As we have pointed out before, Vanuatu is one of the freest countries in the world. This is partly because in Vanuatu there is no income tax and almost no taxes whatsoever, except for import duties, tax on rental income and stamp duty on some property transactions. If tax residency is properly established in Vanuatu, you will be free of foreign and local income tax as well.

This means, even if your foreign bank reports back to Vanuatu under the CRS, you will be legally free of taxation. Ergo you can have millions of dollars in your bank account and still be legally tax free. We recommend that you also take into consideration the legislation of the country your business is based on, or other countries you may reside in, as you may be subject to taxes there. 

Tax residency in Vanuatu

One of the problems faced by many passport holders and citizens of Vanuatu was establishing tax residency since Vanuatu did not recognize personal income tax of any kind and, therefore, did not levy a tax on local income or worldwide income. Simply speaking, they did not have and still don’t have any tax department to collect taxes and no tax police. Consequently, it follows that there was no opportunity or need to file tax returns and indeed no personal Tax Identification Numbers.

As part of the newly implemented Vanuatu Tax Administration Act (TAA 37), a system for issuance of Personal and Corporate “Tax Identification Numbers” (TIN) has been introduced by the Vanuatu Customs and Inland Revenue Department.

As anyone who has opened or operated a bank account in a Common Reporting Standard (CRS) signatory jurisdiction will be aware, the provision of a TIN is mandatory in facilitating the automatic exchange of information required under the CRS system.

Vanuatu, itself a CRS signatory member, has struggled in the past to fully meet its obligations due to the absence of a TIN system. This has also created some obstacles for individuals with Vanuatu Citizenship seeking to open bank accounts around the world where, often (in fact, almost invariably), the provision of a TIN is stated as mandatory.

For Vanuatu citizens under the Vanuatu Development Support Program (VDSP) and Vanuatu Contribution Program (VCP), the introduction of a TIN is the most obviously relevant –and beneficial– of the new provisions.

However, the Act itself is a little over one hundred pages long, spanning many facets of tax administration in Vanuatu. For those VDSP and VCP citizens engaged in business activities in Vanuatu, it would merit further study to understand any changes and reinforcements, and the impact these might have.

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