Exploring the World of Tax-Free Banking in Vanuatu
In the South Pacific, the island nation of Vanuatu has been making waves in the world of offshore banking for decades. The country introduced its Value Added Tax (VAT) at 12.5% in 1998 as part of its financial reform element of Vanuatu's Comprehensive Reform Program.
Recently, Andrew Henderson, Founder of Nomad Capitalist, visited Vanuatu to explore the country's banking industry. He found that Vanuatu is considered a valid option for offshore banking, offering privacy and freedom not available in many other places.
Vanuatu's allure as an offshore haven is not a new phenomenon. Old expats in the country still have promotional materials from before the OECD, FATCA, and CRS came into existence, which advertised Vanuatu as a zero tax, zero disclosures, zero tax treaties, no rules tax haven-offshore jurisdiction.
The country's financial landscape is dotted with two distinct groups of expats: the old and the new. The new expats are focused on investment opportunities and total return, while the older ones have become patrons of the community.
One of Vanuatu's main sources of income is offshore banking. The country offers zero corporate tax, exemption from capital and exchange control, and no filing or auditing requirements, making it a favourable location for forming an offshore company.
The two offshore banks operating in Vanuatu are the Vanuatu National Bank and Pacific Private Bank. The Vanuatu National Bank, run by Ni-Vanuatus, has 25 branches across the country. Pacific Private Bank, run by Europeans, is a smaller, more exclusive operation that charges high fees but offers more flexibility than other banks.
If implemented, the proposed personal tax rates would be 0% for those making less than 750,000 vatu ($7,000 USD), 10% for those making between 750,001 and 3,500,000 vatu ($32,000 USD), and 17% for those making more than 3,500,000 vatu. The proposed corporate tax rate would be 17%. However, the introduction of a corporate tax could lead to the disappearance of an estimated 1% of the manufacturing sector, a 10% chance that 2% of the retail trade sector would leave, a 25% chance that 18% of the finance and insurance industries would leave, and a 5% chance that 35% of the professional, scientific, technical, and administrative service industries would leave.
The Resistance and Reform Coalition (RRC) is strongly against increasing Vanuatu's VAT due to the potential increase in the cost of living for residents who already have low incomes. Despite this, Vanuatu's VAT remains at 12.5%, while other countries like New Zealand have raised their VAT to 15%.
The search results do not provide information about the changes that Tax-Free Vanuatu has experienced in the last 20 years. However, it is clear that Vanuatu's International Companies Act exempts international businesses from paying taxes, business license fees, tax on income, capital gains, and stamp duty. Furthermore, there is no requirement for annual meetings, annual returns, or the appointment of an auditor in Vanuatu. Only the name, nature of the business, and any charges against the business are publicly available.
The Australian government is currently trying to convince Vanuatu to implement an income tax, but it is unclear if or when this will happen. Regardless, Vanuatu continues to be a favourable location for those seeking privacy, freedom, and financial opportunities in their offshore ventures.
