All Your Questions Answered
Many a human’s idea of blissful living involves swinging in a palm-strung hammock while the ocean swooshes gently onto a white-sand beach nearby - so it’s no surprise that the South Pacific island nation of Vanuatu was voted top dog in the New Economics Foundation’s Happy Planet Index (for the second time). The water’s ridiculously blue and teeming with life; the interior’s lush and volcanically rumbling, great for exploring amid the breadfruit trees. But it’s the sense of community that makes this a truly happy place. Extended families congregate regularly for age-old celebrations - in Vanuatu, there’s always a knees-up somewhere.
Visit from April/May to October, when temperatures range from 18°C to 28°C. The terrifying Land Diving festival (the original bungee) runs in April/May.
Lonely Planet May 10, 2010 4:16:22 AM
There are many reasons for investing in real estate in the Pacific Islands, particularly where there is a stable, independent and tolerant government, as is the case in the Republic of Vanuatu. Many are satisfied to own a holiday home or investment property that, under normal circumstances, requires little or no input once purchased. Residency Status is another popular reason to acquire property which, provided the level of investment meets the pre-requisite, can be a very simple process. Whatever the individual’s reasoning, the common denominators are lifestyle and freedom.
Is Vanuatu a Tax Haven?
In recent times there have been some major changes in regard to this question, however for those that wish to make Vanuatu their home or permanent base further investigations would be beneficial.
Is land in Vanuatu on Leasehold or Freehold?
All land in Vanuatu, as is the case throughout the South Pacific, is Leasehold. When a property is registered, it is registered as a leasehold title. The Minister of Lands is the Lessor in the urban areas (around the CBD). Land outside the urbanisation (which has in many cases already been sub-divided for resale) has a custom owner as the Lessor.
The Constitution states that the maximum term of a lease is 75 years, which is derived from the productive life of a Coconut Palm. Leases can be for 50 years from their creation or from the date of Independence, 30 July 1980. It is accepted these days that new leases are given and registered for 75 years, but this is a point for negotiation and includes strata title leaseholds.
Is it possible to receive a Residence permit?
Standard residence permits are issued by the Vanuatu Government for a period not exceeding 12 months, which are renewable on request every year, provided conditions of first issue are unchanged. Fee: 40,000 Vatu per year (about US$400).
Work permits can be obtained from the Labour Department and are appended to Residence Permits. Work Permits require an application from both the Employee and the Employer who pays the fees in most cases.
A repatriation bond (equal to a return airfare to the country of citizenship) issued by a local bank may be required to be submitted with the Residency Application.
By demonstrating you have made an investment in Vanuatu the minimum being VT5,000,000 (approx US$50,000) You may apply for Residency as an Urban Investor. There are two main options for qualification under these rules subject to satisfaction of other requirements:
· This can be by way of a term deposit with a local bank.
· Ownership of a property of a value of VT5, 000,000 or more.
Long term residence permits are available according to the value of your investments in Vanuatu. The schedule below lists the options available in relation to the investment.
At a glance:
The authorities will also request copies of the following documents:
1. A Police Clearance from your Country of Origin.
2. A Birth Certificate.
3. A list of dependents and a copy of their birth certificates.
4. A certificate of Incorporation (for investors).
5. Medical Certificate stating your medical condition.
6. A copy of your Passport.
7. 2 Passport Photos.
In depth table Supplied by AJC
If you wish to invest or do business locally in Vanuatu you will need to incorporate a Local Company or if your main activity is conducted outside Vanuatu an international Business Company. This category particularly suits internet based business, this is presently the biggest growth area, ideal for those that are looking to reduce costs and have a lifestyle.
Incorporating a company in Vanuatu requires specialised knowledge and understanding, for further information on the many advantages Caillard & Kaddour suggest you contact a professional.
Is Strata Titled Property an Option?
The Strata Titles Act of 2000, with its accompanying regulations, allows for more flexibility in a property design or sub-division and opens doors for large international projects, as well as Tourism. It is possible to strata title existing buildings, in addition to new apartments and commercial buildings. Both Barrett & Partners and AJC can offer professional advice and assistance.
There is a tax that is levied against rent collected on residential properties in Vanuatu, which is calculated bi-annually. It is charged at a rate of 12.5%, but there is an allowance up to which point no tax is charged. In the case of rental income earned from commercial property, VAT is payable. There are no restrictions on non-citizens and it’s not necessary to have either residency or employment in Vanuatu to purchase a property or business.
When the lease comes to an end, what happens then?
On purchasing a property with an existing lease agreement, you are procuring the residual lease term, not a new 50 or 75 year period. The shortest period of time for a lease granted to date has been 40 years. All urban leases can be renewed for a fee. This is 10% of the "unimproved land value" (as assessed by the Government's Valuation Unit), plus any administrative costs.
Land that is rural or falls outside the urban area will have a different renewal fee and is a matter for negotiation with the Lessor or Land Owner. This can range from a simple one off payment of 30,000 Vatu (around AU$350), to 2% of the unimproved land value.
Land of this type is normally in the hands of family groups or communities and should when negotiating, be handle in line with local customs, for a positive outcome.
A lease renewal can be negotiated at any time, on terms suitable to both parties.
If we purchase a property, are there any annual charges?
If you have a property in the urban area, there are municipal rates/taxes to cover roads and other public works, refuse collection etc. All properties, whether inside the designated municipal area or not, will incur electricity, water, gas charges (if connected) and land rent. Land or ground rent is paid annually in advance in July and is a nominal amount related to the size or square meterage based on the unimproved value of the land, these details are mentioned in the lease. As with all real property, it is highly recommended that building insurance is arranged to commence from the date of settlement.
What restrictions, if any, are there in buying properties in Vanuatu?
At this time there are no restrictions on non residents purchasing leasehold property in Vanuatu, either as a private individual or within a company structure.
When I buy a leasehold property, what other expenses could I expect to incur?
As with all property transactions there are added costs. For the most part, these are to protect you and normally expressed as a percentage of the sale price.
- Solicitor’s fees are around ½%. Alternatively, a conveyancing agent will charge about VT 50,000.
- Stamp duty is 2%
- Government registration is 5%
In the case of a business, or a property owned by a registered company, these government charges can be reduced to as little as 4%. However the initial financial benefits may be negated by the ongoing company charges. It is recommended that the advice of a legal professional be sought in these situations.
Are the local banks interested in lending against Vanuatu property?
As a financial centre, Vanuatu is able to offer outstanding banking services and the competition is very healthy. ANZ, Westpac, BRED and the National Bank of Vanuatu all operate full banking services here. Whilst each case is different, as a guideline the banks usually require a 20-30% deposit on residential property and 40% on commercial. The lending criteria are as you would expect the same as anywhere else in the world. There is very healthy competition for your business between ANZ & BRED; both are very active in sourcing funds from within and outside of the Pacific Rim at keen rates; we suggest you approach them directly to obtain specific advice.
Since the GFC the main banks have been more cautious, understandably. Local banks are more likely to be sympathetic to your application as follows:
- Those that are able to offer collateral, even if it is overseas may find it easier to negotiate better terms.
- A local income in the currency that the lender is offering, that will cover the repayments, may put you in a better position when negotiating with the banks.
What regulations are there governing the building industry?
Certainly the regulations are nowhere as restrictive as you would encounter in some of our neighbouring countries. Traditional materials, which can be very cost effective, are widely used and can provide a very elegant and environmentally friendly alternative. Vanuatu is no different to anywhere else in that the lease requirements and ability to insure the building will dictate the standard of construction. For this, a construction certificate will have to be issued. Also in some cases there are covenants to maintain the presentation, to be considered. Most importantly as with anywhere submit your plans to the local council for approval which is a simple process and receive a building permit number. All these common sense requirements and procedures will ultimately be reflected in your ability to sell.
Are there professional builders available?
The main difference, many have found, when building in Vanuatu is that you the owner have more freedom to design and have built or build yourself the home of your dreams, costs particularly if a lot of imported materials are used are can be on a par to our larger Pacific neighbours budget anywhere from Vtu120, 000 for a every day house with little personal involvement to as much as 200,000 per m²
Your expectations, involvement and budget will determine who you want to build your home. There are local contractors and those from overseas plus professional construction firms. Because Vanuatu has in the past occasionally been exposed to cyclones and earthquakes houses are engineered to a higher level than you would find generally in most first world countries.
What is the Step by Step Process?
1. Find a suitable property and agree with the vendor on the price, remember the agent has an obligation to obtain the best out come for the seller.
2. The vendor or his agent will provide a written agreement, this is a very straight forward document anything more is superfluous in Vanuatu; this is your opportunity to add you conditions of purchase.
3. On signing the agreement pay a 10% deposit no more, to be held in trust, as part of the purchase price.
4. Make application to the government for consent of Transfer of Lease
5. Sign the Lease Transfer.
6. On Settlement transfer the balance to the vendor’s agent or as instructed.
7. Pay Stamp Duty of 2% on the transfer.
8. Register the Transfer at the Lands Records Department the fee for this is 5%.
Is it worth me going to all this trouble?
Your personal needs will dictate whether there are significant gains to be had in investing your money and time in this Island Paradise. However the facts remain that buying into the real estate market in Vanuatu, whether residential or commercial is an excellent way to make your money work for you. With the right legal advice ordinary investors can enjoy significantly benefits that it would be near on impossible to have else where, why:
- The market at this stage has a lower entry level.
- Rental returns on capital invested far out perform more traditional locations.
- Capital growth in Vanuatu has kept pace with and in some cases surpassed Vanuatu's larger neighbours
- The responsibilities of a landlord are more realistic than overseas
When all things are considered, the quality of life here is hard to match, the distinct easy-going ambience to the country that causes visitors to return and residents to remain.
To find out more about how Vanuatu’s leading real estate agent can help you contact us.