In Vanuatu, employers have several tax responsibilities. One of these is the mandatory contribution to the Vanuatu National Provident Fund (VNPF). Employers are required to contribute 4% of an employee's gross salary to the VNPF. Additionally, they must withhold 4% from the employee's wages for the same purpose.

VNPF Registration and Payment

Employers must register with the VNPF within seven days of starting a business. The contributions, both from the employer and the employee, must be remitted on a monthly basis.

Payroll Deductions

Employers may be required to withhold income tax from employee salaries. This is based on a progressive tax system. It's essential for employers to check with the Vanuatu Revenue and Customs Department for the latest withholding requirements and submission deadlines.

Record Keeping and Reporting Obligations

Employers must maintain accurate payroll records for tax and compliance purposes. They may also have additional reporting requirements, particularly concerning foreign employees and work permits.

In Vanuatu, employees are required to contribute 4% of their gross salary to the Vanuatu National Provident Fund (VNPF). This mandatory contribution is deducted directly from their wages by their employer. The VNPF is a social security scheme that provides retirement benefits to members.

No Income Tax

Interestingly, Vanuatu does not currently have a personal income tax. This means employees do not have any income tax deductions from their salaries.

Additional Considerations

While there's no direct income tax, employees will indirectly pay taxes on their purchases of goods and services. However, these are not deducted from their salaries but are paid at the point of purchase.

VAT applies to a wide array of services provided in Vanuatu. Some common examples include professional services such as consulting, legal, accounting, hospitality services like hotels, restaurants, tourism activities, telecommunications services, transportation services, construction and engineering services, and advertising, marketing, and related services.

VAT Registration

Businesses providing taxable services in Vanuatu must register for VAT if their annual turnover exceeds a specific threshold. The current threshold for mandatory VAT registration is 4,000,000 Vatu (VT).

VAT Compliance

VAT-registered businesses must follow these compliance requirements:

• Charging VAT: Businesses must add VAT to the price of their taxable supplies of services.
• Issuing VAT invoices: Businesses are required to issue VAT invoices for their taxable services.
• Filing VAT returns: Businesses must file VAT returns periodically (usually monthly) and pay any VAT due.
• Record-keeping: Maintain accurate sales and purchase records for VAT purposes.

Zero-Rated Services

Certain services are zero-rated for VAT purposes. This means:

• VAT is charged at 0% on the supply of these services.
• Businesses providing zero-rated services can generally reclaim input VAT incurred on their expenses.

Some examples of zero-rated services in Vanuatu include exported services and international transport services.

Vanuatu offers a highly attractive tax environment for businesses, with several general and specific tax incentives.

General Tax Incentives

• No Corporate Income Tax: Vanuatu does not impose corporate income tax on businesses, making it an attractive environment for both foreign and domestic companies.
• No Capital Gains Tax: There's no capital gains tax in Vanuatu, which can further maximize business profits.
• No Withholding Taxes: Vanuatu does not levy withholding taxes on dividends, interest, or royalties.
• Minimal Import Duties: Import duties are generally low, especially for capital equipment and items related to priority sectors.
• Foreign Exchange Freedom: There are no restrictions on foreign exchange transactions or the repatriation of profits.

Specific Tax Incentives

Certain industries and activities in Vanuatu are eligible for additional tax incentives. These include:

• International Companies (IC): ICs incorporated in Vanuatu for conducting business outside of the country are exempt from most business licenses and stamp duties.
• Agriculture and Fisheries: These sectors can benefit from tax holidays and import duty exemptions.
• Tourism: Qualifying tourism-related businesses may receive concessions on import duties and other taxes.
• Manufacturing and Export: Businesses engaged in manufacturing for export may be eligible for tax concessions.

Important Considerations

• Eligibility: The specific eligibility criteria for tax incentives will vary. Businesses should carefully evaluate the requirements before applying.
• Application Process: An application process is usually involved to obtain tax incentives, which may require approval from relevant authorities.