Vanuatu Companies and Vanuatu Trusts

General Introductory and Offshore Tax Information

Vanuatu is one of the jurisdictions which can be readily called a true offshore haven, not only because of its international financial services and but for its performance in keeping up with new regulatory demands whilst preserving the offshore sector.

For example, in December 2008, Vanuatu, along with Bermuda, was admitted as a full member of the Offshore Group of Insurance Supervisors after having been a member with observer status for 6 years. Vanuatu Insurance Act which was passed in 2005 is thus the result product of Vanuatu’s effort to offer an insurance product which is in keeping with international regulatory standards whilst being a competitive piece of offshore legislation.

From 2010 onward, Vanuatu expects to see a series of developments in the offshore sector through the enactment of new amendments and legislations intended to be brought forward to Parliament by December 2009. These are in order to keep abreast with changes in the offshore world, in response to new competition staged by other offshore havens where, for example, the Offshore Limited Partnership offers an additional alternative to the LLC and IBC, and in an attempt to clarify and confusions and overlaps which exist in some of the laws such as the Vanuatu Protected Cell Companies Act and the International Companies Act. Vanuatu thus anticipates the enactment of new pieces of legislation for the Limited Partnership which has not yet been introduced in Vanuatu, the replacement of the Vanuatu Offshore Trust by the Private Foundation which is generally considered a more effective and efficient vehicle for protecting assets and maximizing profits as foundations are usually able to invest and transact, as well as the legislation of a new Trustee Act. This reform initiative will also include amendments to the Stamp Duties Act, in the view to increase fees and penalties for Vanuatu onshore and offshore companies and entities which violate sections of the Act.

By carrying through with these plans for the offshore sector, Vanuatu hopes to ensure that Vanuatu maintains its appeal as offshore jurisdiction and that Vanuatu offshore business entities evolve positively and maintain their relevance to entrepreneurs, investors and high net worth individuals.

To present, the tax regime for Vanuatu offshore companies and entities remains unaltered. Vanuatu offshore business entities still preserve their ability to protect the assets and investments of their owners, assuage the tax burden and to be used as tools for optimizing profits. Vanuatu offshore business entities are therefore exempt from income tax, corporate tax, stamp duty, excise tax, VAT with regard to locally established offshore banks, inheritance tax and tax on capital gains. Vanuatu offshore companies (International Companies) in particular are guaranteed this exemption for 20 years, after which time such exemptions may remain in force unless if any contrary legislative decision were taken. The fees which are applicable to Vanuatu offshore business entities are annual license renewal and registration fees which are due to the Government of Vanuatu.

Vanuatu Offshore Business Entities

• Vanuatu International International Company
• Vanuatu Offshore Bank
• Vanuatu Offshore Trust
• Vanuatu Offshore Insurance
• Vanuatu Protected Cell Company

Vanuatu International Companies

Main Features:

• Regulation — International Companies Act
• Specially addresses offshore companies, ie., Vanuatu international business companies, formerly referred to as International Companies in Vanuatu
• Prohibited from trading and doing business locally
• A Vanuatu international company constitution must state the company’s name and business objectives, the name and address of the registered office and agent in Vanuatu, liability of the company (shares, guarantee of both), and the names of the directors may be stated
• Vanuatu offshore companies can be incorporated as companies limited by guarantee, companies limited by shares or by both guarantee and shares. Any of these statuses can be changed from one to another provided that the company meets the necessary requirements
• Required to have a locally based registered agent
• Incorporated with at least one member
• May issue bearer shares, registered shares, shares with or without par value, shares entitling participation to specific assets, ordinary, redeemable or preferential shares, options, warrants or rights, numbered or unnumbered shares
• Cannot trade or do business in Vanuatu with any person, firm or corporation, except with another exempted company or in furtherance of the business of the company carried on outside Vanuatu
• Local companies may apply to re register as an exempted company
• Vanuatu offshore company names may end with the following expressions which mean limited liability: Corporation or Corp.; Limited or Ltd.; Incorporated or Inc.; Sendirian Berhad or Sdn Bhd.; Gesellschaft mit bescrankter Haftung or GmbH.; Société à Responsabilité Limitée or SARL.; Besloten Vennootschap or B.V.
• Vanuatu offshore companies are not allowed to conduct any insurance, company management, banking and trust business
• Vanuatu offshore companies have no o obligation to file annual returns or keep general meetings
• Can only acquire interest in or shares issued by another exempted company

Vanuatu International/Offshore Banks

Main Features:

• Regulation — International Banking Act, 2003
• Minimum capital of USD 500, 000
• Licenses of Vanuatu offshore banks are not transferable
• Vanuatu offshore banks may only conduct banking business outside Vanuatu
• Vanuatu offshore banks are required to use to the word ‘bank’ in name
• Change of ownership exceeding 20% subject to governmental approval
• Quarterly returns subject to filing with the Banking Supervisor
• Annual audited accounts must be maintained, accurate and done in compliane with international standards
• Vanuatu offshore banks have no requirement to publish accounts
• Vanuatu offshore banks are subject to mandatory suspicious transaction
• Subject to scheduled inspection by the Reserve Bank Vanuatu
• Branches, subsidiaries and agencies outside Vanuatu must only be established with the prior approval of the Reserve Bank
• Foreign banks to which offshore licenses are issued must be of sound repute, subject to thorough supervisory and regulatory procedures, and satisfies all other licensing requirements in Vanuatu and original jurisdiction of incorporation

Vanuatu Offshore Trust Companies

Main Features:

• Regulation — Trust Companies [Cap. 69.] 1971
• Vanuatu trust companies do not conduct trust business from within Vanuatu
• Most Vanuatu offshore trusts take the form of a discretionary trust
• Required to appoint a resident officer as authorized agent within Vanuatu
• Maximum duration of 80 years
• Subject to Minister’s approval for transfer of shares and securities
• A trust company with its head office outside Vanuatu is required to have a minimum aggregate outstanding and unimpaired reserves as well as issued and paid-up capital of VT50,000,000
• A trust company with its head office in Vanuatu is required to have a minimum aggregate outstanding and unimpaired reserves as well as issued and paid-up capital of VT12,500,000
• Unless required by law, the details of any Vanuatu offshore trust is maintained private

Vanuatu Offshore Insurance

Main Features:

• Regulation — Insurance Act No. 54 of 2005
• The Act is a comprehensive piece of legislation which governs both domestic and offshore insurance business in Vanuatu
• Any mutual company insured by a Vanuatu insurer must be limited by guarantee and other companies are required to be companies with limited liability and have a fully paid-up capital
• Vanuatu offshore insurers which are protected cell companies must be licensed before carrying on any type of insurance business, authorization must be given to every cell which functions as an insurer, and all additional cells must obtain prior approval from the Commission
• The head office of a Vanuatu offshore insurance company must be established in Vanuatu and if not a licenses insurance manager operating in Vanuatu must be appointed. On the other hand, captive insurance companies are only required to delegate a Vanuatu based licensed insurance manager
• In the Vanuatu Insurance Act, captive insurance company refers to a company which mainly insures its parent company’s interests or those of affiliated or associated companies
• Vanuatu offshore insurance licenses are valid for one year, and must be renewed for the continuation of operations
• The minimum capital requirement for Vanuatu captive insurers providing general insurance is VT10 million; life insurance captive insures — VT20 million; and for all other insurers the minimum capital is set at VT30 million
• Decisions such as issuing and converting shares with preferential rights to income or capital allocation, reducing the authorized capital, issuing bearer shares and debentures must first be approved by the Commission before undertaken

Vanuatu Protected Cell Company

Main Features:

• Regulation — Protected Cell Companies Act No. 37 of 2005
• Vanuatu protected cell companies are able to function as domestic companies, offshore companies or as companies with both offshore and onshore operations; however, only captive insurance companies regulated under the Insurance Act (2005), mutual funds regulated under the Mutual Funds Act (2005), and unit trusts regulated under the Unit Trusts Act (2005) may be converted into or incorporated as protected cell companies
• Vanuatu companies, offshore and domestic, are able to be converted into protected cell companies or incorporated as protected cell companies
• To segregate and protect the cellular assets of a Vanuatu company, one or more cells can be created
• Non- cellular assets must always be kept distinct and recognizable from cellular assets by the directors; cells must be maintained distinct from each other with regard to the cellular assets they hold
• Cellular assets of a Vanuatu protected cell company are assets belonging to the company such as share capital and reserves
• The Act makes provision for both types of assets to be held by a nominee or company