A Vanuatu Private Foundation provides foreigners with a tax free private foundation in which foreigners may participate in all aspects.
Vanuatu enacted the Foundation Act of 2009 (hereinafter the “Act”). Two years later, the Foundations Regulation Order No 146 of 2011 were issued. The Act and the Regulations govern the establishment, operations, and dissolution of all foundations. The Vanuatu Financial Services Commission is the regulatory body supervising and regulating the foundation industry.
The Act defines a foundation as a separate legal entity where property (assets) can be transferred by the founder for a specific purpose. Foundations may be private or for the public benefit.
Vanuatu consists of 80 islands near Australia and Fiji. Both the French and the British colonized Vanuatu resulting in both languages being two of its three official languages. Vanuatu obtained full independence in 1980.
Its political structure is a democratic republic with an elected parliament. It follows English common law unless its parliament enacts laws replacing common laws.
A Vanuatu Private Foundation provides foreigners with the following benefits:
• 100% Foreign Participants: Foreigners can establish foundations will every beneficiary a foreigners and assets all located outside of Vanuatu.
• No Taxes: Foundations and beneficiaries pay no taxes of any kind. Note: U.S. taxpayers and everyone subject to world income taxation must disclose all income to their governments.
• Privacy: The Charter and information regarding the founder and beneficiaries are not part of the public records.
• Guardian: A guardian must be appointed to make sure all of the objectives of a foundation are fulfilled.
• Asset Protection: Foreign laws cannot invalidate or void Vanuatu foundations.
• Estate Planning: Private foundations benefiting the founder’s family members can provide estate planning benefits without interference from foreign laws.
• English: English is one of the three official languages in Vanuatu.
Vanuatu Private Foundation Name
Foundations may not select a name exactly alike or too similar to the name of another legal entity in Vanuatu.
The foundation’s name must include the word “Foundation” at its end.
The name may be changed by resolution of its councillors.
The applicant acting on behalf of the founder registers the Foundation Charter with the Vanuatu Financial Services Commission (hereinafter the “Commission”). A foundation may be established for any lawful purpose.
The registration application must include the following information:
• In writing attaching the Foundation Charter which can be written in English or French);
• States if the foundation is a public or private foundation;
• Provides the Foundation’s name;
• Details the initial assets transferred to the foundation;
• Foundation’s secretary’s name and address;
• Foundation’s local registered address;
• Signed by either the founder or authorized legal representative; and
• Pays the required application fee.
In addition, the person acting on behalf of the foundation and/or its founder must possess a CTSP license.
Upon approval, the Commission issues a Certificate of Establishment and Incorporation which establishes the foundation as a separate legal entity able to sue or be sued in its own name. The Certificate will contain the foundation’s name, its assigned registration number, and the date of registration. The Certificate is conclusive proof that the foundation as established and incorporated.
If one wants to use the foundation for financial services or investment management for others, we can help you obtain a financial license.
The Commission must keep a Register of Foundations containing the above-mentioned information of the application. This is a public record accessible by the public. However, documents filed with the Commission are not available to the public such as a Foundation’s Charter.
The Act specifies that a founder is a natural person or a corporate body who executes a charter establishing the foundation. The founder’s properties (assets) are irrevocably (permanently) transferred to the foundation. Founders can be more than one person or corporate body.
There are no restrictions against a founder being a national of any country or residing anywhere.
A foundation’s assets must be managed according to its Charter, Bylaws, and the Act to benefit the beneficiaries in attainment of its objects or purposes.
Foundations have the power to do what is necessary to properly administer the assets including purchasing and selling assets, engaging any actions incidental or ancillary to its main objectives and purposes. Commercial operations may be engaged in by a foundation only if ancillary to the foundation’s preserving and distributing its assets.
A foundation will be managed by a board of councillors whose members are called “councilors”. A councillor may be a natural person or a corporate body. Councillors can reside in any country and be of any nationality. The Charter and Bylaws sets forth the procedures for compensating, removing and appointing councilors.
Councillors owe a fiduciary duty to the foundation and must act honestly and in good faith while exercising care, due diligence, and skills of a reasonable prudent person. In addition, councilors must not disclose any information regarding the foundation’s assets or their administrative duties unless required by the Act or other Vanuatu laws or a local court order.
Anyone dealing with a foundation can assume that the councilors have the powers binding the foundation to its contractual obligations or authorized others to act on their behalf.
The Foundation Charter sets forth any limitation upon the powers of the councillors. Any actions taken by the councilors which are beyond the scope of the powers can only be ratified by resolution of the guardian or the founder.
Every foundation must appoint a secretary. Secretaries may be natural persons or corporate bodies. A sole councillor cannot be appointed as the secretary.
The secretary s responsible for administering the foundation and any other duties set forth in the Charter and Bylaws.
Every foundation must appoint a guardian. The first guardian is appointed by the founder and identified in the Charter which also details the compensation, removal, and appointment of a new guardian. A sole councillor may not be appointed as a guardian.
The guardian ensures that the councillors comply with the Charter and Bylaws. In addition, the guardian supervises the conduct and management of the foundation by the councillors and other functions set forth in the Charter and Bylaws.
The guardian has all powers necessary to fulfill his or her functions. Guardians have full access to all accounting records, books, and information about the foundation.
The beneficiaries may be citizens of any country and can reside anywhere.
Every foundation must maintain a local registered office. The secretary’s office may be the registered office.
The registered office must maintain registries of the foundation’s secretary, guardians, and councilors.
Foundations are not subject to any type of taxes except for a small stamp duty. However, they must file an annual return with the Commission.
Note: U.S. taxpayers must report all global income to their IRS as anyone paying worldwide sourced income taxes must report all income to their tax authorities.
Foundations must keep proper accounting records at its registered office involving the assets and their income, monies received, expensed and distributed for what purposes along with receipts. All purchases and sales by the foundation and the assets and liabilities must be recorded in books and accounting records.
Private foundations are not required to conduct an audit unless the Charter or Bylaws require it.
Other countries or jurisdictions cannot declare any act of a foundation or transference of properties to the foundation which are valid under Vanuatu laws to be void or voidable or legally defective because it conflicts with their laws.
In addition, the capacity of anyone who transfers property to a foundation cannot be questioned not the rights of a beneficiary to be subject to liability or be deprived of a rights solely because foreign laws do not recognize the validity of private foundations or defeats the claim or right by foreign law on another person because of inheritance rights or a personal relationship with the founder.
While foundations must register with the government and file a copy of their Charter, only basic information regarding a foundation is made accessible to the public. The Charter is not available for public inspection.
Time for Formation
The Charter may be prepared in one day while the application to register can be completed in the same day, as well.
A Vanuatu Private Foundation offers these benefits to foreigners: total foreign participants, privacy, asset protection, estate planning, guardian, no taxes, and English is one of its three official languages.