flag Vanuatu Vanuatu: Investing

FDI in Figures

According to the 2021 World Investment Report published by UNCTAD,  FDI flows to Vanuatu decreased by 16% from USD 35 million in 2019 to USD 30 million in 2020, mainly due to the global health and economic crisis triggered by the Covid-19 pandemic. The stock of FDI is estimated at USD 724 million at the end of 2020. The pandemic and the tropical cyclone prompted the postponement or cancellation of many investment projects. Traditionally, the industries that attract most FDI are food and wood processing. Australia is the main source of foreign investment in Vanuatu's economy (The Australian aid budget for Vanuatu is expected to reach USD 75.6 million in 2021-22, according to the Australian Department of Foreign Affairs and Trade) with a focus on tourism (two-thirds of long stay tourists to Vanuatu and the vast majority of cruise ship passengers come from Australia), finance and construction, followed by Japan and New Zealand. The main undergoing project is the Vanuatu Aviation Investment Project (VAIP), which is supported by the World Bank and is aimed at repairing and rehabilitating Vanuatu’s three main airports, especially the Bauerfield International Airport. New initiatives and essential reforms contributing to the overall regime of doing business in Vanuatu have been undertaken on a regular basis as part of the Government's commitment to improving the country’s business environment thereby enhancing its attractiveness for private investors and encouraging greater investment expansions to the rural areas of the country (VIPA, 2022).

The factors that encourage foreign investors in 2022 include an attractive tax system (no direct taxes), lack of exchange controls, a stable political situation and a particularly proactive FDI promotion agency (the Vanuatu Investment Promotion Authority - VIPA). The country's vulnerability to natural disasters, the weakness of its infrastructure and its geographical isolation remain some of the potential hindrances to investment. Property rights are poorly protected, and investment is deterred by the country’s inadequate physical and legal infrastructure. Business activity is further limited by rigid labour regulations and widespread corruption. Foreign investors may lease but not own land, and investment in some sectors of the economy may be screened by the government. The country has been working on the creation of Economic Development Zones (EDZs) for years although they have not materialized yet. Vanuatu ranks 107th in the last 2020 Doing Business report published by the World Bank, losing thirteen places compared to the previous year. The enforcement of contracts, the protection of minority investors and the resolution of problems related to insolvency are three points on which the country has a large margin of progress. The COVID-19 pandemic puts Small island developing economies in dire straits. A small and narrow economic base, high degree of openness and significant dependence on few large developed countries make small island economies extremely vulnerable to global economic shocks. These economies are often at the receiving end of global crises, as they are highly dependent on external flows—trade, remittances and external capital and borrowing—compared to other groups of developing countries (United Nations, 2022). The collapse in tourist arrivals not only directly affects income and employment in airlines, ground transport and hotels, but also adversely affects the rest of the economy, including agriculture and construction. Falling tourism, and subsequently, reducing tax revenues, will exacerbate fiscal balances of many small island economies and also reduce the flow of foreign direct investment (FDI), as the tourism sector is typically the largest recipient of FDI.

 

Country Comparison For the Protection of Investors

  Vanuatu East Asia & Pacific United States Germany
Index of Transaction Transparency* 5.0 5.9 7.0 5.0
Index of Manager’s Responsibility** 6.0 5.2 9.0 5.0
Index of Shareholders’ Power*** 5.0 6.7 9.0 5.0

Source: Doing Business - Latest available data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

 
Foreign Direct Investment 201920202021
FDI Inward Flow (million USD) 352526
FDI Stock (million USD) 641.5666.1691.8
Number of Greenfield Investments* 1.00.00.0
Value of Greenfield Investments (million USD) 4300

Source: UNCTAD - Latest available data

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

 

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Tax Rates

Value Added Tax (VAT)
12.5% (standard rate)

Supplies which are exempt from VAT include financial services, education supplied by an approved educational institution, donated goods and services sold by non-profit organisations, residential rental accommodation, and the sale of a property which has been used for residential rental accommodation for at least 5 years.
Supplies which are zero-rated include exported goods, goods not situated in Vanuatu at the time of supply, taxable activities sold as going concerns to registered persons, international transportation of passengers and goods, services provided to non-residents who are outside of Vanuatu, services physically supplied outside Vanuatu, goods or services supplied directly to approved educational institutions and goods or services supplied to aid donors in respect of approved aid projects.

Company Tax
Withholding Taxes
Dividends: 0%, Interests: 0%, Royalties: 0%.
Social Security Contributions Paid By Employers
Employers must contribute to an approved superannuation scheme. The most common is the Vanuatu National Provident Fund, with a contribution equal to 4% of the salary being paid by the employer.
Other Domestic Resources
Vanuatu Customs & Inland Revenue Department
Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.
 
 

Individual Taxes

No personal income tax
 
 

Country Comparison For Corporate Taxation

  Vanuatu East Asia & Pacific United States Germany
Number of Payments of Taxes per Year 31.0 23.4 10.6 9.0
Time Taken For Administrative Formalities (Hours) 120.0 195.1 175.0 218.0
Total Share of Taxes (% of Profit) 8.5 33.8 36.6 48.8

Source: Doing Business - Latest available data.

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Investment Opportunities

Tenders, Projects and Public Procurement
Tenders Info, Tenders in Vanuatu
DgMarket, Tenders Worldwide
Setting Up a Company
Consult Doing Business Website, to know about procedures to start a Business in Vanuatu.
Useful Resources
Vanuatu Investment Promotion Authority (VIPA)
 

Business Setup Procedures

Setting Up a Company Vanuatu East Asia & Pacific
Procedures (number) 7.00 7.25
Time (days) 18.00 29.73

Source: Doing Business.

 
 
 

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Latest Update: May 2022