Vanuatu: Domestic Corporate Taxation

In Vanuatu there are no taxes on profits, dividends or income; there is no capital gains tax, no withholding tax and no sales tax (this was replaced by a value-added tax in 1998). The main taxes impinging on companies are import and export taxes, and the business licence tax.

Import taxes vary widely according to the type of goods; export tax is 5% on most goods.

Every business licence is issued annually and may be subject to certain conditions. The licence is transferable and is subject to an annual fee which has been standardised to a principal sum of VT20,000 plus VT90,000 for each non-citizen employee, principal or partner engaged in the business.

Other businesses in the financial and monetary sectors, including insurance companies and agents, are charged on the basis of 2% of estimated turnover. Most offshore businesses are exempt from some or all of these imposts (see Offshore Legal and Tax Regimes).

See Types of Company for details of annual capital duties payable depending on status.

Although there are no State social security contributions as such, employees and employers contribute 3% of salary each to an approved superannuation scheme, usually the Vanuatu National Provident Fund.

In 1998, the need for Vanuatu to broaden its tax base led to the introduction of a Value Added Tax (VAT). It replaced the then Sales Tax and the ad valorem Business Licence fee and made Vanuatu less dependent upon revenue collected on international trade. As of 2005, VAT was levied at 12.5% and raised approximately 37% of Government’s revenue.

The Value Added Tax Act No.12 of 1998 requires any entity in Vanuatu carrying on a “taxable activity” with a turnover of at least VT 4 million to register for Value Added Tax. A “taxable activity” is defined as any activity (personal, professional, corporate or otherwise) carried on continuously or regularly involving the supply of goods or services to any other person for a consideration.

There are several exemptions to VAT, including any activity carried on by a company registered under the International Companies Act No.32 of 1992. Such companies, instead, pay a business licence fee based on 5% of turnover. Also exempted are any engagement, occupation, or employment under any contract of service or as a director of a company. There is also no VAT on the making or supply of goods or services, which are already exempt under the Act.