A digital asset in Vanuatu is "an intangible asset stored digitally using distributed ledger technology, such as blockchain, and representing a set of rights and values". This definition is enshrined in the Financial Transactions Licensing Act No. 9 of 2021.
Ownership of land, commodities, debentures and shares can be in the form of digital assets. But more often than not, owners of digital assets hold accounts in cryptocurrency, such as bitcoins.
The 22 July amendments to the Financial Transactions Licensing Act formally allow digital asset distribution, resale, and custody services. Advice on the investment of digital assets is also possible.
Which companies will be able to manage digital assets
In order to provide digital asset management services in Vanuatu, a licence, the Financial Dealer Licence, will be required. The Vanuatu Financial Services Commission will issue licences to local and international companies.
A company must have a physical presence on the island to obtain a licence. One of two representation options is available:
- Opening an office with a manager who spends a minimum of six months a year in Vanuatu;
- employ a licensed agent who will be responsible for dealing with governmental authorities, e.g. the Financial Services Commission and Vanuatu Revenue Authority on behalf of the company.
Members of the Vanuatu Financial Markets Association will be the first to take advantage of the new opportunity. The 2021 membership of the association comprises 12 companies selling goods, securities and currencies, including to overseas customers. All members are licensed by the Vanuatu Financial Services Commission.
Agent licensing ensures that transactions involving digital assets are legal and safe for all parties involved in transactions.
How investors will benefit from the new law
Tax optimisation. Vanuatu tax residents pay no income tax, wealth tax, capital gains, dividends and interest. By comparison, in Russia, income from cryptocurrency transactions is subject to an income tax rate of 13%.
An investor can also register their own company in Vanuatu. International Business Companies (IBC) are exempt from tax for 20 years. Instead, they pay an annual contribution of US$300 to the Vanuatu budget.
Investors who have been in Vanuatu for at least 183 days in a year become tax residents. One must not spend more than half a year in another country in order to remain a tax resident.
A company is resident for tax purposes if its head office is in Vanuatu.
Chief Development Officer in Immigrant Invest, lawyer
Proof of the legality of income is required for all major transactions, such as the purchase of real estate. New bank customers also have to prove the legality of their income and savings when they open an account.
Investors may face problems verifying the legality of cryptocurrency income. Not all countries regulate cryptocurrency markets, so the risk of illegal transactions is high. However, if transactions are conducted through regulated exchanges or agents licensed by the government of the chosen jurisdiction, investors will be able to document that the sources of income were legal at all stages of the transaction.
Participation in the citizenship programme by investment. In 2017, it was reported in the media that Vanuatu had allowed participation in the programme to be paid for in cryptocurrency. But in fact, payments cannot be made directly: the investor first sells the cryptocurrency and pays for participation in the programme in US dollars.
Participants in the citizenship programme can use digital assets to prove the legality of income and money for the investment. Document preparation will be easier if the investor's digital assets are managed by an agent licensed by the Government of Vanuatu.
Wealthy people are granted Vanuatu citizenship to travel visa-free to 135 countries. A Vanuatu passport also allows you to spend more than 183 days a year in the country and change your tax residency. To participate in the government’s citizenship programme, investors make a non-refundable contribution of $130,000 or more to a government fund.
Immigrant Invest is a licensed Vanuatu citizenship programme agent by investment. If you want to travel freely around the world and hold assets in a second citizenship country, seek advice from investment programme experts.