Vanuatu continues to reaffirm its commitment to implement the internationally agreed tax standard set by the OECD(1) Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum). Last month Vanuatu entered into seven tax information exchange agreements (TIEAs) with Denmark, Finland, Iceland, Norway, Sweden, Greenland and the Faroes Islands. The Vanuatu Government also recently amended the International Companies Act [Cap 222] (Vanuatu) (Act) to require that all bearer shares issued in an international company be deposited with a custodian by 31 December 2012.

Tax Information Exchange Update

On 13 October 2010, Vanuatu entered into seven TIEAs taking the tally of TIEAs to 10. Assuming that Vanuatu signs two more TIEAs, it will shortly follow the Cook Islands and Samoa onto the Global Forum's 'White' list of countries which have substantially implemented the internationally agreed tax standard.

The internationally agreed tax standard requires exchange of information on request by a treaty partner in all tax matters for the administration and enforcement of domestic tax law (without regard to the domestic tax law and bank secrecy provisions of the country receiving the request). Please see The OECD International Tax Standards and the Current State of Play for more information.

The Vanuatu Government is yet to enact enabling legislation necessary to give effect to the TIEA provisions; however, we understand it is currently considering the form that this legislation will take. Vanuatu will be the first Pacific jurisdiction to be examined by the Global Forum's peer review group in the first half of 2011. This review will assess the adequacy of a Vanuatu's legal and regulatory framework for the exchange of information.

Bearer Shares to be Registered

The Vanuatu Government has also recently moved to improve the transparency of the ownership of international companies. The International Companies (Amendment) Act No. 11 of 2010 (Amendment Act), which commenced in August 2010, requires that all bearer shares issued in an international company be deposited with a custodian by 31 December 2012(2). This follows similar moves in Samoa under the International Companies Amendment Act 2008 where all bearer shares and bearer debentures were effectively 'immobilised'(3) (see PLN Article for further details).

The Act currently permits the issue of bearer shares to company members(4). On the share certificate of a bearer share the word "bearer" is inserted instead of the true owner, effectively masking the ownership of the shares.

However, by depositing the bearer share with an 'authorised' or 'recognised' custodian, the person delivering the relevant share or shares must provide the full name of the beneficial owner of the bearer share and any other person having some form of interest in the share(5). This change will disrupt the use of bearer shares as a mechanism to hide the true ownership of international companies in Vanuatu.

Footnotes

1. Organization for Economic Co-Operation and Development

2. Section 9 of the Amendment Act.

3. See section 6 and 8 of the International Companies Amendment Act 2008 (Samoa).

4. Section 22 of the Act.

5. See the Guidelines – Custody of Bearer Shares Order No 15 of 2007.

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