About Vanuatu

The Country

The Republic of Vanuatu is located in the South Pacific approximately 1500 miles northeast of Sydney, Australia and 500 miles due west of Fiji. A "Y" shaped archipelago, Vanuatu stretches almost 560 miles North to Southeast, encompassing approximately 80 islands. The land mass is roughly 5,700 square miles, about the size of the state of Connecticut. One of the largest countries in the South Pacific, its territorial waters are regarded as an important resource for future development.

Vanuatu is the picture perfect South Pacific escape. The Vanuatu islands are magnets because of their charm and raw beauty. Visitors to the islands have the choice of small, well-managed resort hotels or beautifully situated modern hotels offering all the amenities the sophisticated traveler demands. There are hotels to fit every budget.

Vanuatu offers many pristine beaches and snorkeling or scuba diving in its world famous waters. Fishing, as a sport, takes on a whole new meaning in Vanuatu where each expedition could land a record marlin.

And the food! For most of Vanuatu's history the French cooking style has prevailed in its restaurants and hotels. In the last few years a large variety of cooking styles from Europe and the Far East have begun to appear. But no matter what the style, the diner can be assured that fresh fish and island fruits will adorn the plate.

The People and the Language

Currently the population is estimated to be about 170,000. Approximately 90% of the population are Melanesian (ni-Vanuatu). The remainder consists of a mix of small numbers of Europeans, Australians, New Zealanders, Micronesians, Polynesians, Vietnamese and Chinese, most of whom live in the two urban centers, Port Vila on the island of Efate and Luganville on Santo. English and French are official languages of the country, while Bislama, the local pigeon English is the national language. Additionally, about 108 distinct languages are spoken throughout the archipelago.

The Climate

The climate varies from tropical in the north of the Archipelago to subtropical in the south. Both the weather and the fertile land are important to agriculture and livestock development. The humidity level is moderate most of the year but is usually higher from December to April. Most days are sunny with intermittent rainfall, which becomes heavier during the more humid months. Air conditioning is desirable in the rainy season but not necessary during the rest of the year as cool ocean breezes are frequent. Although severe storms can occur, they are infrequent, often coming years apart.

The History

The first European to discover these islands was Captain De Quiros who named them "Tierra Australia del Espiritu Santo" believing them to be part of the major southern continent. The largest island in the chain still bears the name Espiritu Santo.

The next European to land there was the French explorer Bougainville. He put ashore on the islands of Ambae, Pentecost and Maewo and named them the "Cyclades" (after the Greek Islands). Bougainville named the strait between these islands after himself.

In 1774, Captain Cook sailed through the chain from north to south and gave them the name New Hebrides (after the islands off the Scottish coast). Following Captain Cook's voyage, the islands were visited by other French explorers and by 1895 both French and British subjects had settled there. In 1902 both nations appointed Resident Commissioners and in October of 1906, Britain and France signed an agreement resolving their various claims to the country and making it a Condominium (the only one of its kind in the world) under joint management of both nations.

At the end of 1978, the Condominium Arrangement ceased. Elections were held in November 1979 and the nation became independent on July 30, 1980. Vanuatu joined the United Nations on September 5, 1981.

Communications

Comprehensive 24-hour international telecommunications in the form of telephone, facsimile, email and telex services link Vanuatu by satellite, via its own earth satellite station in Port Vila, to the rest of the world. Reliable domestic and international postal and courier services are also available.

Transportation

Vanuatu's modern international airport, Bauerfield International Airport, provides easy access to the world. Direct flights to Australia, New Zealand, Fiji, New Caledonia, and the Solomon Islands, connect with flights to other major international destinations.

In Vanuatu, traffic drives on the right-hand side of the road. Local road transport is inexpensive and well-served by fleets of generally well-maintained  taxis and small buses.

Vanuatu has two main deep sea ports with a number of smaller wharves located in the outer islands. Regular cargo services from Australia, Europe, New Zealand, the United States and Japan are provided by a number of shipping lines. Passenger lines call on the average of twice a month, serving Vanuatu's beautiful resorts. Sport fishing in the waters around Vanuatu is internationally renowned.

World / Local Time

Vanuatu is 11 hours ahead of GMT and the indicated number of hours ahead of other major cities in the table below. All times are in Standard Time.

The normal business day in Port Vila begins at 7:30am. This allows for a 30 minute overlap with New York so that information on New York's closing markets is immediately available to Port Vila offices. Offices in Port Vila open three hours ahead of Hong Kong  and Singapore, enabling them to obtain information from these closing markets. In addition, local offices remain open until London and European markets open. In summary, Port Vila's business hours establish it as a link between Eastern and Western markets, as well as bridging the time gap between London and New York.

The Economy

Vanuatu enjoys an above average standard of living for an emerging nation. Indeed, the national economy is considered a model for developing nations. The economy is not troubled by deep poverty or chronic unemployment. There are no personal or corporate income taxes, death duties or exchange controls.

Agricultural export industries (principally copra) still predominate in revenue, but the 2300 companies operating from the Republic of Vanuatu are estimated to represent approximately ten billion dollars in assets (1998 estimate). Government revenues from company and ship registration, as well as other fees, account for 1.5 million US dollars annually.

Tourism is the second leading source of income, with development closely controlled by the Government. The islands are a frequent port of call for cruise ships operating in the South Pacific and a package vacation destination for Australian and New Zealand tourists.

It is not surprising that the Government is using all means available to encourage these sectors of commercial activity to further increase employment opportunities and foreign-exchange earnings. All segments of the population, including over 350 ni-Vanuatu currently employed in the finance industry, are utilizing the experience and training obtained in both Government and private sector positions to further expand the economy of Vanuatu.

Currency and Exchange Controls

The local currency is the Vaut (Vt) which floats against a basket of international currencies. Currently the exchange rate is approximately 1 US$ = 115 Vatu. There are no exchange controls or restrictions. Bank accounts may be in Vatu or any major international currency which may be freely purchased and sold in Vanuatu. Funds may be readily transferred anywhere in the world without Vanuatu government approval.

Vanuatu's Financial Center

Companies legislation in Vanuatu is substantially more flexible than that found in the legislation of other jurisdictions based on British Law.

It is especially suited to foundations. Companies incorporated under the Vanuatu International Companies Act must not offer shares or debentures to the public. The cornerstone of the Act is the solvency test. Creditors of the company are to be protected but the owners can do with the company assets as they see fit. The result is the ability to pay dividends from profits, reserves or capital as the Directors wish.

Port Vila is more than a banking center and jurisdiction of convenience. English and French financial, investment, banking, accounting and legal expertise has been developed in Vanuatu since 1971, when the Finance Center was established (email fincen@vanuatu.com.vu).

The Vanuatu Financial Center has the advantage of being longer established than its competitors and has the following specific advantages as an International Financial Center:

Vanuatu is a pure tax haven, has no income taxes, withholding taxes, capital gains taxes, gift, death, estate or succession duties applying to companies, trusts or individuals. There are no tax treaties with other countries and thus no exchange of information with foreign governments. Under the Vanuatu International Companies Act, companies have a 20-year guarantee against taxes, duties and exchange controls.
Vanuatu holding companies are an ideal vehicle for joint venture and international operations. Operating companies in various countries can be funded by loans from the Vanuatu parent so that the subsidiary benefits from tax deductions on interest paid. Vanuatu holding companies may show a margin between the cost of borrowing and on lending.

Accumulated profits of Vanuatu companies can be used to increase the funding of subsidiaries or invested in other ways such as tax free deposits in the Asia or Euro currency markets; formation of further companies or investment in stock exchange securities, real estate or other assets.

Further details on any of the services mentioned above can be found at the Offshore Financial Services website, www.financial.com.vu

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.