Hebrides Insurance Regulation, 1973. Exempt Insurers can sell securities, unit trusts or mutual funds under the New Hebrides Prevention of Fraud (Investment) Regulation 1971, but cannot solicit insurance business with the general public in Vanuatu.

Application for insurance licenses are processed by the Registrar of Companies and are usually available within two weeks, depending upon the satisfactory submission of details of the beneficial owners or principals behind the proposed company.

Independent written references that provide evidence of good character and standing of the principals are required.

Incorporation and licensing costs are competitive and first year costs may be as little as US$2,000. Annual fees thereafter can be kept as low as US$1,200 if only a minimal amount services are required.



Exempted Offshore Banks

Exempted banking licenses cost about US$5,500, with an annual fee of US$4,500 due each year thereafter. An exempt bank cannot do business within Vanuatu, other than with other exempted companies. Exempted banks do not have to meet any reserve requirements, and need not submit detailed statistical returns.

Generally, the requirements of the government in making an application for an exempted bank or insurance company require a paid up capital of at least $150,000.

There are only a limited number of reputable, full service banks and trust companies that can help you with incorporation in Vanuatu. At least five Australian banks are open for business in Vanuatu, even though the Australian government has made it increasingly demanding for Australians to use the tax haven entities. Barclays Bank (P.O. Box 123, Port Vila, Vanuatu) and representatives of banks in Hong Kong, Switzerland and France are also open for business. Peat Marwick, the U.S. accounting firm, can be contacted about its trust services by writing:

Peat Marwick

P.O. Box 212


Port Vila, Vanuatu


The South Pacific

Currency, Bank Secrecy, Exchange Controls and Tax Treaties

Vanuatu has no tax treaties with any nation. This means the government will not exchange tax information with any outside jurisdiction. Secrecy is protected by the Government Act. In addition, management companies often require all officers and staff to sign a Declaration of Secrecy at commencement of employment to further protect client confidentiality and privacy.

Vanuatu’s local currency is the VATU (VT) which is tied to the International Monetary Fund’s S.D.R. (Special Drawing Rights). The VATU, the Australian dollar (once the legal tender) and other currencies can be used within Vanuatu, as there are no exchange controls. Government approval is not required to transfer or withdraw funds to anywhere in the world.

For more information on Vanuatu write:

Finance Center Association

P.O. Box 1128


Port Vila


Vanuatu, South Pacific