National policy

Foreign Investors who are interested in doing businesses in the islands of Vanuatu are welcomed. Vanuatu has an attractive investment environment that is highly competitive in the pacific region. It has an almost absolute industrial calm and a peaceful environment with a high standard of living where investors from all over the world can live and do business for profits and pleasure.

The incoming foreign direct investment continues to reflect the positive growth the country is going through. Because of the appropriate conducive environment, we call Vanuatu an Investor's dream of Paradise. You will only experience this if you live and do business with us.

The Government of Vanuatu offers foreign investors an opportunity to operate under one of the most open and liberal systems in the world. The intention is to encourage and welcome foreign investment on the same terms and conditions that are available to investors who are citizens of Vanuatu.

All foreign investors must still comply with the requirements of the:

1. Immigration Act
2. Labor (Work Permits) Act
3. Business Licenses Act
4. Registration of Company Act
5. Other laws of Vanuatu that requires the granting of a permit, license or other approval (however described) before undertaking the activity involved in the investment proposal.
   
   

Investment regulation

Company registration
Government requires all companies doing business in Vanuatu to be incorporated under the Companies Act [CAP 191] of 1986 and registered with the Registrar of Companies (the Vanuatu Financial Services Commission). Fees applicable for incorporation vary with the value of the nominal share capital. They are VT 30,000 for a nominal share capital of VT 35 million or less, and VT 250,000 for a nominal share capital of more than VT 350 million.


Apply for a Business License
With your VIPA certificate in hand you can obtain the required Business license from the relevant official body. Government requires all businesses operating in Vanuatu to hold a business license. The license is issued under the Business Licenses Act No 19 of 1998 and is administered by the Department of Customs. The issue of such licenses is a straightforward, automatic registration procedure for any business that meets the publicly stated, transparent registration criteria. Renewal is automatic, providing the annual fee is paid and the license holder has not breached any conditions of the license.

To administer its foreign investment entry policy, Government requires all foreign investments to be licensed under the VFIP Act. In determining an application for a foreign investment approval certificate, the Vanuatu Foreign Investment Promotion Board assesses whether the proposal is for a reserved or prohibited activity. If the investment proposed is acceptable in this regard, the proposal is further assessed for economic feasibility, whether the applicants are fit and proper persons and whether the financial resources for the venture are adequate. The Board will make its decision within 7 working days of the receipt of a completed application.

Reserved List Activities
To protect the interests of citizen investors, the Government has reserved some investment activities for citizen investment. Those sectors or activities that are reserved for citizen investors and the conditions that apply to them are attached. In the main, these protections are put in place for small retailing, services, tourism and inter-island trade operations, the trade in local natural products, the manufacturing of handicrafts, residential building and construction and fishing within coastal waters.

Residency Permits

From the perspective of investment, the Government offers residency to investors who wish to reside in Vanuatu and manage their investment if it is awarded a foreign investment approval certificate. Residency is also available to non-citizens nominated to fill work permit positions in an investment.
Residence permits are issued annually but can be renewed for a maximum of three years. Non-citizens who have resided continuously for 10 years in the Republic may apply for citizenship by naturalization.

Labor Force
The potential labor force, i.e. persons aged 15 years and above, was 79,669 in 1989, of which 84 percent or 66,597 were economically active. Of these, 49,811 or 75 percent were working in agriculture and other primary industries. In the nonagricultural sector, 25 percent were employed in trade/hotels, finance, insurance, community, social and personal services, and 5 percent in manufacturing, construction, transport and related industries.

Employment

Government seeks to protect the interests of workers in Vanuatu through appropriate legislation and has in place the Employment Act [CAP 160] 1983, the Trade Unions Act [CAP 161] of 1983, the Trades Disputes Act [CAP 162] of 1983 and the Minimum Wage Act. The Trade Unions and Trade Disputes Acts are currently under review to bring them into line current international best practice. An Industrial Relations Bill to replace these acts is expected to be introduced into Parliament during 2005. The Minimum Wage Act addresses Government’s policy on minimum wages. The current minimum wage applicable in the private sector is VT 16,000 per month.

Working Permits And Residency Permits For Non-Citizens
All non-citizens require a work permit if they wish to work in Vanuatu, with the exception of foreign investors who wish to manage their own investments. Such investors are exempted from the need for a work permit.
To facilitate foreign investors and to ease their uncertainty in relation to the employment of key personnel of their own choosing, government automatically awards two work permits to each investment issued a foreign investment approval certificate.

The procedure to be followed to acquire access to land is as follows:

1. Identification of a suitable site by the investor. The Government may provide some facilitation assistance if required.
2. Before an Investor intends to negotiate for a rural land (land outside of the 50km city precinct) a negotiation certificate must be produced from the Land Used Planning Office to qualify their negotiations for the land. It is compulsory that the Investor must have a VIPA approval certificate before obtaining a certificate of negotiation from LUPO. The Department will facilitate the investor to identify the customary owners through the completion of an identification of customary land ownership form.
3. Acquisition of the consent of the customary owners to the proposal enables the investor to have the site surveyed and registered by the Department of Land Surveys. A lease can then be drawn up, either by the Department of Lands or by a private agent recognized by the Department. Once signed by the parties, the lease is registered by the Department of Lands.

To further facilitate development, Government has legislated the Strata Titles Act of 2001, enabling strata titling of existing leases. The Government has also introduced a new policy, referred to as ‘75 Plus’, permitting current leases to be re-issued in order to re-establish the 75 year lease period.

Government levies fees on the acquisition of land, charging 2% of the unimproved capital value as a registration fee and 5% of the unimproved capital value as stamp duty.

For further information on rural lands please contact:
Land Used Planning Office (LUPO)
Private Mail Bag 9090
Port Vila
Phone: +678 27602
Fax: +678 27708.

Access to Raw Materials

There are no current limitations on access to imported raw materials (subject to quarantine restrictions).

Investment Guarantee

Investment Guarantee

Vanuatu entered into an agreement with the United Kingdom for the promotion and protection of their foreign investments in December 2003. Additional investment promotion and protection agreements are currently being developed with the USA, the Peoples Republic of China, Japan, France, Australia, New Zealand and New Caledonia.

Expropriation

Government guarantees that it will not expropriate foreign investments or take measures that will have a similar effect. The exception is expropriation for a designated public purpose and will be done on a non-discriminatory basis. Such expropriation would only occur in accordance with the Vanuatu Foreign Investment Promotion Act No. 15 of 1998, other domestic laws and the principles of international law. Such action would result in the prompt payment of adequate and effective compensation.

Intellectual Property

To protect and safeguard intellectual property in Vanuatu, the Government has passed the Copyright and Related Rights Act No.42 of 2000. However, the legislation has not yet been gazetted. The Act will apply to works, performances, sound recordings, broadcasts and expressions of indigenous culture. In particular, original intellectual creations include artistic, literary, dramatic, musical, audiovisual and collective works. Works are protected by the sole fact of their creation and irrespective of their mode or form of expression, content, quality or purpose.

Non-Discrimination Between Source Countries

Government extends equal treatment to investors from any country in relation to the establishment, expansion and operation of investments. The treatment of any individual is no less favorable than that which is extended to an investor from any other country in a like situation, without prejudice to any and all relevant international obligations.

National Treatment

Except as provided for under the VFIP Act, the Government accords to all foreign investors treatment no less favorable than that accorded to domestic investors in like situations with respect to the establishment, expansion, operation and protection of their investments.

Non-Commercial Risk

Government appreciates that foreign investors’ uncertainty in investing in a new country can be partly alleviated if they have access to some form of internationally recognized investment protection. Consequently, Vanuatu is a member of the Multilateral Investment Guarantee Agency (MIGA), a part of the World Bank Group. MIGA can guarantee against non-commercial risks such as currency transfers, expropriation, and war and civil disturbance (civil risks).

Dispute Settlement

Although Government is aware of the benefits for investment of having access to a range of appropriate dispute settlement mechanisms, resolution through the Vanuatu courts is the only legislative avenue available at this time. Nonlitigious legislation, such as an arbitration law, is not in place. Government is yet to sign and ratify either the Washington Convention on the Settlement of Investment Disputes between States and nationals of other States or the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Historically, however, foreign investors have achieved dispute resolution through the auspices of the International Chamber of
Commerce.
Vanuatu entered into an agreement with the United Kingdom for the promotion and protection of their foreign investments in December 2003. Additional investment promotion and protection agreements are currently being developed with the USA, the Peoples Republic of China, Japan, France, Australia, New Zealand and New Caledonia .

Taxation
Vanuatu is a tax-free paradax.was established in 1971. This has enabled Vanuatu to build a sound financial infrastructure with a high degree of professional expertise available.

Government revenue is primarily obtained from indirect taxation. The International Companies Act provides for a period of 20 year exemption from taxes for all international companies from the date of their incorporation. Vanuatu is free of income tax at both the corporate and individual levels. As Government policy is to raise revenue through a taxation system that is fair, simple, and conducive to investment, the majority of Government revenue is raised by levying trade, excise and value added taxes. To supplement revenues raised by these taxes, a wide array of fees are levied for the provision of licenses, permits or approvals and for an array of Government services. The most significant of these, from an investment perspective, are for business licenses, work permits, residence permits, foreign investment licenses, land leases, land taxes, rent taxes, and company registration.

In Vanuatu there are no:

1. Income taxes
2. Corporate taxes
3. Estate duties
4. Gifts duties
5. Capital gains taxes
6. Tax treaties or double tax agreements
7. Withholding taxes
8. Landlord taxes

Custom Duty Exemptions

Import

The lack of manufacturing capacity obliges Vanuatu to import almost all the consumer capital goods it needs.
New investment in Vanuatu is welcomed by the Government particularly in the areas of industry, tourism and agriculture. The following types of projects are seen as being particularly beneficial to the country, and accordingly are more likely to attract reductions of customs import duty rates down to a minimum of 5%.
Foreign exchange earning projects:

1. Using locally available raw materials and exporting the products based thereon
2. Tourism related
3. Foreign exchange saving projects aimed at appropriate import substitution using imported or locally available raw materials.
4. Projects planned for diversified and balanced development in rural areas on other islands in the group in addition to Efate (where the capital Port Vila is situated).

The concessions provide for full exemptions on trade taxes for manufacturing, processing and mineral exploration and extraction of raw materials and capital items. For other sectors, the benefit, in general, is a reduction of trade taxes to not less than 5%. The extent of the reduction is discretionary.

Import Duty Concessions

The Minister of Finance may at his discretion grant exemption or reduction of customs duty on all or part of any goods imported for tourism development projects. Building materials such as cement, nails, nuts and bolts, which have duties ranging from 20-30%, may qualify for full or partial duty concession. Furniture, furnishing and fittings may also qualify for such concessions.
New boats or yachts bought for tourism purposes qualify for full duty concessions as well as equipment used in water sports.
Duty free on cars is low ranging from 22-60% depending on engine capacity. All items however are liable to a 5% port service tax, which is not exempted.

Tax Exemptions

The Government of the Republic of Vanuatu has provided for the granting of exemption from payment of customs duty on goods imported for manufacture or process, and a reduction to a minimum rate of not less than 5% on specified imports as mentioned in Schedules III of the Vanuatu Customs Tariff under Section 1 for Economic Relief as follows:
V X.1 Goods imported for Manufacture or Process (Total exemption)
V X.3 Goods imported for Agriculture, Horticulture, Livestock or Forestry Projects
V X.5 Goods imported for a Tourism Development Project
V X.6 Goods imported for Mineral Exploration and Extraction
V X.9 Fisheries Industry Equipment
Application for exemptions prior to the commencement of a project is recommended, as the savings available can be substantial.
The grant of exemption from custom duties is always subject to the condition that the goods imported fall within the policy guidelines laid down for the grant of such exemptions by the Government of Vanuatu
Other incentives for the investor are the allowances given to passengers on arrival at Bauerfield Airport, Port Vila.

Department of Customs and Taxes (VAT Office)
PMB. 012 Port Vila, Vanuatu.
Phone: +678 24573
Fax +678 245574

Valued Added Tax (VAT)
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 License fee and made Vanuatu less dependent upon revenue collected on international trade. At present, the VAT rate is 12.5% and raises 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.

Other Taxes

The Government supports and encourages all export-oriented investments and does not levy any export taxes on the export of any goods or services with the exception of shells and raw logs.

A turnover tax of 10% is imposed on sales of food, beverages and accommodation sold in hotels and restaurants.

Finance

Financial Service Center

Vanuatu Offshore Financial Center was established in 1971. This has enabled Vanuatu to build a sound financial infrastructure with a high degree of professional expertise available.
The professional services offered within Vanuatu are second to none within the Pacific Region. The providers of those services include banks, accounting firms, legal firms, trust companies and insurance companies and brokers. Most of the service providers are members of the Vanuatu Finance Center Association. This institutional framework has led to a sustained platform for excellent financial dealings within Vanuatu for many years. It has been a particular buffer against the impact of change, which has been apparent within Vanuatu economic and political life over the past decade.
Given that Vanuatu is the longest established offshore financial center in the Pacific the FCA members also provide extensive services to overseas clients who are not directly involved in the Vanuatu economy.
Vanuatu is very proud of the track record of its finance center for both offshore and onshore activities. The banking services that are provided give a wide range of choice to customers. Particularly so to direct investors in Vanuatu. New investors to Vanuatu can expect that they will receive prompt service and sound advice from the active participants in Vanuatu's financial and banking sectors.

Banking and Finance

The banking structure consists of a Reserve Bank, the National Bank of Vanuatu, numerous internationally recognized commercial banks, merchant banks, and the State-owned Development Bank. In addition, a substantial offshore banking center exists. Many international commercial banks have licenses to conduct business locally as well as with non-residents. These banks provide international services through a worldwide network of branches and correspondents.

1. Reserve Bank of Vanuatu

The Reserve Bank oversees the proper functioning of the banking system in the country including the issue of the country's currency. The Bank also manages the external assets, in particular the foreign currency backing for the Vanuatu currency

      2. Commercial Banks

Four commercial banks operate in Vanuatu:

1. National Bank of Vanuatu
2. ANZ Bank (Vanuatu) Ltd.
3. Westpac Banking Corporation
4. European Bank Ltd

The commercial banks all have licenses to conduct business locally as well as with non-residents, corporations and financial institutions. The European Bank restricts its business to international clients and private banking.

       3. The Asian Development Bank

Major functions of the ADB's South Pacific Regional Mission include the administration of loans and technical assistance projects; policy, planning and management advice; providing economic and other inputs for the Bank's policy and project work; organization of seminars and workshops to discuss issues; and promotion of private sector development

Currency

The local currency is the Vatu (VT), which is tied to a regional basket of currencies. As there are no exchange control regulations in Vanuatu, bank accounts can be held in Vatu or any of the major international currencies, and funds in any currency can be readily transferred anywhere in the world without the need for approvals

Local Borrowing

Government does not place any restrictions on investors borrowing locally, decisions on local lending being at the discretion of the commercial banks. There is an expectation, however, although not a requirement, that foreign investors will bring their investment capital from abroad.

Repatriation of Funds

The Government places no restrictions on the repatriation of funds, providing this guarantee through the VFIP Act. The allocation of foreign exchange is at the discretion of the commercial banks.

Foreign Exchange

The value of the Vatu in terms of other currencies is determined by the Reserve Bank acting in accordance with written instructions from the Government after consultation with the Reserve Bank. The current instructions are the use of an undisclosed basket of currencies, weighted according to trade and tourism receipts. The rate is established daily by the Reserve Bank and communicated to the commercial banks via electronic and surface mail.

Interest Rates

The Reserve Bank establishes the"official"interest or rediscount rate after regular assessment of international and domestic economic, monetary and financial conditions. The rate is communicated to the commercial banks through the Governor's Quarterly meeting with the Bankers Association of Vanuatu and published in the Bank's Quarterly Economic Review, the Bank's Monthly publication and on its website. The Bank's objective in managing this function is the promotion of monetary or price stability. With inflation low, currently at less than 3% per annum, the official interest rate is at 6.5% per annum and has been at this level for approximately 18 months.

Oversea Trade

The Government's policy is to continue to promote the development of export industries in the private sector, which are economical and beneficial to Vanuatu. It has adopted an outward-looking policy and is gradually removing protection measures to encourage more competition and promote more export.

Vanuatu Investment Promotion Authority

The Government established the Vanuatu Investment Promotion Authority (VIPA) under the VFIP Act to undertake investment promotion activities in Vanuatu. While the Authority is responsible for the promotion of foreign investment, it is also responsible for the regulation of foreign investment in Vanuatu. As a promotion unit, the Authority seeks to generate foreign investment interest in Vanuatu. It also acts as a single point facilitator for interested investors by meeting their investment related information needs and assisting them through the regulatory processes required to get into and stay in business in Vanuatu.

Trade Agreement

Preferential Trade Agreements

Fortunately the Republic of Vanuatu is a beneficiary country under three important trade agreements; SPARTECA, ACP-EC/LOME IV Convention and GSP.

Under these agreements special treatment is afforded to imports from developing companies in the form of a reduction or total waiver of customs duties on a non-reciprocal basis.

The agreements are in operation with 23 donor countries, being;
Australia, Austria, Bulgaria, Canada, Czechoslovakia, Finland, Hungary, Japan, New Zealand, Norway, Poland, Switzerland, United States of America, USSR, and the European Community (EC) which comprises Belgium, Denmark, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Spain and the United Kingdom. The European Community (EC) applies the Lomé Scheme whilst Australia and New Zealand apply SPARTECA to the South Pacific Island Countries who are members of the South Pacific Forum.

In general "rules of origin" must be adhered to, which stipulate that goods must either:

Be wholly produced in the beneficiary country
OR
Although manufactured wholly or in part from imported materials or components, or of which the origin is unknown, must have undergone a substantial transformation in the beneficiary country.

Melanesian Spearhead Group Preferential Trade Agreement

The Melanesian Spearhead Group (MSG) Preferential Trade Agreement is a trade treaty governing the four (4) Melanesian States of Vanuatu, Papua New Guinea, the Solomon Islands and recently, Fiji.

The MSG Trade Agreement signed in 1994 is a sub-regional trade treaty established to foster and accelerate economic development through trade relations and provide a Political framework for regular consultations and review on the status of the Agreement, with a view to ensuring that trade both in terms of exports and imports is undertaken in a genuine spirit of the Melanesian Solidarity and is done on a Most Favoured National (MFN) basis.

The MSG Trade Agreement is GATT consistent and has recently been approved and accorded recognition by the World Trade Organisation (WTO) Committee on Regional Arrangements to be compatible and meeting the requirements of Article 24 of the GATT/WTO Agreement.

This Agreement covers over 180 Tariff lines of the Harmonised Systems of Customs Tariff Code and is consistent to agreed trade rules and obligations.

Negotiations are held regularly between the leaders of the four countries to consider the progress and developments of the MSG Trade Agreement.

The MSG Trade Agreement is by and large, the most effective sub-regional economic cooperation arrangement between the four countries and is likely to include issues of Intellectual Property Rights and Trade-in-Services as we approach the new millennium.

Environmental Protection

The Government recognizes the intrinsic value of Vanuatu’s natural environment and is concerned about its conservation, sustainable development and management. The Government’s environment policy is reflected in the Environmental Management and Conservation Act No 12 of 2002. Although the Act requires the development and implementation of a comprehensive National Environment Plan, detailed work on this plan is yet to begin. The Act also requires all projects, proposals or development activities that cause or are likely to cause significant environmental, social and or custom impact in Vanuatu to be subject to an environmental impact assessment. Included in this requirement are investments that will or are likely to have all or any of the impacts specifically listed in the Act.

These include:

1. Physical impacts, such as changes in landscapes or river courses;
2. Social or cultural impacts, such as relocation or access that affect livelihood and lifestyle;
3. Economic impacts, such as ability to continue income generating activities; and
4. Environment or ecological impacts, such as land based activities affecting coral reefs through increased sedimentation.

Further, the legislation also requires any investment involving bioprospecting to hold a permit issued by the Biodiversity Advisory Council. Bioprospecting is the harvesting or exploitation of samples of genetic resources, samples of any derivatives of genetic resources for the purposes of research, product development, conservation or industrial or commercial application. It also includes the knowledge, innovations and customary practices of local communities associated with those genetic resources.

Vanuatu Maritime Services- Shipping Register

There are over 30 privately owned vessels which freighting goods and trading throughout the Vanuatu archipelago. These Vessels make regular visits to all ports of the republic. While the frequency of visits varies according to area, a regular weekly or fortnightly service to all areas is ensured.

Vanuatu as an open registry nation is a member of the United Nations and the British Commonwealth. Its shipping registry is, however, independent and is open to owners of any nationality. Vessels flying the flag of Vanuatu have received friendly treatment in various world ports, including Australia and Western Europe.

The harbour both in Port Vila and Santo affords excellent shelter for all classes of vessels. The existing port facilities at Vila are all located within the natural harbour fronting the town.

Vanuatu Maritime Services Ltd is a privately held Vanuatu company operating under contract to the Vanuatu government as the Maritime Administrator. VMSL operates the central registry office and handles all details of vessel registration, mortgage recordation, crew documentation, and all matters relating to safety and proper vessel inspection and documentation.

When considering Vanuatu as a registry for your needs, consider the following points:

1. The registry personnel are available 24 hours a day, 7 days a week, when needed.
2. All details of vessel registration are handled through the central registry office in New York City.
3. The Maritime Act is based on US maritime law. The preferred ship mortgage sections of the Act have been reviewed and accepted by major law firms and banks world-wide.
4. Vanuatu is a member of IMO and has acceded to all the major conventions, including MARPOL, SOLAS, STCW, Load Line Convention, Collision Prevention Regulations, etc.
5. VMSL takes pride in its fleet safety record and strives to assist its clients in maintaining this record through proper manning and an effective inspection program.
6. Vanuatu registration and annual costs are amongst the most competitive available. In addition, fleet discounts are offered.
7. The Maritime Act has no restrictions on crew nationality, and offers the most flexible crewing requirements, consistent with safety.

Membership of International Organization

Vanuatu is a full member of the British Commonwealth, the French League of Nations, the United Nations, Agence de Co-operation Culturelle et Technique, the South Pacific Bureau for Economic Co-operation (SPEC), the Secretariat of the Pacific Community, the World Bank and the Asian Development Bank (which has its regional headquarters here in Port Vila).

Schedule 2
Reserved Occupations

List of occupational activities declared under section 9 of ?the Labour (Work Permits) Act as reserved for citizens, as at the date of commencement of this Act

Able seaman/ordinary seaman
Bricklayer
Bus driver
Joiner
Clerical supervisor
Dock worker and freight handler
Driver
Earth moving and related machinery operator
Hotel receptionist
Housemaid/domestic worker
Lorry and van driver
Mason
Painter
Portable sawmillers
Receptionist
Street vendor
Typist
Waiter/waitress/bar tender