Key Takeaways
- Vanuatu operates a zero-tax regime with no corporate income tax on company profits, which the article explains through its legal basis.
- Foreign-owned and international companies generally fall outside a profits tax, but pay an annual company fee in place of it.
- Narrow charges such as the rental income of companies can apply, and businesses still face filing, annual return and recordkeeping obligations.
- Penalties follow non-compliance, and the outlook section addresses how the OECD global minimum tax under Pillar Two may affect Vanuatu.
Corporate Tax in Vanuatu: An Introduction to the Zero-Tax Regime
Corporate tax in Vanuatu does not exist in the conventional sense: the jurisdiction applies a 0% corporate income tax rate to company profits. This places the South Pacific republic among the small group of jurisdictions, all island nations, that levy no general tax on corporate earnings, a position confirmed in the Tax Foundation survey of corporate rates worldwide.
The zero-tax regime reaches companies of every size and sector, both domestic firms and international companies incorporated by foreign owners. This article explains what the absence of corporate income tax actually means, the obligations that remain in its place, and the external pressures that could affect in-scope multinational groups.
It will be most useful to foreign business owners, investors, and their advisers weighing incorporation or assessing ongoing compliance for an entity already on the register.
Legal Basis for the Absence of Corporate Income Tax
The zero-tax position is a structural feature of the system rather than a clause granting exemption. No statute imposes corporate income tax, so none is owed; there is no provision to repeal or qualify.
International business companies are governed primarily by the International Companies Act [CAP 222], introduced in 1992 to let foreign interests incorporate as offshore entities. Domestic corporate life runs under the Companies Act No. 25 of 2012.
Two bodies matter for foreign owners. The Vanuatu Financial Services Commission registers and supervises companies, while the Customs and Inland Revenue Department administers the indirect taxes that do apply.
Because no law levies corporate income tax, there is no exemption certificate to obtain and no annual tax return to file with the revenue department. The benefit is automatic for every registered company.
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What "No Corporate Tax" Means for Companies and Investors
For a registered company, profits are not taxed. The same applies to dividends, capital gains, and wealth, and there is no withholding tax on payments made to non-residents.
The reach is wide. Inheritance tax, capital export tax, annual property tax, and personal income tax are all absent, and foreign exchange controls do not restrict the movement of funds, so profit can be repatriated freely.
The exemption generally covers both locally sourced and foreign-sourced income for resident companies. There is also no "tax year" in the local system, which removes the annual cycle of assessment familiar in most countries.
One limitation deserves attention. The jurisdiction has no double taxation conventions, so while earnings are not taxed twice locally, the country receiving a transfer may tax it under its own rules.
A second point applies to anyone running the company from abroad. Controlled Foreign Company rules in your home country can attribute the profits of a foreign subsidiary back to a domestic parent, meaning the 0% rate may not survive the journey home.
Treatment of Foreign-Owned and International Companies
The policy does not discriminate by ownership. A company controlled by foreign investors faces the same zero rate as one owned locally, across every industry.
Two registrations are required before a foreign-owned business begins operating. You must hold a Foreign Investment Certificate from the Vanuatu Foreign Investment Promotion Agency (VFIPA) and be registered with the Financial Services Commission.
Offshore companies formed under the International Companies Act sit outside several charges that touch local firms. They pay no income, corporate, withholding, capital gains, inheritance, estate, gift, or wealth tax, and no stamp duty.
Value Added Tax is the practical dividing line. Because an offshore company cannot transact within the country's territorial boundaries, the domestic VAT does not apply to it.
Record-keeping still binds owners of international companies. You must maintain accounting records and track capital and currency movements, even though there is no requirement to file reports with the revenue department.
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The Annual Company Fee in Place of Profits Tax
Instead of taxing profits, the state collects a flat annual fee. An international company keeps its standing by paying this fee to the Financial Services Commission on its due date, which falls on the anniversary of incorporation.
Multiple secondary sources cite an annual fee of USD 300, but the operative amount and any late charge should be confirmed against the VFSC fee schedule for the year in question before you rely on it.
A separate obligation runs alongside the fee. Under section 95C of the International Companies Act, each company must lodge an annual return on every anniversary of registration, in the form prescribed by Order No. 34 of 2011.
Miss the payment date and a late fee applies, set out in the Commission's published schedule.
Narrow Charges Within Corporate Tax's Scope (Rental Income of Companies)
One genuine income tax exists, and it touches companies that earn rent. Where a company owns property in the country and lets it, the rental income is taxed.
The rule treats companies more strictly than individuals. There is no threshold relief for a company, so the charge falls on all rental income rather than only the portion above an exemption.
Collection runs on a six-monthly cycle, with two fixed payment dates:
| Period earned | Payment due |
|---|---|
| 1 December – 31 May | 28 June |
| 1 June – 30 November | 28 December |
The applicable rate requires care. Some sources state 12.5% on company rental income, while the VFIPA overview cites 15% on rent above VT 200,000 in a six-month period; you should confirm the operative rate with the Customs and Inland Revenue Department before filing.
Other narrow charges round out the picture, including stamp duty on property transactions and import duties on goods brought into the country.
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Filing, Annual Returns and Recordkeeping Obligations for Companies
No corporate tax return is due, but procedural filing is not optional. Every business must register with the Financial Services Commission and hold the relevant licences, then file annual returns through the online registry.
The calendar has a quirk worth planning around. No filings are processed in December or January, so a company incorporated in either month files in November or February instead.
Timeliness carries weight. A return over six months overdue leads to removal from the register, after which the company's assets pass to the Crown.
A registered presence is mandatory at all times. An IBC must keep a registered office within the country and engage a licensed local agent, who handles filings with the Commission, including the annual return, director changes, and amendments to constitutional documents.
Records must be kept even where they are never published. An IBC is not required to file financial statements publicly, but it must maintain adequate accounting records, minutes, and shareholder registers, and produce them to competent authorities on lawful request.
VAT-registered firms follow a distinct timetable. Returns fall due on the 27th day of the month after the taxable period, or the next working day, and such businesses must keep proper records and issue tax invoices on request.
Penalties and Consequences of Non-Compliance
Late payment of the annual fee starts a short sequence. The Commission issues a notice if the fee is unpaid within 30 days of the due date; should a further 14 days pass without payment, the company is struck off.
Procedural lapses expose directors as well as the entity. Administrative penalties, deregistration, and legal exposure can follow a failure to meet domestic obligations, and enforcement is widening through cooperation with regional and international bodies.
Foreign investment breaches are treated seriously. Under the Foreign Investment Act, infringements attract fines of VT 100,000 to VT 500,000, with the top figure reserved for matters such as operating without a valid certificate or in activities reserved for Ni-Vanuatu citizens.
- Late renewal of a financial dealer's licence carries a penalty of 10% per month, capped at 50% of the licence fee, under the Financial Dealers Licensing (Amendment) Act No. 5 of 2024.
Anti-money laundering duties add a further layer. Companies offering financial, fiduciary, or business services must operate customer due diligence and suspicious transaction reporting under the Anti-Money Laundering and Counter-Terrorism Financing Act No. 13 of 2014.
Business and Sector-Specific Incentives Relevant to Corporate Profits
Beyond the zero rate, targeted concessions can lower the cost of entry and operation. They concentrate in priority sectors: primary production, tourism, infrastructure, energy, and ICT.
The main reliefs available to a new or expanding business include:
- Business licence fee exemptions for the first three years in certain priority sectors
- Import duty relief on raw materials, machinery, and equipment for agriculture, tourism, or infrastructure projects
- Negotiated tax holidays or concessions arranged through VFIPA, used notably in tourism and renewable energy
- Duty-free importation for accredited tourism businesses under the Import Duties (Consolidation) (Amendment) Act No. 24 of 2023, covering construction materials for hotels and resorts
- Reduced transaction costs or stamp duty concessions for selected property developments
Foreign direct investment has responded to this framework. The VFIPA reported 861 registered FDI projects in 2023, an 18% rise on the prior year, with roughly 83% in services such as tourism, financial services, and real estate.
The OECD Global Minimum Tax (Pillar Two) and Vanuatu's Outlook
The international tax reform known as Pillar Two changes the calculation for large groups. It sets a global minimum effective rate of 15% for multinational enterprises with consolidated revenue above EUR 750 million.
The jurisdiction remains one of 15 small island nations that levy no general corporate income tax. It has not enacted a Qualified Domestic Minimum Top-up Tax, unlike Bahrain, Guernsey, the Isle of Man, Jersey, and the Bahamas, which moved their effective rate to 15% in 2025.
No public record shows the country enacting, announcing, or consulting on GloBE implementing legislation, and it does not appear in the OECD record of legislation with transitional qualified status.
Even without local Pillar Two rules, a parent-company jurisdiction that has adopted the Income Inclusion Rule can levy a top-up tax on profits held in a local entity, effectively erasing the 0% rate for in-scope groups with consolidated revenue of EUR 750 million or more.
For smaller enterprises the position is unchanged. The reform reaches only the largest multinational groups, leaving the zero rate fully effective for the great majority of foreign-owned companies.
The jurisdiction also maintains standing with international standard-setters. Its IBC framework aligns with OECD Global Forum requirements on beneficial ownership and data availability, and it sits on the OECD "White List".
Conclusion
The zero-tax regime is real, but the decision to incorporate in Vanuatu turns less on the absence of a profits tax and more on whether a business can meet the compliance obligations that remain, because penalties for missing annual returns or recordkeeping requirements can quietly erode the advantage the structure was built to capture. A foreign business owner weighing Vanuatu should therefore examine those ongoing obligations first, and confirm whether any narrow charges, such as those on company rental income, apply to their specific activity before treating the headline rate as the whole picture.
How Expanship Can Help Your Business in Vanuatu
Expanship supports foreign owners in confirming their corporate tax position, meeting annual return and fee deadlines with the Financial Services Commission, and handling the narrow charges that do apply, such as VAT registration and rental income tax. The same team manages the wider set of tasks a foreign-owned entity needs to stay in good standing.
- Company formation and structuring for international and local entities
- Registered agent and registered office services
- Tax registration and filing, including VAT and rental income obligations
- Ongoing compliance management, annual returns, and corporate record-keeping
- Accounting and bookkeeping aligned with statutory record requirements
- Introductions to banking and financial service providers
To discuss incorporation or compliance for your business, contact Expanship Vanuatu.
Frequently Asked Questions
No. The corporate income tax rate is 0%, so profits, dividends, and capital gains earned by a registered company are not taxed, and there is no withholding tax on payments to non-residents. The benefit is automatic, since no statute imposes the tax in the first place.
Yes, in limited situations. A company that owns and rents out property is taxed on its rental income, with no threshold relief, and businesses transacting locally fall within the Value Added Tax system. Offshore companies that cannot trade within the territory are outside VAT.
International companies pay a flat annual fee to the Financial Services Commission on the anniversary of incorporation, widely cited at USD 300, alongside lodging an annual return. You should confirm the current fee against the official VFSC schedule before relying on the figure.
Late payment of the annual fee triggers a notice, and a company that remains unpaid 14 days after that notice is struck off. An annual return more than six months overdue results in removal from the register and transfer of the company's assets to the Crown.
Not for most companies. The jurisdiction has not adopted Pillar Two legislation, so the 0% rate stands; only multinational groups with consolidated revenue of at least EUR 750 million face a possible top-up tax, which a parent jurisdiction can collect through its own Income Inclusion Rule.
The zero rate applies regardless of ownership or sector. Foreign-owned businesses must additionally hold a Foreign Investment Certificate from VFIPA and register with the Financial Services Commission, and they must keep accounting records even though no report is filed with the revenue department.
Legal Disclaimer
The information provided in this article is for general informational purposes only and does not constitute legal, tax, or professional advice. While we strive to ensure the accuracy and timeliness of the content, laws and regulations are subject to change, and the application of laws can vary widely based on specific facts and circumstances.
Readers should not act upon this information without seeking professional counsel tailored to their individual situation. Expanship and its authors disclaim any liability for actions taken or not taken based on the content of this article.
For specific advice regarding your business setup, compliance requirements, or any legal matters, please consult with qualified legal and tax professionals in the relevant jurisdiction.
