Tax Haven Vanuatu

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Tax haven Vanuatu possesses a unique climate for international businesses and investors. Apart from offshore financial services, tax haven Vanuatu heavily relies on tourism which contributes about 40% of GDP. World class accommodation provided by a hotels, resorts, motels and villas, as well as inter-island cruises, ecotourism and recreational activities such as game fishing, trekking, outdoor sports and kite surfing make tax haven Vanuatu not only an attractive destination for tourists but a place of excitement, fun and frolic. Tax haven Vanuatu possesses a wealth of opportunities for offshore companies in fisheries, manufacturing, aquaculture, education, information communication and technology.

Country Overview

Tax haven Vanuatu or New Hebrides is a top class offshore jurisdiction and consists of about 83 tropical islands located 1,75o kilometers east of Australia in the Southwestern Pacific Ocean. Tax haven Vanuatu has an estimated population of 300,000 inhabitants, 95% of whom are indigenous to the islands and called ‘Ni-Vanuatu’; the remaining 5% consisting of Australians, Europeans, Asians, New Zealanders and other islanders from the Pacific area. Vanuatu tax haven is a democratic republic which gained its independence on July 30th, 1980 and has a President as head of state where French, Bislama and English are spoken. The capital is Port Vila and the currency used is the Vatu (Vt), which has an exchange rate of 100Vt to USD1.

Agriculture in Vanuatu is still a vibrant part of the economy and primary source of subsistence living. The Government of tax haven Vanuatu plans to develop agriculture which in large part remains relatively underdeveloped. Areas looked at for improvement include cattle and livestock, the implementation of stronger conservation policies, increased cocoa production, forestry and wildlife conservation and plant processing. Beef production constitutes a relevant part of tax haven Vanuatu economy as a significant earner of foreign exchange and export commodity.

Vanuatu Fiscal Incentives and Advantages

In addition to its diverse international financial services, another major attraction of Vanuatu as a tax haven is its fiscal regime. Tax haven Vanuatu has no double taxation agreements and as a result has no obligations to provide tax information to overseas tax authorities. Other tax advantages of Vanuatu as a tax haven include:

  • No personal or corporate income tax
  • No estate tax
  • No death tax
  • No exchange controls
  • No capital gains tax
  • No withholding tax
  • No tax in inheritance and gifts
  • Twenty years tax exemptions for international business companies on the condition that he company maintains its solvency

Vanuatu Offshore Financial Services

Tax haven Vanuatu’s financial services sector is diverse and can be divided into financial businesses, professions and designated non-financial businesses and professions (DNFBP). Vanuatu’s financial services may be further broken down into the:

  • finance sector - comprising banks and insurance providers from which roughly 7% of Vanuatu tax haven’s GDP is acquired;
  • financial sector – comprising the Reserve Bank of Vanuatu (RBV), domestic and offshore banks, insurance companies, credit unions, money exchanges and remitters;
  • banking sector – comprising of 5 local banks, offshore banks;

Designated non-financial businesses and professions (DNFBPs) in tax haven Vanuatu include trust companies and service providers (TCSPs), accountants, real estate agents, gaming agencies, accountants and car dealers. About 7% of Vanuatu’s GDP comes from the financial sector.

Vanuatu Financial Services Commission (VFSC)

Most of tax haven’s achievements are derived from the jurisdiction’s legislative and regulatory system which is achieved through the set up of the Vanuatu Financial Services Commission (VFSC), a financial services regulatory organisation established in 1993 under the Vanuatu Financial Services Commission Act No. 35 of 1993. The Commission is responsible for:

  • Developing, enhancing and protecting tax haven Vanuatu’s reputation
  • Providing assistance and advice on topics pertaining to the financial services regulations and legislations to the government
  • Representing Vanuatu’s interests internationally as the local authority responsible for supervising and overseeing Vanuatu as a tax haven
  • Administering and collecting fees
  • Overseeing Vanuatu’s financial services
  • Making recommendations as well as preparing and submitting reports to the government on international financial services

Vanuatu Offshore Legislative Framework

Tax haven Vanuatu has erected a thorough offshore legal framework that encapsulates various aspects involving international financial sector and services such as international companies, insurances, stamp duties, trade unions, UK patent and trade mark registration, company name registration, trust companies, fraud prevention, charitable associations, bankruptcy and credit unions.

In highlighting the primary objectors of tax haven Vanuatu’s financial services sector’s objectives, Bill Banitamwata, Chairman of the VFSC expresses the importance of setting out the vision, mission, desired key outcomes, values, corporate objectives and behavior of the Commission through proper organisation and planning. In his message, while acknowledging the possible benefits of a well governed and developing financial services sector, Banitamwata also identifies the challenge of developing and implementing suitable strategies in order to attain the Commission’s objectives in Vanuatu’s best interests as a tax haven.

Lawyers in Vanuatu are required to register with the Law Council before practicing. Lawyers were allowed to be involved in Vanuatu’s offshore sector by the Financial Transactions Reporting Act (FTRA).

Some of tax haven Vanuatu’s offshore laws include:

  • Vanuatu Financial Services Commission Act, 1993
  • Prevention of Fraud Investments, 1971
  • International banking Act, 2002
  • Mutual Funds Act, 2005
  • International Companies Act, 1992
  • Protected cells Companies Act, 2005
  • Unit Trusts Act, 2005
  • Business Names Act, 1995

New Developments

Tax haven Vanuatu has a positive outlook for its offshore financial services and intends to undertake several legislative overhauls in the near future. This is revealed in the number of projects that are in the making in an attempt to strengthen Vanuatu as a tax haven. In January 2009, Vanuatu Registry Services Ltd. (VRS), a company registered in Hong Kong with over 60 years of corporate experience, was appointed deputy Commissioner of the Vanuatu Financial Commission.

Major plans for 2009 include the modernization of the companies, bankruptcy and insolvency laws and companies registry in collaboration with the Asian Development Bank (ADB). VFSC also commenced talks with First Initiative for technical assistance in building a judiciary system, which is based on the Isle of Man law, and aimed at overseeing and governing Trust and Company Service Providers (CTSP). In the course of 2009, tax Vanuatu is also looking at introducing a Foundation Bill which will serve as an alternative to common law trusts.

The introduction of Incorporated Cell Companies (ICC) to tax haven Vanuatu’s already long list of financial services seeks to give additional competitive edge. This piece of legislation will be based on Guernsey Law and give birth to a flexible and dynamic juridical structure. Existing legislation on Protected Cell Companies (PCC) will also be restructured, making it possible to convert ordinary companies to PCC’s or ICC’s, transfer an international company between different ICC’s, remove an international company from the umbrella of an ICC and transform it into an ordinary company, wind-up an individual cell without implicating the undamaged parts of the entity and merge two international companies.

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