The Economy of Vanuatu has four recognized cornerstones. These are agriculture, tourism, offshore financial services, and cattle raising. The main economic activity in terms of the labor force is fishing, however this is mostly for personal and local consumption and this industry only generates a small amount of foreign exchange. The primary exports are agricultural and they include, copra (dried coconut kernels), kava (an intoxicating beverage), cocoa beans, timber and beef. The primary imports are machinery, foodstuffs and fuels. Agriculture is by far the biggest industry in Vanuatu and it employs 65% of the population.
Cattle and Coconuts in Vanuatu
Typically farmers will produce a range of tropical fruits and vegetables but this is being replaced by the more lucrative copra and kava. Kava is also used as a medium of exchange in many villages and clans, particularly in the more isolated islands. Vanuatu has no mining sector as this was stopped in 2006 however the existing reserves of previously mined Manganese are still being sold. There is a small light industry sector, which caters to local demand. Government tax revenue is mainly gained from import duties in the form of a 15% VAT on goods and services. The biggest revenue producer is tourism. The vast majority of tourists come from Australia and New Zealand followed by New Caledonia, Europe, North America and Japan.
Vanuatu has been recognized as an international Tax Haven since 1971, and an international financial destination since 1992. In 1992 the presiding Vanuatu government introduced, “The Vanuatu International Companies Act”. This Act enabled international interests to incorporate in Vanuatu as “offshore” companies, and take full advantage of its tax haven status. The predominant reason to incorporate an offshore business in Vanuatu is to take advantage of countries Tax Haven status. Vanuatu is a 100% legal, internationally recognized tax haven and companies incorporated in Vanuatu benefit from: • No Income Tax • No Corporate Tax • No withholding Tax • No Capital Gains Tax • No Inheritance Tax • No Estate Tax • No Gift or Wealth Tax • No Stamp Duty
There is a 12.5% Value Added Sales Tax (VAT) applied to local businesses but this is not applicable to offshore companies, as by definition, offshore companies cannot conduct business transactions within the territorial boundaries of Vanuatu or with local Vanuatu residents.Modeled on similar legislation to that of the Bahamas and British Virgin Islands, the Vanuatu International Companies Act, has proven extremely popular among foreign companies. In fact, it is generally believed that companies incorporated under the Act, are some of the most profitable and “cost effective offshore companies in the world.” Offshore businesses incorporated in Vanuatu also benefit from ease of incorporation, and quickness of incorporation. Indeed, in some cases a company can be incorporated within a 48 hour time period. There are also significantly less stringent reporting requirements, no currency exchange regulations, fixed annual fees, minimal reporting requirements, a high level of asset protection, minimal fees, and single member ownership is allowed.One very important advantage of incorporating a company offshore in Vanuatu is that this ensures the company a much higher level of privacy and confidentiality. In fact, under Vanuatu law, it is illegal for banks or account administrators to divulge the income of incorporated offshore companies. This means greater protection against theft, lawsuits, threats, vengeful spouses, and legal disputes. Passing the Vanuatu International Companies Act in 1993 created the Vanuatu Financial Services Commission, and this organization together with the Reserve Bank of Vanuatu, regulates all banking and financial services within the Republic. For investors and offshore companies this represents a long established banking system, which in turn means a higher level of stability and security. There are numerous other advantages in incorporating an offshore company in Vanuatu. For example, offshore companies incorporated in Vanuatu are exempt from all local taxation requirements, and company financial records can be held in whatever country the company owner’s desire. Further advantages include, there are no audit, no annual return, no company meeting, and no financial accounting requirements.Privacy and confidentiality are of paramount importance to all offshore companies and in Vanuatu the names of people associated with the offshore company, such as the owners, directors and shareholders, are strictly confidential and privacy is further bolstered by local financial statutes.Other advantages include, the name of the company can be in any language, company meetings are not required, and company secretaries are not required. The presiding legal system in Vanuatu is based on English Common Law, and Vanuatu is included on the Organization for Economic Cooperation and Development (OECD) “White List”.Last but by no means least, for the company share capital there is no minimum and it can be made up of any currency.
