Key Takeaways
- A Vanuatu Local Company (Proprietary Limited Company) provides separate legal personality and limited liability, shielding owners from company debts.
- Shareholders, share capital, and director roles define the ownership and management structure governed by Vanuatu's company law.
- Taxation and permanent establishment treatment are central considerations for non-resident owners weighing this entity type.
- Ongoing compliance and reporting obligations apply, so understanding both advantages and limitations supports an informed formation decision.
Understanding the Local Company (Proprietary Limited Company) in Vanuatu
A Local Company (Proprietary Limited Company) in Vanuatu is the incorporated vehicle a foreign owner uses to trade inside the domestic economy, something the offshore International Company is barred from doing. It is a private company limited by shares formed under the Companies Act, registered with the Vanuatu Financial Services Commission (VFSC), whose Commissioner also acts as Registrar of Companies.
This guide explains what the structure is, how it is governed, who runs it, how it is taxed, and what a non-resident must do to keep it compliant. It is most relevant to foreign investors and their advisers who need a genuine operating presence in the country, whether for retail, tourism, property holding, or professional services.
The form is the local analogue of the Australian "Pty Ltd": shares carry transfer restrictions and membership is capped. Shareholders enjoy limited liability, but the entity carries broader disclosure and regulatory duties than an offshore company.
Legal Basis and Governing Law for Vanuatu Local Companies
The Companies Act [Cap. 191], as substituted by Companies Act No. 25 of 2012, governs the formation and administration of domestic companies. It descends from the UK Companies Act 1948, the common ancestor of company law across most Commonwealth states, and has been updated to reflect contemporary practice.
Every company other than an International Company falls under this Act. The offshore regime sits separately under the International Companies Act [Cap. 222], so the two should not be confused when choosing a vehicle.
Several adjoining statutes matter to a foreign owner. Business name registration runs under the Business Names Act [Cap. 211], trading licences under the Business Licence Act [Cap. 249], and foreign investment approval under the Vanuatu Foreign Investment Promotion Act [Cap. 248].
One feature shapes nearly every tax decision that follows: the country is not party to any double taxation treaty. No treaty relief exists to reduce home-country tax on money you take out.
Company Incorporation in Vanuatu
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Defining Features: Separate Legal Personality and Limited Liability
A Local Company is a separate legal person. It can own property, sign contracts, and sue or be sued in its own name, independently of the people behind it.
Shareholder liability is confined to any amount unpaid on shares held. Once shares are paid up, personal assets stand behind the corporate veil rather than the company's debts.
The firm cannot trade before the VFSC issues its Certificate of Incorporation. An unlimited-liability variant exists under the Act but is rarely seen and unsuited to ordinary commerce.
Shareholders, Share Capital, and Ownership Structure
A private company needs at least one shareholder and may have no more than 50. None of them need to live in Vanuatu, and foreign owners may hold 100 percent of the equity without local participation.
Be aware that ownership is not private. Shareholder and director details appear on a public file, which distinguishes this structure sharply from an International Company.
There is no fixed statutory minimum share capital for most company types; the amount you commit should match the scale of the planned business. Capital may be denominated in any currency, and no-par-value shares are available under the modern framework.
Incorporation fees scale with authorised share capital. The published schedule runs from a lower band for modest capital up to a higher band for the largest authorised amounts.
The fee bands circulated in older investment material date from 2018/2019. Verify the live schedule on the VFSC fees page before relying on any figure.
Bearer shares were historically permitted. In line with FATF-driven transparency reforms, they are now immobilised or otherwise restricted, so confirm the position with a VFSC-licensed registered agent before assuming they are available.
Ongoing Compliance in Vanuatu
Keep your Vanuatu entity compliant with filings, returns, and statutory obligations.
Directors, Officers, and Company Management
The management rules carry real cost for a non-resident, so read them carefully. A Local Company must have at least one director who resides in Vanuatu, and it must also appoint a resident company secretary.
You may encounter a stray source suggesting the director need not be resident. The operative rule for a Local Company is residency for at least one director; in practice the resident director and secretary roles are filled by a licensed corporate services provider.
The entity must keep a registered office in the country at all times, and its annual general meeting must be held there. Statutory records, including minutes, resolutions, and the registers of directors and shareholders, are kept at that office or at another place the directors choose.
Directors carry the usual fiduciary duties: to act in good faith, in the company's interest, and with reasonable care. Electronic signatures are accepted, which eases document execution from abroad.
Typical Uses and Who Chooses a Local Company
This is the vehicle for foreign capital that needs to operate on the ground. Because an International Company is prohibited from trading domestically, a non-resident who wants to sell, serve, or hold assets inside the country incorporates here instead.
Common applications include the following:
- Retail and service businesses operating in-country
- Tourism and hospitality ventures
- Holding land leases and other local property
- Professional services firms requiring a local licence
- Joint ventures with Vanuatu-based partners
Licensing varies by sector. Regulated fields such as finance, tourism, and hospitality call for specific permits, and a few areas, including broadcasting and telecommunications, carry foreign ownership conditions you should check before committing.
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Taxation and Permanent Establishment Treatment
The tax position is the principal draw. There is no corporate income tax, no capital gains tax, no withholding tax, no dividend distribution tax, and no estate or inheritance tax; nor are there foreign exchange controls.
The taxes that do apply are narrow. Value-added tax runs at 12.5 percent on goods and services supplied locally once the registration threshold is met, and stamp and customs duties may arise, with sector exemptions in tourism, manufacturing, and mineral exploration.
| Tax or charge | Position |
|---|---|
| Corporate income tax | None |
| Capital gains tax | None |
| Withholding tax on distributions | None |
| Dividend distribution tax | None |
| Value-added tax | 12.5% on local supplies above threshold |
| Payroll (VNPF) | Employer contributions required |
| Exchange controls | None |
Employers contribute to the Vanuatu National Provident Fund. Confirm the current VAT registration threshold with the Department of Customs and Inland Revenue, since that figure determines when you must register.
For permanent establishment, the company is a Vanuatu tax resident because it is incorporated and operates there. Your home tax authority may still treat dividends you receive as foreign income, and with no treaty in force, no relief is available to cut home-country tax on what you distribute.
No economic substance regime has been identified for standard Local Companies, which sets this apart from some neighbouring Pacific jurisdictions. Check with the VFSC for any sector-specific substance rules that might apply to your activity.
Ongoing Compliance and Reporting Obligations
Keeping the company in good standing involves several annual duties. The firm files an annual return with the VFSC, prepares annual accounts, and pays an annual government fee on the same scale as the incorporation fee.
Audit is turnover-driven. Financial statements must be audited and filed where annual turnover exceeds VUV 20 million; below that, accounts are still prepared but the audit obligation does not bite.
Records must be kept accurately and preserved for at least seven years, at the registered office or another accessible place. Changes to directors, shareholding, the secretary, or charges over property, along with certain special resolutions, must be notified to the Registrar.
Foreign-owned businesses carry an extra layer. A new business licence or renewal for a foreign-owned firm must be accompanied by a valid VFIPA certificate, and the company is subject to an annual VFIPA survey scheduled for 21 February (VFIPA Form 3).
The licence cycle follows the calendar year. New licences run from commencement to 31 December; existing businesses renew on or before 31 January, with the renewed licence valid for the full year that follows.
The VFSC has issued notices to directors of Local Companies on mandatory Ultimate Beneficial Owner disclosure (as of June 2025). Treat UBO reporting as a standing obligation and keep KYC information current.
Advantages and Limitations of the Local Company
The strengths cluster around access and tax. This is the only incorporated vehicle that lets a foreign investor trade inside the domestic market, and it does so with separate legal personality and limited liability for shareholders.
On the fiscal side, the absence of income tax, capital gains tax, and withholding tax is genuine, and there are no exchange controls, so funds move in and out freely. Foreigners may own the company outright, re-domiciliation in and out of the jurisdiction is permitted, and electronic signatures are accepted.
The limitations weigh more heavily on a non-resident owner:
- A resident director and resident secretary are mandatory, usually meaning nominee appointments and recurring cost.
- Shareholder and director details sit on a public file, so privacy is lower than under an offshore structure.
- The annual general meeting must be held in the country, an awkward requirement for fully non-resident ownership.
- Accounts must be prepared and filed, with audit triggered above VUV 20 million turnover.
- A VFIPA certificate must be obtained and maintained, a regulatory step local owners avoid.
- With no treaty network, home-country tax on distributions cannot be reduced.
- A private company is capped at 50 shareholders, limiting capital-raising compared with a public company.
Sector rules add a final caveat. Broadcasting, telecommunications, and similar fields may restrict or condition foreign participation, and business licence fees vary by turnover and activity, an ongoing cost not present in offshore vehicles.
Formation Overview at a Glance
The full procedure is covered in the dedicated incorporation guide; what follows is the short version. The entity is a Private Company Limited by Shares formed under the Companies Act and registered with the VFSC in Port Vila.
- Reserve a name. Check availability with the VFSC and submit up to three proposed names.
- Obtain VFIPA approval. Foreign entrepreneurs must secure a Foreign Investment Application Certificate before starting business; VFIPA authorises all new foreign investment.
- File the incorporation application. Complete the prescribed Application for a Permit to Form an Incorporated Company, with the Memorandum and Articles (or Constitution), the list of consenting directors, and consent forms.
- Submit KYC. For each foreign shareholder and director, provide a notarised passport copy (notarised within the last three months) and notarised proof of address.
Once a complete application reaches the VFSC, a Certificate of Incorporation is typically issued within three to five working days. VFIPA works to a 15-day processing standard, so build that into your timetable.
Incorporation and annual fees follow the same capital-based scale; confirm the current figures directly with the VFSC rather than relying on older published bands. If you trade under a different name, business name registration costs VT 10,000 with annual renewal at VT 5,000 where renewed before 30 September.
After incorporation, apply for the Business Licence from the Department of Customs and Inland Revenue, register as an employer with the VNPF if you hire staff, and obtain any sector licences your activity requires. A company seal is optional. A foreign entity that re-domiciles must nominate two Vanuatu residents able to accept notices on its behalf.
Conclusion
For a foreign investor who needs to operate inside the country rather than offshore, the Local Company is the route, and it pairs limited liability with an unusually light tax base. The trade-off is visibility and upkeep: public ownership records, a resident director and secretary, a yearly meeting held locally, audited accounts above the turnover threshold, and a standing VFIPA obligation. None of this is onerous with proper local support, but it is more than an offshore company demands. Weigh the operating access and tax position against the compliance load, and confirm current fees and sector rules before you commit capital.
How Expanship Can Help Your Business in Vanuatu
Expanship handles the formation and ongoing administration of a Local Company (Proprietary Limited Company) in Vanuatu, from name reservation and VFIPA approval through to the VFSC filing, and supports the wider needs of a foreign-owned entity once it is running.
- Company incorporation under the Companies Act, including document preparation and submission
- Resident registered agent and registered office in Vanuatu
- Business Licence and VFIPA certificate, plus tax and VAT registration
- Ongoing compliance, annual returns, AGM support, and UBO reporting
- Accounting, bookkeeping, and audit coordination where turnover requires it
- Introductions to banking and payment providers
To discuss your plans and the right setup for your business, contact Expanship Vanuatu.
Frequently Asked Questions
Yes. There are no restrictions on foreign ownership, and a non-resident individual or entity may hold the entire share capital, subject to obtaining a VFIPA certificate and to any sector-specific rules in regulated fields such as telecommunications.
It does. At least one resident director and a resident company secretary are required, and these roles are commonly filled by a licensed corporate services provider on behalf of a non-resident owner.
There is no corporate income tax, capital gains tax, or withholding tax. The main charges are value-added tax at 12.5 percent on local supplies above the registration threshold, customs and stamp duties, and employer contributions to the Vanuatu National Provident Fund.
Yes. Shareholder and director details appear on a public file maintained by the VFSC, and beneficial ownership disclosure has been made mandatory, so this structure offers less privacy than an International Company.
Audited financial statements are required where annual turnover exceeds VUV 20 million. Below that level, the company still prepares annual accounts and files them with an annual return, but no audit is mandated.
Once a complete application is lodged with the VFSC, a Certificate of Incorporation is generally issued within three to five working days. Foreign owners should also allow for VFIPA approval, which follows a 15-day processing standard, before the company can begin trading.
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.
