FREQUENTLY ASKED QUESTIONS ABOUT PROPERTY INVESTMENT IN VANUATU (updated January 2012)

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1 FREQUENTLY ASKED QUESTIONS ABOUT PROPERTY INVESTMENT IN VANUATU (updated January 2012) 1. Q. Can foreigners buy property in Vanuatu? A. Yes. There are no restrictions on foreigners buying property. A non-citizen may be required to provide a "financial reference" and a "professional reference" from a local legal or accountancy firm, for urban purchases processed through the central Lands Department, but that is the only distinction made between citizen and non-citizen buyers. You do not need a Vanuatu Investment Promotion Authority (VIPA) Investor s Certificate or a business licence to buy property in Vanuatu. If your purchase does requires a business licence (for example, when you buy an existing business) then a noncitizen would need a VIPA approval and a business licence in your name, or in a local company's name. 2. Q. Is there any freehold land in Vanuatu? A. No. When a property or parcel of land is registered, it is registered as a leasehold title. There are different classes of leases (eg: Residential, Commercial, Industrial, Agriculture) but all titles are leasehold, whether they are owned by foreigners or Vanuatu citizens. In fact the majority of land titles in Vanuatu are owned by locals, not foreigners, which simply reflects the population. The urban areas of Port Vila and Luganville on Santo island were declared "public" land in 1980 under the Land Reform Act (Cap 123). The Minister of Lands is the Lessor in the urban areas, and in about 25% of rural leases where the customary ownership is not yet established, or where there is no agreement in place for trustees to act on behalf of the local community landowners. 3. Q. Do I have to live here or have a business licence to own property? A. No. There is no requirement for property owners to live in Vanuatu. Many property buyers obtain Vanuatu residency permits on the basis of their investment in the country, but there is no requirement that you must reside in Vanuatu. Unless the property you want to buy operates with a business licence you will not need to obtain any form of business licence. Investment properties, including multi-unit apartments or commercial buildings, can be managed by our company under our business licence. 4. Q. What are the normal steps in buying property in Vanuatu? A. See our leaflet "Steps involved in Purchasing Property in Vanuatu. 5. Q. What is the maximum term of a leasehold title? A. The Constitution states that the maximum term of any lease is 75 (seventy five) years. Many leases are for a term of 50 years from their creation or from Independence on 30 July 1980, but nearly all new leases are approved and registered for 75 years, including strata title leaseholds. 6. Q. When you buy a lease title, is it renewed at the time of purchase or do you buy the term that is remaining?

2 A. When you buy an existing lease, you purchase the remaining term of that lease; you do not get a new 50 or 75 year title. However, many of the 50 year leases that now have less than 20 years remaining have been, and are being, extended (under recent Parliamentary legislation - see Q7 below) either because people simply want longer tenure or because it is now increasingly common for the commercial banks to require a lease extension as part of their lending conditions. 7. Q. What happens at the end of the lease title? A. In 2003 Parliament passed a law (the Land Lease (Amendment) Act No. 24 of 2003) enabling any urban lessee to extend a lease that is currently less than 75 years up to the maximum allowed by law of 75 years or, where a lease is already for a period of 75 years, to renew the lease for a full period of 75 years from the date of renewal, upon payment of the requisite one off premium assessed by the Government s Valuation Department, plus certain administrative fees. 8. Q. Is there any way to extend a lease when you buy, or at any other time in either the urban or rural area? A. Yes. Lessees may surrender their leases either to subdivide land, re -zone (ie: residential to commercial; agricultural to tourism, etc) or to extend the term. (see Question 7 above). "Premium" payments and revised annual lease rents are likely to apply, which are determined by the Government s Valuation Department in the urban areas, or negotiated between Lessor and Lessee in the rural areas. The premium payable is a percentage of the assessment of the unimproved value of the land. 9. Q. Is it possible to buy apartments or shops on their own Strata title? A. The Vanuatu Parliament passed the Strata Title Act in 2000 and subsequently approved the Strata Title Regulations. This means it is possible to strata title existing buildings and to create strata titles for new apartment and commercial buildings, allowing for the management of common property by body corps in a similar way that occurs in Australia and New Zealand. 10. Q. Do the commercial banks accept leasehold titles as security for loans? A. Yes. Mortgages and "Cautions" are registered on the leasehold titles as they would be on freehold and leasehold titles in other countries, so that lenders have full legal security. 11. Q. How long does it take to complete a transaction? A. Generally, about 1-2 months. This varies depending on conditions that may be part of a particular transaction. Any transfer of a property title, whether urban or rural, requires the Lessor s Consent to Transfer. 12. Q. What are the normal buyer's costs? A. When a lease title is transferred, a 2% Stamp Duty and a 5% Title Transfer Registration fee is payable by the buyer. If the buyer is purchasing an existing local company, the Stamp Duty is 4% on the share transfer value, and because the shares in the lessee company are transferred, not the title itself, there is no 5% Registration fee. Legal costs vary between 0.5% - 1.0% depending on the solicitor and the nature of the transaction.

3 13. Q. Has there been capital gain over the years? If so, how much and where? A. Residential property and vacant land capital gain has been best in prime areas such as the harbourfront. Lagoonfront areas with good water and sunset views, and for commercial property along the main streets of the CBD areas of Port Vila, and to a lesser extent Luganville have also seen steady increases in market value. In some places, 5 10 percent per year has occurred while in other prime areas, less than 5% per year. There have been periodic lulls in the market, mostly reflecting trends in the region and around the world. 14. Q. Where are the best places to buy? A. Residential - In Port Vila, Tassiriki, Elluk, the Harbourfront, the First Lagoon, the Second Lagoon, Bellevue, Malapoa and the newer oceanfront subdivisions near town particularly Dream Cove, Paradise Cove and Angelfish Bay. Commercial - CBD and main street and central harbourfront. Agricultural Efate, Santo & Malekula islands. 15. Q. Is it easy to rent out property? A. Well maintained property in good locations typically rents well. There are many aid organisations and private foreign companies who prefer to rent for 1-3 year contracts rather than buy property for their senior management staff. 16. Q. Is it possible to find good property management? A. Yes. Our company has been doing property management of houses and commercial buildings since This usually costs a maximum of 7% of gross income plus VAT and provides a service covering rent collection, payment of bills, arranging and paying for insurance and cyclone certification, advertising for new tenants, settling in new tenants, carrying out end of tenancy inspections, sending net revenue to nominated accounts, whether in Vanuatu or overseas in effect a total management service. 17. Q. What sort of tenants are there, and how long are the tenancy agreements? A. Many residential tenants are employees of aid donor agencies, high commissions and other private and public organisations. Most residential tenancy contracts are for one year, but 2 and 3 years tenancies are also common. Typically, a good standard furnished family home would rent for AUD 2,000 to AUD 3,000 per month, and sometimes higher. 18. Q. Are there qualified builders in Vanuatu? A. There are several companies in Port Vila with qualified builders. As in any other country it is important to select a builder carefully and to see other jobs they have done. 19. Q. How do I know the house I am buying is well built? A. Engineering and survey reports may be requested from qualified professionals or engineering companies operating in Port Vila. For many years it has been impossible to obtain bank financing, full insurance (including against cyclone) on property without engineers and architects reports, so this helps to reassure buyers and commercial banks. 20. Q. If I want to build my own house, do I need any permissions or approvals, or do I need a business licence?

4 A. No. Not to do the building for yourself on your own land title. You will still need to obtain your planning permission and building permit from the local panning authority (the Municipal Council in urban areas and the Provincial Council in rural areas) and you will need to register as an employer with the VNPF (the Vanuatu National Provident Fund) if you hire any workers. 21. Q. What does it cost to build a good house in Vanuatu? A. Naturally, this varies from builder to builder, and on the standard of construction and materials, but a reasonably good guide is about AUD 1,200-1,500 (approximately VT 120, ,000) per square metre. Obviously where more luxurious fixtures and fittings are used, or where more sophisticated engineering may be required, this price will be higher. 22. Q. What amount of equity contribution toward the purchase do local commercial banks require from buyers? A. Banks typically require 20% of the purchase or building cost for residential loans and up to 50% for commercial loans from the borrower. This varies, as it does in other countries, depending on the nature of the loan and the bank's assessment of the borrower. 23. Q. What is the usual deposit when exchanging contracts? A. Ten per cent is the standard contract deposit when a sale agreement is exchanged between a buyer and seller. Deposits are held in trust, until settlement, usually by the vendor s agent or solicitor. 24. Q. Do I need to use a lawyer for conveyancing? A. The law does not oblige purchasers to use a solicitor but for those contemplating buying property or a business it is very wise to seek legal advice and qualified representation, especially if you are entering the Vanuatu market for the first time. Our laws and practices are likely to be different from your own country. 25. Q. Is VAT (Value Added Tax) payable on housing sales? A. VAT or GST as some people know it by (currently 12.5%) is not payable by the purchaser on second hand residential property. VAT is payable by a licenced builder if he sells a new house he has built or by a property developer selling lots in a land subdivision. The VAT in these cases will usually be included in the price, but may be itemised separately for buyers able to claim back the VAT eg: a VAT registered purchaser. 26. Q. Is VAT payable on all commercial transactions? A. As a rule VAT is payable by the purchaser on the sale of commercial property. He can then claim back the VAT if he is a registered VAT entity. Often such transactions are sold as VAT neutral to save the seller charging VAT only to have the buyer turn round and claim it back. A VAT registered business is usually sold as a going concern and no VAT is payable. A "one-off" sale of a commercial property where the seller is not registered for VAT and has not claimed back VAT for expenses on the property may not be subject to VAT. Also a sale where the vendor has already de-registered from VAT is not subject to VAT. Specific enquires should be made to the VAT Office, or to a solicitor

5 or accountant accustomed to dealing with VAT issues. 27. Q. What are the usual outgoings on property in Vanuatu? A. 1. Municipal Property Tax (in the Urban Zones) is paid every six months. 2. Annual Lease ("ground") rent payable to the registered Lessor. 3. Insurance. 4. Rent Tax of 12.5% on Residential property is paid twice a year in June and December. 5. VAT on commercial rents is 12.5% and is charged by landlords and recovered in full by tenants. 6. Property Management (optional) usually 7% + VAT. 28. Q. How is property sold in Vanuatu (eg: Private Treaty; Tender; Auction)? A. Most property is sold by Private Treaty and occasionaly by Tender. Auctions rarely occur because it is unusual that all potentially interested parties would be present in the country on the day of the auction. Occasionally, the "Expressions of Interest" method is used, especially for a larger property, or for a project or subdivision not yet done, but approved, where the developers wish to determine the level of market interest in their project. 29. Q. What do I need to do to reclaim land or build a jetty? A. To reclaim land on the waterfront boundary of any property, you require:- 1. Foreshore Development Act approval (Minister of Internal Affairs). 2. Negotiator Certificate from the Minister of Lands. 3. Lessor's approval if land is rural, or the Minister of Lands is not the Lessor. 4. Municipal Planning Permission in the urban areas. 5. Provincial Government Planning permission in the rural areas. 6. An environmental impact assessment study will be required for a commercial or tourism project, but may not be required where minimal environmental impact is likely. 7. A jetty will require Department of Ports & Marine approval. 30. Q. Can I put a yacht mooring anywhere? A. Yacht moorings are marked on a grid pattern within Port Vila Harbour. Department of Ports & Marine control this and they should be consulted about any rules and fees for moorings anywhere else in the country. 31. Q. Can sale agreements be done in any currency, or only in vatu? A. Private parties can agree to a sale in any currency acceptable to both sides. First time purchasers are not likely to have vatu so it is common for these transactions to be done in foreign currency. Likewise, when a seller plans to leave the country for good, he may prefer a sale agreement in his country s currency. There are no restrictions on exchanging currencies locally or in sending foreign currency into or out of Vanuatu so this is really a matter for the contracting parties to decide between themselves. The VIPA Act guarantees the repatriation of foreign investor s funds. 32. Q. What happens if someone tries to sell me land in the rural area that has no registered title over it? A. Any land area with no registered title cannot be sold, because there is actually nothing

6 legally existing to sell and transfer into your name. The majority of land in Vanuatu is unregistered or indigenous land, and the legal customary owners have not been established in many areas. A leasehold title must be registered before a transfer (sale) can take place. An undisputed Lessor who has had their land ownership legally recognized is absolutely necessary in order to create and register a lease. We strongly advise all potential investors not to enter into any agreement, or pay any money to anyone in such circumstances without first seeking legal or professional advice. 33. Q. What do I need to insure my property? A. Insurance will cost about 0.5% to 0.7% of insured value. You will need an engineer s certificate to obtain cyclone insurance. Other perils such as fire, earthquake, theft, burglary, etc., are also covered in standard policies. Public liability, workers compensation, loss of rental income, and so on are also available. Contact the local brokers and insurance companies for further details. 34. Q. Are there any restrictions if I am a foreigner and I want to sell my property in Vanuatu? A. There are no restrictions on selling. If a vendor is up to date with his outgoings to the local authorities, and lease rent to the Lessor, he will be able to obtain the Lessor s Consent to Transfer the title. Encumbrances such as bank mortgages are discharged at settlement as typically happens in other countries. 35. Q. What are the vendor s costs in a sale transaction? A. The vendor s costs are agent s commission, legal fees if a solicitor is used, a consent to transfer fee, and in rural transactions only, (where the unimproved value of the land between the time of purchase and the current sale is deemed to have risen), the lessor has the legal right to a payment of up to a maximum of 10% of the increase in value under the terms of Land Leases (Amendment) Act No. 5 of There are no taxes on the sale, unless VAT is applicable. NB: Laws, Government regulations and fees may be subject to change from time to time. It is advisable to seek qualified advice as to the current situation from the Government departments concerned or from qualified private companies.