Why and How to get a 2nd passport, incorporate a company and open a bank account in Vanuatu
Vanuatu is a small republic of just 230,000 people, made up of an archipelago of 83 islands of the South Pacific Ocean. Last years, the Vanuatu’s Government has launched several programs to grant citizenship or residency to foreigners who make investments or donations to the country. The new citizenship by investment program came into effect last January. By which through a donation a foreigner can obtain a Vanuatu passport, considerably valuable after the visa waiver agreements with Russia and the Schengen area.
Vanuatu is also known as an offshore financial center. Offshore services is one of the largest sectors of Vanuatu’s economy. With around 5,000 registered institutions offering a wide range of banking, investment, legal, accounting, insurance and trust services. No corporate or individual income tax, no dividend distribution taxes, no capital gains taxes, no withholding taxes, no estate and inheritance taxes, no foreign exchange controls and company regulations lay on easy administration and privacy.
How to get Citizenship by Investment in Vanuatu
Currently, under the Honorary Citizenship Act [CAP 112] of Vanuatu, honorary citizenship can be obtained by donation through the Development Support Program.
The Development Support Program replaces the former Economic Citizenship Program -Vanuatu Economic Rehabilitation Program (VERP)-, which was established in 2015 to raise funds to mitigate damage made by Tropical Cyclone Pam to the infrastructure and houses. Tropical Cyclone Pam is considered to be the largest natural disaster in Vanuatu’s history. The program awarded more than 40 honorary citizenships and raised around USD 5.5m.
On January 1, 2017, come into force the Regulation Order No. 215 and 216 of 2016, which grants under the Development Support Program, honorary citizenship by investment in Vanuatu to foreigners who make certain economic contributions to the Government.
Economic Citizenship Costs
The citizenship by investment in Vanuatu cost is:
- USD 260,000 non-refundable contribution to the Government of Vanuatu. The amount includes spouse and two children under 18 years.
- US$ 19,250 (extra child less than 18 years, IF included)
US$ 44,250 (a dependent aged 18 to 25, or +65, IF included)
Investment amounts include due diligence costs, background check, VIPA fees, processing fees, passport fees and agent handling charges.
The main requirements for obtaining the citizenship by investment in Vanuatu under the Development Support Program are:
- Proof of the ownership of assets with a minimum total value of USD 450,000, in established businesses, real estate, shares, bank deposits, among others.
- Completed nomination forms of the lead applicant and dependents.
- Proof of identity by a certified copy of the passport and a certified copy of the identity card of the applicant and his / her dependents.
- Notarization of marriage certificate, evidence documents showing the relationship with the parents (if applicable).
- Notarization of clean criminal background or police clearance certificate (for applicant and dependents over 16)
- Notarization of the birth certificate of the applicant and dependents.
- Basic Health Check and Health Statement of the applicant and dependents over 16 years of age.
- Personal profile, employment certification (original) and academic certification (copy) of the applicant
- Bank reference letter (original) and professional reference (original) of the applicant
- School certification for dependents aged 18-25 (original in English or with certified translation)
- Passport photo on white background of applicant and dependents.
First, it must be sent a copy of the passport and a police clearance certificate to the authorized agent who will provide them to the Vanuatu Citizenship Office. The Screening Committee will conduct due diligence checks through the Financial Intelligence Unit (FIU) which may take about 7 days. If the FIU confirms that the applicant does not have a criminal record, the applicant must complete the application forms, the required documentation and pay 50% of the total cost. This payment is not refundable, however, the applications that have been authorized by the FIU, if the required documentation is properly delivered and remain payment is made, is likely to be granted the Citizenship.
Within one month, the Citizenship Commission will decide whether to approve the application. If the application is approved the Commission will issue a letter to the applicant confirming it. Within 5 days the applicant must pay the remaining 50% of the total cost and complete the application for the passport. Within a period of one month, the Commission will inform the Prime Minister of the decision, which in turn will inform the president of the persons to be granted with honorary citizenship. After this the Commission will issue the certificate of citizenship and will require the passport office to issue the passport (s). A soft copy of the certificate of citizenship and passport will be sent by email to the new citizen.
Processing can be done entirely remotely without the need to travel to Vanuatu. The new citizen will have three options to receive the citizenship certificate and original passport: to travel to Vanuatu and to appear before the Commissioner of Oath or to invite the Commissioner of Oath to his country (the applicant must pay travel and accommodation expenses) or wait for the Oath Commissioner visit the nearest Embassy or diplomatic mission in Vanuatu (see https://www.embassypages.com/vanuatu). The process can take a total of 2 to 3 months.
Dual Citizenship in Vanuatu
Since 2013, Vanuatu recognizes dual citizenship. This means that those who obtain the nationality of Vanuatu, no need to renounce their original citizenship if their home country allows it.
Vanuatu Passport Travel Freedom
The Vanuatu passport is considerably valuable in terms of travel mobility. Since June 2015 the citizens of Vanuatu are able to travel visa-free to the Schengen area, and in September 2016, a mutual visa exemption agreement with Russia entered into force.
Currently the Vanuatu passport ranks 43rd, according to Visa Restrictions Index of Henley & Partners. Its holders can travel visa-free or visa-on-arrival to 113 countries, including Russia and the Schengen area, in addition to other EU countries (including the United Kingdom), most of the territories of the Caribbean, Ecuador, Peru, Bolivia, Iran, Israel, Malaysia, Indonesia and the Philippines, among others.
Residency Visas in Vanuatu
In addition to the citizenship by investment in Vanuatu, there are different options for obtaining residency, and eventually can lead to citizenship:
- Self-funded Visa: it is required a monthly income received in Vanuatu and certified by a bank operating in Vanuatu of at least VUV 250,000 (≈ USD 2,300) or VUV 500,000 (≈ USD 4,600) if it includes the spouse. Children or other dependents are not included. Renewable annually if the requirements are still met. It applies an annual fee of VUV 20,000 (≈ USD 180).
- Land Owner Visa: Leasehold ownership of a property in Vanuatu with a value of at least VUV 10m (≈ USD 90,000) and a monthly income received in Vanuatu of at least VUV 250,000 (≈ USD 2,300) per person included in the application. Renewable annually if the requirements are still met. Annual fee of VUV 20,000 (≈ USD 180).
- Investor Visa: Invest in a project approved by the Vanuatu Investment and Promotion Authority (VIPA) and have a certificate as a Foreign Investor. The required investment amounts are VUV 5m (≈ USD 45,000) for a 3-year residence visa, VUV 50m (≈ USD 450,000) for 10 years, and VUV 100m (≈ USD 900,000) for 15 years. Application fee is VUV 50,000 (≈ USD 450), including the first annual fee. For the following years, it applies an annual fee of VUV 20,000 (≈ USD 180), paid in advance. Other fees for due diligence, background check, VIPA fees may apply and fees are non-refundable.
After 10 years of legal residence in the country, a resident alien may apply for citizenship by naturalization.
Set up an Offshore Company in Vanuatu
Vanuatu is a pure tax haven, there is no corporate or individual income tax, no dividend distribution taxes, no capital gains taxes, no withholding taxes, no estate and inheritance taxes, and there are no foreign exchange controls. The only applicable taxes are a value-added tax of 12.5%, certain stamp duties and custom duties, with certain exemptions in sectors such as Tourism, Manufacturing or processing and Mineral exploration.
Company law in Vanuatu is based in English Common Law. Companies in Vanuatu are governed by the Companies Act, except International Companies, the most common offshore entity, which are governed by the International Companies Act. This category of company offers more flexibility and easier administration as we will see below.
International Companies in Vanuatu
Companies registered under the International Companies Act are entitled to do international business and may have restrictions to trade within Vanuatu, own a real estate interest within the territory, except the lease of an office where it conducts its management, and hold banking, trust or insurance licenses.
A Vanuatu offshore company is commonly used for international trading, holding company, holding tangible and intangible assets, asset protection and confidentiality, estate planning, security dealer, holding vessels, among others.
Offshore companies in Vanuatu are guaranteed to be fully tax-exempt for 20 years, and only subject to an annual fee of USD 300. Companies may elect to be long term entities and pay renewal fees of USD 1,000 (5-year company), USD 1,500 10-year company) and USD 2,500 (20-year company).
The name of the company must include a word or abbreviation that denotes limited liability, such as Ltd., Corp., Inc., S.A., S.R.L., B.V., Sdn Bhd, GmbH, … etc. The name can be in any language. It can not include any words that refer to financial services, such as trust, bank or insurance, or words that relate to a public institution or words such as Foundation or Charity.
ICs may be formed by one or more shareholders, one or more directors, who may be legal or natural persons. Directors may be residents or non-residents. Nominee directors and shareholders are allowed.
Details of beneficiaries, shareholders, directors of a Vanuatu offshore company are not publicly disclosed. There are no annual meeting requirements, and meetings may be held outside Vanuatu by call, videocall or any other mean.
ICs must have a registered office and a local registered agent. There is no secretary requirement, and the secretary may or may not be in Vanuatu.
There is no minimum capital required. The authorized share capital is usually USD 10,000 and it may be in any currency. The issued minimum capital is a share with or without par value. Shares with or without par value, shares with or without voting rights, nominative, bearer, preferred and redeemable shares may be issued.
Vanuatu offshore companies may be subject to a solvency test, directors must ensure that any distribution does not affect the company’s capability to meet its liabilities, failure to comply with it may carry his personal liability.
International Companies may be required to keep financial records, but may not be required to file accounts and annual returns.
An International company in Vanuatu may be incorporated within one day. Registration process comprises filling Company Constitution to the Vanuatu Financial Services Commission, containing name and purposes of the company, registered office and registered agent if the company is limited by shares or by guarantee or by both, number of issued shares, authorized capital, currency, shares, contributions of each member and by-laws. The company’s constitution, registered office and registered agent are publicly available. Re-domiciliation is permitted.
You can incorporate your offshore company in Vanuatu now at incorporations.io/vanuatu.
Resident Companies in Vanuatu
Companies registered under the Companies Act have no restriction to trade with residents, own real properties within the territory, but may require a license to provide financial services. There are four main types of resident companies: Single Shareholder Private Company, Private Company, Public Company and Community Company.
Private Companies may be limited by shares or by guarantee. They are restricted to invite the public to subscribe to the shares, shares may not be freely negotiated and transferred, and the numbers of shareholders are limited to 50. A private company must have at least one Vanuatu resident director and one local secretary.
Public Companies are required to have at least two directors, one of which must be Vanuatu resident, and a local secretary. Shares may be offered to the public, freely negotiated and transferred if bylaws do not state otherwise.
Details of shareholders and directors of resident companies are publicly disclosed.
Both private and public companies must hold annual meetings in Vanuatu, file annual returns, and submit audited financial statements if their annual turnover exceeds VUV 20m (≈ USD 180,500).
Resident companies are tax exempt, but subject to annual registration fees, may be subject to a stamp duty on certain transfers and to V.A.T.
Resident companies registered under the Companies Act may be considered exempted. This company category is commonly used by companies holding bank, trust or insurance licenses, which must be registered under the Companies Act. Exempted companies may have restrictions to do business with residents.
Exempted Companies must file financial accounts and annual returns. They must have a resident director and must hold annual general meetings. But accounts and details of shareholders and directors are not available to the public.
Offshore Banking in Vanuatu
Incorporate a Bank in Vanuatu
Banking in Vanuatu is regulated by the Banking Act Cap 63, Reserve Bank of Vanuatu Cap 125 and the International Banking Act. The banking system in Vanuatu consists mainly of a national bank “Reserve Bank”, commercial banks, banks and the offshore banking sector. Commercial banks are authorized to provide services to non-residents and internationally through a network of correspondents, consultants and branches. The Reserve Bank is the authority in charge of supervising the operations of banks and financial institutions.
In Vanuatu, there are two types of licenses for the financial sector, the financial institution license and the banking license. The main difference is that the financial institution license prevents the provision of the checking accounts service, since most other banking services are available. Most offshore banks under the exempt company structure operate under the license of financial institution.
Under the International Banking Act, a financial institution with a minimum paid-in capital of at least USD 500,000 can be established. Subject to the approval of the Reserve Bank, the capital may be held in a foreign financial institution and may be invested in approved financial instruments. It may not be required to hold a banking license in another reputable jurisdiction. The Reserve Bank will conduct a due diligence process, to verify that the company has a sound business plan, shareholders and directors have good bona fides and evaluation of facility property, management and capital (source and structure) to assess risk management.
Offshore banks may have restrictions to do banking business locally. Banks must maintain a physical office and keep all accounting and financial records in Vanuatu and must file financial accounts and annual returns, so shell banks are not allowed. Any bank, whether offshore or not, must present monthly and quarterly data on assets and liabilities, profitability, large loans and deposits, maturity of assets and liabilities, credit risk between countries, risks of partner organizations and capital investments.
In addition, the Reserve Bank conducts at least once every two years’ banks’ inspections. To verify loans risks and the measures of compliance with the anti-money laundering regulations.
The guidelines established by the Reserve Bank’s Banking Supervision Department for banks and financial institutions in accordance with the Financial Institutions Act and the International Banking Act include:
- A minimum capital of USD 500,000 for offshore entities and VUV 200m (≈USD 1.8m) for local entities.
- A maximum risk limit on the issuance of loans for a single customer or related clients group, of 25% in relation to exposures to non-banking and non-government counterparties.
- Authorization of the Reserve Bank for holdings of more than 25% of its capital in non-financial companies, amounts exceeding that limit are deducted from the capital of a bank. The establishment of a subsidiary requires the authorization of the Reserve Bank, either in Vanuatu or abroad.
- Compliance with KYC policies established for the effective management of bank risks and compliance with anti-money laundering and terrorism guidelines in customer due diligence.
- Credit risk management and compliance with the minimum requirements of the Reserve Bank for the classification of assets and measures to reduce losses.
- Application of liquidity management policies to ensure compliance with its depositors’ demand.
- Annual report from the external auditors that the information filled to the Reserve Bank is correct and that the bank operates in accordance with all the rules and requirements
- The financial institution must be well-managed and the people in key positions have relevant qualifications and experience in accordance with their responsibilities.
Open an offshore bank account in Vanuatu
Offshore banks in Vanuatu comply with several KYC requirements when opening accounts to non-residents. In addition to the passport you may be required to provide a bank statement, tax statement, proof of address, insurance or medical cards, a bank reference letter or an introductory letter from existing clients. In the case of corporate accounts it may be required copies of the certificate of incorporation and constitution of the company.
In some banks, it is possible to open a bank account remotely, without having to go personally. Flag Theory has strong relationships with banks here where this is possible through our introduction.
Usually bank accounts can be opened in any currency, and multi-currency accounts may be available in US Dollars, Euros and British Pounds. There are no capital controls in Vanuatu. The minimum deposits to open an account vary depending on the bank, but are not usually very high. Savings accounts, term deposits, merchant accounts or investment and asset management portfolios are available. International wire transfers are widely used, internet and mobile banking are available, and in most offshore banks you can request a prepaid card.
Vanuatu has concluded Tax Information Exchange Agreements (TIEa) with Ireland, Grenada, San Marino, Greenland, Sweden, Norway, Iceland, Finland, Faroe Islands, Denmark, New Zealand Australia and France. You can consult them at incorporations.io/vanuatu.
Vanuatu has committed to undertake the first OECD’s automatic exchanges of information (AEOI) following the CRS (Common Reporting Standard) by 2018. It is an unknown how will be done because Vanuatu does not currently collect the financial data of its citizens and foreigners. Vanuatu does not have an Income Tax Office and therefore has no means to collect the information.
There is no intergovernmental agreement (IGA) between Vanuatu and the United States to report US taxpayers accounts, but some Vanuatu banks participate in the US Foreign Account Tax Compliance (FATCA) on an individual basis.
Vanuatu is on the FATF list of high-risk and non-cooperative jurisdictions, currently there are no sanctions in force but the country has been warned to implement anti-money laundering and fiscal transparency measures.
Vanuatu is an archipelago of 83 islands of volcanic origin surrounded by coral reefs, covering more than 12,000 sq. km of the South Pacific Ocean. Located 1750 km from Australia, 500 km northeast of New Caledonia, west of Fiji and south of the Solomon Islands, near New Guinea.
66 of the 83 islands are uninhabited. Some have active volcanoes and others are totally covered by tropical rain forests. According to the annual WorldRisk Report published by the United Nations University’s Institute for Environment and Human Security (UNU-EHS), Vanuatu is the country most prone to natural hazards. In 1987, a hurricane devastated most of the local dwellings. In 2005 thousands of people had to be evacuated for fear of the explosion of the Mount Manaro volcano on the island of Ambae and more recently in 2015 Cyclone Pam took the Life of 15 people and 70% of the population was displaced.
Vanuatu is a democratic republic of only 230,000 inhabitants, a prior French-English protectorate, independent only 37 years ago. Port Vila, located in the south of the island of Efate, is the most populated city (about 44,000 inhabitants) and is the capital and economic, financial and commercial center of the country. Where is one of the two international airports, and the most important, with daily direct flights to Australia or New Zealand and other Pacific countries. The climate of Vanuatu is subtropical, hot and humid November to April, and cool to warm May to October. The official languages are English, French and the native Bislama.
Vanuatu has become a tourist attraction in recent years thanks to its incredible white sand beaches, volcanoes still active today, pristine lagoons and rainforests, sunny climate and an abundance of diverse indigenous cultures, making it one of the most culturally diverse countries in the world.
If you want to know how it is living in Vanuatu you can read some interesting articles of an expat living there here.
Economy in Vanuatu
The economy in Vanuatu relies heavily on tourism, which currently accounts for half of GDP. The sector was the main driver of the growth of the Vanuatu economy during the second half of the 2000s, which reached growth rates of 6-8% a year. The outbreak of the global economic crisis, and the consequent decline in Western tourism, slowed the economy, which gradually recovered until 2014.
The Tropical Cyclone Pam in March of 2015 swept the country. With more than a dozen dead and 70% of the displaced population, it destroyed thousands of homes and buildings. The consequent decline of tourism and the destruction of agricultural fields, the two main sectors of the country, lead a -0.8% recession of the GDP.
In 2016, reconstruction (such as water and sanitation works, schools and medical facilities), infrastructure projects started, aid and loans from international agencies, foreign investment and better-than-expected tourism sector behavior have led to the growth of 3.5. % and the positive trend is expected to continue in 2017.
Agriculture and fisheries are the second largest economic sector in Vanuatu, accounting for 25% of its GDP. Subsistence agriculture is large, occupying more than 60% of the population. Although agricultural exports grew at an annual rate of more than 6% of GDP in the 2011–2015 period, they declined by 40% in 2015 due to the cyclone, and the trend has been maintained in 2016. With a current account deficit of more than 20% of GDP. Exports are mainly copra, coconut oil, kava, beef, timber, cocoa and coffee, and destined to Australia, New Zealand and Japan.
Vanuatu has been an offshore financial center for more than 40 years. The sector contributes almost one tenth of GDP. With well-developed banking and financial infrastructure, international financial institutions, professional lawyers, accountants and financial advisors, including multinational firms.
The Government plays an important role in the country’s economy. There are more than a dozen state-owned enterprises in such important economic areas as airports, banking, agriculture and broadcasting. Although historically Vanuatu has maintained stable public accounts. Reconstruction work due to the cyclone has triggered public spending by about 40% of GDP in the last two years (typically 20-25%), with a budget deficit of more than 10%. Currently the public debt is equivalent to 33% of GDP. Inflation has traditionally been low (0.5-1%) but in the last two years it has risen to more than 2%. The Government’s monetary policy has traditionally been to keep the Vatu (VUV) stable, pegged to an undisclosed basket of currencies. Although in 2015 it depreciated by almost 10% against the dollar, an exchange rate that has been maintained until now.
The country is one of the most underdeveloped in the region, with a per capita income that barely reaches USD 3,000 annually and a very unequal distribution of wealth, with much of the population devoted to subsistence agriculture.
In short, the country has a fragile economy, with inherent economic difficulties, is remote and isolated, so it faces heavy transport costs, is prone to natural disasters and is heavily dependent on foreign investment, tourism and commodities price fluctuations.
Invest in Vanuatu
Investment opportunities in Vanuatu lie in the tourism, real estate, agricultural, food processing and timber sectors and in the investment of public infrastructure projects such as communications or transportation.
Any investment in Vanuatu requires the approval of the Vanuatu Investment Promotion Authority (VIPA). To obtain the investment certificate, details and tests are required regarding the financial level of the investment, a diagram of the company structure, copies of police authorization certificates, bank reference, cash flow projections for the next three years. In addition to full employment details for any position where work permits are required and how many work permits, an environmental impact assessment if necessary, how many residence permits will be required and the disclosure of any bankruptcy, liquidation and conviction. The certificate must be renewed annually.
Lands in Vanuatu are not freehold. Properties can be leased for up to 50 years for residential lots and 75 for commercial ones.
The real estate market is young and it can be difficult to find quality long-term rental accommodation. Prices for residential properties in the most profitable areas are on average around USD 1,000-1,500 per square meter, and investment returns may be around 6-7%. Rental income is subject to value added tax, which is 12.5%. There is no transfer tax or capital gains tax.
Investing in Vanuatu has its risk, it is a country vulnerable to natural disasters, its infrastructure is weak and its geographic isolation are some of the possible obstacles to the investment. But being an economy that has started to develop relatively recently, and with only 5 years of membership in the WTO, it can offer some attractive investment opportunities, as everything is to be done.
How we can help you
The citizenship by investment in Vanuatu is a considerably interesting option, especially for Asians. In three months, you can be a citizenship of a free tax jurisdiction and travel visa free to Europe and Russia. We can help you to get the Vanuatu passport, get started applying now at passports.io/vanuatu.
Vanuatu has no taxes and company regulations lay on easy company administration and privacy. If this is what you are looking for, you can incorporate an offshore entity in Vanuatu now at incorporations.io/vanuatu or open an offshore bank account through bankaccounts.io at BRED or Pacific Private Bank.
If you want to compare other internationalization options you can try our free jurisdiction comparison tools for passports, incorporation and bank account introduction. You may also join our Intel Society, a Do-it-yourself information center for investors and entrepreneurs. If you need personalized advice, you can apply for our consulting services or email us at [email protected] for further information.
This article should not be construed as legal, tax or investment advice. Flag Theory has access to a global network of qualified attorneys and accountants who can give you the proper advice for your particular circumstances. Contact us for further information.