Vanuatu

Vanuatu is a pure tax haven, there are no direct taxes both for individuals and corporations.

Company law in Vanuatu is based in English Common Law. Companies in Vanuatu are governed by the Companies Act.

Companies registered under the Companies Act have no restriction to trade with residents and lease real properties within the territory, but may require a license to provide financial services. There are four main types of resident companies: Single Shareholder Private Company, Private Company, Public Company and Community Company.

Private Companies may be limited by shares or by guarantee. They are restricted to invite the public to subscribe to the shares, shares may not be freely negotiated and transferred, and the numbers of shareholders are limited to 50. A private company must have at least one Vanuatu resident director and one local secretary.

Details of shareholders and directors of resident companies are publicly disclosed.

Private companies limited by shares must hold annual meetings in Vanuatu, file annual returns, and submit audited financial statements if their annual turnover exceeds VUV 20m.

Resident companies are tax exempt, but subject to annual registration fees, may be subject to a stamp duty on certain transfers and to V.A.T.

Resident companies registered under the Companies Act may be considered exempted. Exempted Companies must file financial accounts and annual returns. They must have a resident director and must hold annual general meetings. But accounts and details of shareholders and directors are not available to the public.

An Exempted company is a commonly used vehicle for holding bank, trust or insurance licenses, as they must be registered under the Companies Act. Exempted companies may have restrictions to do business with residents.

Banking in Vanuatu is regulated by the Banking Act Cap 63, Reserve Bank of Vanuatu Cap 125 and the International Banking Act. The banking system in Vanuatu consists mainly of a national bank “Reserve Bank”, commercial banks, banks and the offshore banking sector. Commercial banks are authorized to provide services to non-residents and internationally through a network of correspondents, consultants and branches. The Reserve Bank is the authority in charge of supervising the operations of banks and financial institutions.

In Vanuatu, there are two types of licenses for the financial sector, the financial institution license and the banking license.

The main difference is that the financial institution license prevents the provision of the checking accounts service, since most other banking services are available. Most offshore banks under the exempt company structure operate under the license of financial institution.

Under the International Banking Act, a financial institution can be established with a minimum paid-in capital of at least USD 500,000.

Subject to the approval of the Reserve Bank, the capital may be held in a foreign financial institution and may be invested in approved financial instruments. It may not be required to hold a banking license in another reputable jurisdiction.

The Reserve Bank will conduct a due diligence process, to verify that the company has a sound business plan, shareholders and directors have good bona fides and evaluation of facility property, management and capital (source and structure) to assess risk management.

Offshore banks may have restrictions to do banking business locally. Banks must maintain a physical office and keep all accounting and financial records in Vanuatu and must file financial accounts and annual returns, so shell banks are not allowed.

Any bank, whether offshore or not, must present monthly and quarterly data on assets and liabilities, profitability, large loans and deposits, maturity of assets and liabilities, credit risk between countries, risks of partner organizations and capital investments.

In addition, the Reserve Bank conducts at least once every two years’ banks’ inspections. To verify loans risks and the measures of compliance with the anti-money laundering regulations.

The guidelines established by the Reserve Bank’s Banking Supervision Department for banks and financial institutions in accordance with the Financial Institutions Act and the International Banking Act include:

• A minimum capital of USD 500,000 for offshore entities and VUV 200m (≈USD 1.8m) for local entities.
• A maximum risk limit on the issuance of loans for a single customer or related clients group, of 25% in relation to exposures to non-banking and non-government counterparties.
• Authorization of the Reserve Bank for holdings of more than 25% of its capital in non-financial companies, amounts exceeding that limit are deducted from the capital of a bank. The establishment of a subsidiary requires the authorization of the Reserve Bank, either in Vanuatu or abroad.
• Compliance with KYC policies established for the effective management of bank risks and compliance with anti-money laundering and terrorism guidelines in customer due diligence.
• Credit risk management and compliance with the minimum requirements of the Reserve Bank for the classification of assets and measures to reduce losses.
• Application of liquidity management policies to ensure compliance with its depositors’ demand.
• Annual report from the external auditors that the information filled to the Reserve Bank is correct and that the bank operates in accordance with all the rules and requirements
• The financial institution must be well-managed and the people in key positions have relevant qualifications and experience in accordance with their responsibilities.

Vanuatu has committed to undertake the first OECD’s automatic exchanges of information (AEOI) following the CRS (Common Reporting Standard) by 2018. It is an unknown how will be done because Vanuatu does not currently collect the financial data of its citizens and foreigners. Vanuatu does not have an Income Tax Office and therefore has no means to collect the information.

There is no intergovernmental agreement (IGA) between Vanuatu and the United States to report US taxpayers accounts, but some Vanuatu banks participate in the US Foreign Account Tax Compliance (FATCA) on an individual basis.

Vanuatu is on the FATF list of high-risk and non-cooperative jurisdictions, currently there are no sanctions in force but the country has been warned to implement anti-money laundering and fiscal transparency measures.