Overview – Why invest in Vanuatu?

The country boasts an advantageous tax regime which is enhanced by several unique features when compared to other finance centres:

• There is no income tax in Vanuatu, no withholding tax, no capital gains tax, no death duties and no exchange controls. Money is easily transferred in all major currencies.

• Vanuatu financial centre has been in operation for almost 40 years, much longer than many of its competitors. Its infrastructure of lawyers, accountants, trust companies and banks is well established and this enables it to offer investors a reliable and high quality service.

• The country has a unique multicultural environment. This is inherited from Condominium times before its independence in 1980 when it was governed both by the French and the British.

There is no doubt that Vanuatu has a number of potential advantages as an investment location. The government is committed to the promotion of new investment.

The government is also interested in encouraging investment in tourism, fishing, forestry and timber products. Naturally, there are restrictions to ensure that natural resources are not over-exploited. The thrust of government thinking is to encourage labour intensive industries, using local products that will lead to import substitution. Manufactured goods exported from Vanuatu generally enjoy concessions from the Vanuatu Government. There are various accountants and lawyers in this tax environment who can help you finalising your project.

Property investment in Vanuatu

All Property in Vanuatu is registered as a leasehold title. For many new investors who are not familiar with the concept, the idea of holding a leasehold title as opposed to a freehold title can be quite unnerving. However, the system has proven itself efficient as can be seen by the rapid increase in real estate prices over the past decade.

The main urban areas of the capital Port Vila and Luganville on Santo Island were declared “public” land in 1980 under the Land Reform Act (Cap 123) at the time of Independence. The Minister of Lands is the Lessor in the urban areas, and for many rural leases where the customary ownership is not yet established. In these urban areas many leases are 50 years from their creation or from Independence on 30 July 1980. Outside of these town areas nearly all new leases are registered for 75 years.

There are no restrictions on foreigners buying property in Vanuatu. A non-citizen may be required to provide a “financial reference” and a “professional reference” from a local firm for urban purchases, but that is the only distinction made between citizen and non-citizen buyers. There is no requirement to obtain a Vanuatu Investment Promotion Authority (VIPA) Investor’s Certificate or a business licence to buy property in Vanuatu, unless it is intended that business will be done locally.

There is no requirement for property owners or holders of Vanuatu residency permits to physically reside in Vanuatu.

FAQ’s

The key things to remember when purchasing land in Vanuatu, is that unlike some other countries there is stamp duty or land tax (7%), chargeable on property purchases. Most properties will be advertised in AUD or Vatu and include the VAT (which will be paid by the vendor) but not the stamp duty which is payable by the purchaser.

Can foreigners buy property in Vanuatu?

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Yes. There are no restrictions on foreigners buying property. A non-citizen may be required to provide a ‘financial reference’ and a ‘professional reference’ from a local firm, for urban purchases but that is the only distinction made between citizen and non-citizen buyers. You do not need a Vanuatu Investment Promotion Authority (VIPA) Investor’s Certificate or a business license to buy property in Vanuatu. You will be required to satisfy the conditions as laid down by the Vanuatu Financial Intelligence Unit.

Is there any freehold land in Vanuatu?

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No. Where a property is registered with a title it is registered as a leasehold title. The urban areas of Port Vila and Luganville on Santo Island were declared ‘public’ land in 1980 under the Land Reform Act (Cap 123). The Minister of Lands is the Lessor in the urban areas and in many rural leases where the customary ownership is not yet established. Outside of these urban areas, land is sold under registered leases and the ‘Kastom owner’ is named and is the ultimate owner of the land when the lease expires.

Do I have to live here to own property?

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No. There is no requirement for property owners or holders of Vanuatu residency permits to reside in Vanuatu.

What are the normal steps in buying property in Vanuatu?

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  • Sign a Sale and Purchase Agreement & pay the deposit (usually 10%) into the agent’s or solicitor’s trust account
  • Purchaser proceeds to meet any conditions in contract if any
  • Vendor then applies for Lessors Consent to Transfer or arranges for a share transfer.
  • Pre-settlement inspection of property or last minute search of title is carried out by purchaser’s side, if desired.
  • Settlement takes place. Documents usually handed over to purchaser include:
    • 3 original Transfer of Lease deeds already executed by Vendors, Copy of Registered Title, Settlement Statement, current Property Tax receipt, current Land Rent receipt, Tenancy Agreement (if applicable), Company Documentation (if applicable)

What is the maximum term of a leasehold title?

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The Constitution states that the maximum term of a lease is 75 years.

When you buy a lease is it renewed at the time of purchase or do you buy the term remaining?

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When you buy an existing lease, you purchase the remaining term of that lease. Leases for The Point Marina were created in early 2018 and the remaining term is 64 years.

What happens at the end of the lease?

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In 2003 Parliament passed a law (the Land Lease (Amendment) Act No. 24 of 2003) enabling any urban lessee to surrender their existing lease title, and either extend a lease that is currently less than 75 years up to 75 years or, where a lease is already for a period of 75 years, to renew the lease for a full period of 75 years from the date of renewal, upon payment of the requisite premium and administrative fees. Given the nation’s first titles were created at independence in 1980 this has not yet affected any titles (as the minimum period has not yet passed). If a title is not extended, then after the 75 years the current law is that the lessor takes back the land and the lessee is to peaceably and quietly to deliver up vacant possession of the demised land including all improvements to the lessor.

Do the commercial banks accept leasehold titles as security for loans?

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Yes. Mortgages and ‘Cautions’ are registered on the leasehold titles as they would be on freehold and leasehold titles in other countries. Banks typically require 20% for residential loans and up to 50% for commercial loans of the loan amount from the borrower. When a mortgage is taken out on a piece of land the kastom owner or Lessor needs to provide a consent to mortgage. For the leases to be created for “The Point Marina” subdivision we have set an agreed fee with the lessor of VT20,000. Note any variations or amendments also require a consent so each time there is a variation to the mortgage a fee of VT20,000 would be paid to the lessor if their consent is required.

How long does it take to complete a transaction?

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Generally it takes from 1 – 3 months. This varies depending on conditions that may be part of a particular transaction. Any transfer of a property title requires the Lessors ‘Consent to Transfer’, which based on our agreement with the lessor incurs a fee of 2.5% of the net sale price after VAT (if any). This is paid by the vendor.

What are the normal buyer's costs?

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2% Stamp Duty
5% Title Transfer Registration
Legals costs are usually between 0.5% – 1% of the purchase price.

Consent to Mortgage fees to lessor (VT20,000)

What is the usual deposit when exchanging contracts?

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10% per cent is the standard contract deposit when a sale agreement is exchanged between a buyer and seller. Deposits are held in trust, untill settlement, usually by the vendor’s agent or solicitor.

Do I need to use a lawyer for conveyancing?

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The law does not oblige purchasers to use a solicitor but for those contemplating buying property or a business it is very wise to seek legal advice and representation, especially if you are entering the Vanuatu market for the first time. Our laws and practices are likely to be different from your own country.

Is VAT payable on housing sales?

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VAT (currently 15%) is not payable by the purchaser on residential property on second generation sales. VAT is payable if a property developer creates a land subdivision for sale and the vendor will pay the VAT in most cases. Prices for The Point Marina include VAT and the vendor will pay this to the Government.

What are the usual annual costs after purchase?

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1. Body Corporate fees which are currently budgeted to be VT20,000 per month and will include common power and water, security, maintenance of public area grounds and services, public indemnity insurance, insurance on public area items such as fencing, entrance gates, marina walls and boat ramp, lighting etc
2. Annual Lease Rent payable to the Lessor which will be set at VT40,000 per year for the first five  years
3. Rent Tax on Residential Rental property (or VAT on commercial). This is 15% of gross income.

What do I need to insure my property?

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Insurance will cost about 0.7% to 1.0% of insured value. You will need an engineer’s certificate to obtain cyclone insurance. Other perils such as fire, earthquake, theft, burglary, etc are also covered in standard policies. Public liability, workers compensation, loss of rental income and so on is also available. Contact local brokers and insurance companies for further details.

Are there any restrictions if I am a foreigner and I want to sell my property in Vanuatu?

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There are no restrictions. If a vendor is up to date with outgoings to the local authorities, lease rent to the Lessor, he/she will be able to obtain the Lessors Consent to Transfer the title.
Encumbrances such as a Mortgage is discharged at settlement as typically happens in other countries.

What are the vendors’ costs in a sale transaction?

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The vendor pays agents’ commission (if used) and legal fees if a solicitor is used. There are no fees or taxes on the sale, unless VAT is applicable (for a corporation mostly).

The Vendor also pays a “consent to transfer” fee to the lessor of 2.5% of the Net Sale Price.

Is it easy to rent out property?

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Good property typically rents well.  Typically, a good standard family home would rent for AUD 1,500 to AUD 3,500 per month, and sometimes higher.

Are there qualified builders in Vanuatu?

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There are several companies in Port Vila with qualified builders. As in any other country it is important to select a builder carefully and to see other jobs they have done.

If I want to build my own house, do I need any permissions or approvals, or do I need a business license?

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No. You may do the building for yourself on your own land title. You will still need to obtain your planning permission and building permit, and you will need to register as an employer with the VNPF (the Vanuatu National Provident Fund) if you hire any workers.

What does it cost to build a good house in Vanuatu?

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Naturally, this varies from builder to builder, but a reasonably good guide is about AUD 2,000– 2,500 (approximately VT 170,000 – 210,000) per m².  Obviously where more luxurious fixtures and fittings are used, this price will be higher.

Financial Services

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For further information on funding your dream property we suggest you speak with Gayle Stapleton at gayle@stapletonpacific.com or visit stapletonpacific.com