VANUATU: COUNTRY AND FOREIGN INVESTMENT REGIME

On this Page:

- VANUATU GEOGRAPHY
- VANUATU POPULATION, LANGUAGE AND CULTURE
- VANUATU GOVERNMENT
- VANUATU ECONOMY AND CURRENCY
- VANUATU ENTRY AND RESIDENCE
- VANUATU BUSINESS ENVIRONMENT
- VANUATU IMPORT OF FOREIGN CAPITAL
- VANUATU FOREIGN INVESTMENT REGIME

Vanuatu Geography

Vanuatu Population, Language and Culture

The islands of Vanuatu have been populated for thousands of years. Europeans first discovered the islands when Spaniard Pedro Fernandez de Quiros landed in 1606. Captain Cook charted the islands in 1774 and commercial exploitation began in the 1820's. In 1906 Britain and France established a condominium over the islands which continued until the islands' independence in 1980.

The population is 212,000 (July 2007 est.) with an estimated growth rate of 1.46% (2007 est.). The Ni-Vanuatu, the indigenous population, are overwhelmingly Melanesian with small numbers of Europeans, Chinese, Vietnamese, Polynesians and Micronesians. The national language is Bislama (or Bichelama) an English-based Melanesian pidgin. English and French are also official languages.

The population is mainly Christian along with indigenous Pacific religions (about 10%).

Vanuatu Government

Vanuatu gained its independence from Britain and France, which had jointly ruled the chain, in 1980. It has a unicameral Parliament with members elected by popular vote to serve four-year terms. The Prime Minister is elected from the Parliament by its members, and appoints the Council of Ministers. An Electoral College consisting of Parliament and the presidents of the regional councils elects the President for a five-year term. The constitution also provides for a National Council of Chiefs, which advises on matters of custom and land.

Elections in 2004 yielded an inconclusive result, and a coalition government is in power, but has difficulties in pursuing a clear legislative programme.

The Supreme Court is comprised of a chief justice, appointed by the President after consultation with the Prime Minister and the leader of the opposition, and three other justices appointed by the President on the advice of the Judicial Service Commission. The legal system in Vanuatu is based on English Common Law with some influence from the French Civil System. Pre-constitution British and French law continues unless specifically revoked or is otherwise incompatible with Vanuatu 's constitution.

The US ambassador to Papua New Guinea is accredited to Vanuatu. Britain is represented through the British High Commission and France through the French Embassy. Australia and New Zealand have High Commissions and China has an embassy. Vanuatu has a Permanent Mission to the United Nations.

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Vanuatu Economy and Currency

Vanuatu has a developing free market economy, which is based primarily on fishing and subsistence or small-scale agriculture. Warmth, rainfall and good soil offer good growing conditions, and crops include coconuts (copra), bananas, coffee and yams. Cattle are raised on coconut plantations and large cattle ranches.

Tourism has become important to Vanuatu. Good international hotels and restaurants are available in Port Vila and Santo, which can both accommodate large cruise liners.

Vanuatu began its development as an offshore financial centre in the 1970s, and has developed regimes for banking, insurance, trust management and shipping.

GDP per head at purchasing power parity is approximately USD2,900, but growth has lately been disappointing, not helped by earthquakes and tsunamis. The currency is the Vatu (VT), divided into 100 centimes. It is tied to a basket of other currencies, the dollar being predominant. In recent years US$1 has tended to be equal to about VT100. Since two-thirds of the population is engaged in subsistence agriculture, there is no useful measure of unemployment.

The Government derives a high proportion of its revenue from customs duties, which bump up the cost of living for expatriates, and value added tax which, in 2005, raised approximately 37% of the Government’s revenue. There is a considerable contrast between the developed international business areas of Vanuatu, particularly Port Vila, and the remainder of the country.

Vanuatu's economy bounced back in 2005, as GDP increased by an estimated 6.8%, and an estimated 5.5% in 2006, following economic contraction in the early part of the decade, which reflected the effects on agriculture and tourism of several major cyclones and weak demand. Total visitors in 2002 were 7.4% lower than a year earlier, attributable to a decline in tourist arrivals due to a combination of greater competition from other destinations in the Pacific and, to a lesser extent, a relatively high real exchange rate. There were about 50,000 tourist visitors in 2004. By 2005, visitor numbers had climbed back to 60,000. After hitting 3.1% in 2003, inflation fell to a negative 1.6% by 2005.

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Vanuatu Entry and Residence

Employment and residence by non-Vanuatu citizens requires permits. These are normally given to skilled workers or to those who have substantial funds to invest. Applications for residency permits are normally made concurrently with work permits. A residency permit is required by anyone who stays in Vanuatu for longer than 4 months in any one year.

Standard Residence Permits are issued initially for a duration of 1 year subject to annual renewal. The non-refundable application fee of Vt.20,000 is payable to the Immigration Office upon submission of the completed application form.

Residence Permits may also be issued to potential investors who wish to undertake businesses in the country. The potential Investors must first obtain an approval for such business from the Vanuatu Investment Promotion Authority Board (VIPA). Residence Permits are normally issued for one year in the first instance but may be renewed provided that the conditions under which they were first issued remain the same.

Persons wishing to visit Vanuatu for a holiday, to see relatives or research the possibility of starting a business or for the furtherance of businesses carried on outside Vanuatu (i.e. sales representatives etc.) may be issued with Visitors Permits on arrival provided they are in possession of a confirmed onward or return ticket to a place to which entry is authorised, have sufficient funds to support themselves and a valid passport.

Retirement residency permits are given to persons who can prove monthly revenue transfer to Vanuatu from a local commercial bank. A minimum of Vt.300, 000 is required. The Following certification is also required: Police Clearance from country of origin (Statutory declaration); Birth Certificate; Number of dependents, gender & birth certificate; Certificate of incorporation from VFSC; Divorce certificate if relevant; Medical Certificate; Married certificate if any; Copy of passport; VIPA certificate; Passport photos.

Long-Term Residency Permit applicants must pledge to invest a minimum amount in Vanuautu, depending on the length of permit, as follows:

Permanent residence in Vanuatu can only be given to citizens of Vanuatu. Non-citizens who have resided continuously for 10 years in the Republic may apply for citizenship by naturalisation.

Residents of the following countries are not required to obtain a visa for stays of less than 30 days: all EU countries, all Commonwealth countries, Austria, Bermuda, Cameroon, China, Dependencies of United Kingdom, Dependencies of France, Brazil, Mexico, Tunisia, Peru, Finland, Japan, South Korea, Maldives, Marshall Island, Federated States of Micronesia, Norway, Chile, Morocco, Russian Federation, United Arab Emirates, Palau, Philippines, Sweden, Switzerland, Thailand, Unites States of America, Kuwait, Poland, South Africa, The Vatican.

All questions regarding visas should be addressed to: Principal Immigration Officer, Immigration Department, PMB 9092, Port Vila, Phone:+678 22354, Fax +678 25492.

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Vanuatu Business Environment

Vanuatu offers a politically stable environment with no direct taxes or exchange controls. Indirect taxes and fees are minimal. The legislative environment in Vanuatu is directed toward the offshore business market and includes good confidentiality provisions. Support for the offshore business sector was strengthened in 1993 with the passage of the International Companies Act, which made Vanuatu an attractive and competitive financial centre. An international company can normally be set up in a day.

Foreigners may conduct business in Vanuatu, provided they do so through a "local" company (see Forms of Company).

Businesses conducted in Vanuatu must obtain a Business Licence. 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 institutions including insurance companies and agents are charged on the basis of 2% of estimated turnover.

The Official Secrets Act and the various companies acts assure the secrecy of information relating to offshore entities. Because Vanuatu has no income tax and there are no double taxation treaties there is no legislation for the exchange of information. Internal legislation, including the Mutual Assistance in Criminal Matters Act and the Serious Offences Act are, however, directed to the prevention of money laundering activities within the jurisdiction. There is also a Financial Information Unit forming part of the Egmont Group.

In 1980 all freehold titles were cancelled and replaced with leasehold titles. The terms of the leasehold vary depending on the location and land use. There is an annual land lease charge. Other municipal charges may also apply. These charges have historically been low. There is a review of the charges every five years. Fifty year leases (beginning in July 1980) are standard in the major urban areas such as Port Vila and Santo. In rural areas leases range from 30 to 70 years.

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Vanuatu Import of Foreign Capital

There are no exchange controls in Vanuatu. Bank accounts may be in any currency, and international transfers are free of all controls.

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Vanuatu Foreign Investment Regime

There are no formal investment incentive schemes; however, there is legislation (The Import Duties Act and The Export Duties Act) which allows the Government to waive import and export duties for activities which bring benefit to the country's economy, and in practice substantial benefits can often be negotiated. Of course, since there is no direct corporate taxation, conventional types of incentive don't apply.

In accordance with the Immigration Act, all investors are subject to the VT5 million minimum investment requirement, which can be held in either cash or assets. However, in assets form, the Immigration Department will only accept certification from a recognised law firm, accounting firm or from a local domestic bank. Once certified, the investor is free to use the funds towards the approved investment.

The government has created the Vanuatu Investment Promotion Authority (VIPA) as the first point of call for all foreign investors planning to invest in Vanuatu. VIPA's primary role is the promotion of Direct Foreign Investment into the Republic of Vanuatu and to provide a service to all foreign investors from initial inquiry to a project's operational stage and even beyond.

It provides general information packages and advice on investment opportunities, incentives and investment procedures in Vanuatu. VIPA is also empowered to facilitate business expansions and variations and to facilitate investors' requests for work permits, residence permits, business licences and other government approvals. No foreign investor is allowed to do any business in Vanuatu until an approval is given by the Vanuatu Government through the VIPA Board.

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