The Law System

Vanuatu is a Parliamentary Democracy modeled on the British system. The Legislature consists of a single chamber, 50 member Parliament, for which general elections are held every four years.

A number of jurisprudential approaches are present in the legislative and non-legislative provisions of the legal system, a legacy of the Condominium form of government. This creates opportunities to keep Vanuatu law flexible, modern and unusually responsive to international factors. The courts are open to seek guidance from the decisions reached bh French, British, Canadian, Australian and United States Courts when adjudicating various issues. This flexibility is reflected in the choice of US non-legislative law as the basis for Vanuatu's Maritime Act and Regulations which results in being well known in legal and shipping communities. This choice was made because of familiarity and the protection afforded to Mortgagees and Banks under this system.

The local laws have been carried over from the Republic's days as a Condominium and contain elements of both British Common Law and the French Napoleonic code. The Companies Act, Cap. 191, was modeled after the 1948 and 1967 British Companies Act and is familiar to attorneys versed in corporate law. This act together with the Vanuatu Banking, Insurance, Stamp Duties, and Trust Companies Regulations form the statutory framework for the operation of the Financial Center This framework is administered by the Vanuatu Financial Services Commission and is interpreted by the Supreme Court of Vanuatu.

In 1992 the government legislated the International Companies Act, which is modeled on the British Virgin Islands International Business Companies Ordinance, and the New Zealand Companies Act, with unique additions. This Act has adopted North American nomenclature and allows the official company name to be in any language and end with any word signifying a limited liability, ie. Inc., Corp., B.V., Ltd., S.A., SARL, etc.

While the business laws and language are primarily English, French may be used.

It is most unlikely that the stability of this western oriented nation will be threatened internally or externally: Vanuatu plays a major role in the South Pacific region and enjoys a close relationship with Australia and New Zealand.

Taxation

Vanuatu has no personal or corporate income taxes, withholding taxes, capital gains taxes, gift, estate or death duties. No tax treaties with other countries are in existence nor are any known to be contemplated. Vanuatu international companies have a 20 year guarantee against taxes, duties and exchange controls. 

The main sources of government revenue are customs duties, a 10% tax on the turnover of hotels and restaurants, license fees for local business, a 15% tax on rental income on properties in Vanuatu, and annual registration fees payable to the Financial Services Commission which includes income from the ship register.

Stamp Duties

Documents which require stamping include bills of sale (0.6%), declarations of trust (0.25% or 0.5%) and transfers of movable property, such as shares (0.6%) and immovable property (5%). The minimum duty payable on settlements (trust formations) is 7,500 Vatu; other documents 2,500 Vatu. Stamp Duty not only applies to companies under the Companies Act (Cap.191), not to companies under the International Companies Act.

It is important to note that :

	transfer of property, wherever held, and for which no change of beneficial ownership is effected in, are assessed at a flat rate of 3,000 Vatu;
	instruments executed in Vanuatu relating to property transactions outside Vanuatu are liable to maximum stamp duty of 10,000 Vatu;
	stamp duty is payable on the issue of bearer share certificates at three times the duty payable on a transfer of shares.

Privacy

Privacy is important in any business dealing, but it is essential in the case of a tax haven or financial center such as Vanuatu. The privacy of the relationships between Trust Company, Banker and Client is considered the foundation upon which the Financial Center is built. That this privacy is considered so essential is reinforced by provisions in the Trust Company and Companies Acts that provide for fines and imprisonment for breach of secrecy. Vanuatu is justifiably proud that there has never been a single instance of this. Despite numerous requests be external agencies, the government of Vanuatu has declined to provide any information.

Banking and insurance laws specifically enacted in Vanuatu, enable companies to conduct their businesses free from excessive regulatory controls. Vanuatu provides prudent business with the flexibility and freedom required to operate in today's complex financial world.

No disclosure of the ownership of an offshore company, except in the case of a bank, trust of insurance company, is required to be made to the Government. The importance attached to such confidentiality is further evidenced by Parliament's passing in 1992 an up-to-date offshore company law, in which penalties for any breach of secrecy were substantially increased and now include a five year prison term.

Vanuatu has no tax treaties with any other country, nor is there any intention of entering into any. With the absence of withholding taxes or exchange controls, and with the minimum of reporting requirements for offshore companies, as well as stringent confidentiality, Vanuatu is one of the  most desirable locations in the world today for company and trust formation.