Vanuatu
This report analyses the implementation of the AEOI Standard in Vanuatu with respect to the requirements of the AEOI Terms of Reference. It assesses both the legal frameworks put in place to implement the AEOI Standard and the effectiveness of the implementation of the AEOI Standard in practice.
The methodology used for the peer reviews and that therefore underpins this report is outlined in Chapter 2.
Overall findings
AEOI legal framework
Vanuatu’s legal framework implementing the AEOI Standard is in place and is consistent with the requirements of the AEOI Terms of Reference. This includes Vanuatu’s domestic legislative framework requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (CR1) and its international legal framework to exchange the information with all of Vanuatu’s Interested Appropriate Partners (CR2).
Effectiveness of AEOI in practice
Vanuatu’s implementation of the AEOI Standard is not compliant with the requirements of the AEOI Terms of Reference to ensure the effectiveness of the AEOI Standard in practice. While Vanuatu is on track with respect to exchanging the information in an effective and timely manner (CR2), there are fundamental issues with respect to ensuring that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures (CR1).
Overall rating in relation to the effectiveness in practice: Non-Compliant
General context
Vanuatu commenced exchanges under the AEOI Standard on a non-reciprocal basis in 2018 (i.e. it sends but does not receive information).
In order to provide for Reporting Financial Institutions to collect and report the information to be exchanged, Vanuatu:
enacted International Tax Cooperation Act No. 7 of 2016 that was subsequently replaced by Tax Administration Act No. 37 of 2018 (with full effect from 1 January 2020);
introduced Automatic Exchange of Information Regulations Order No. 76 of 2017 that was subsequently replaced by the Tax Administration Regulation Order No. 154 of 2019 (with full effect from 1 January 2020), as amended with effect from 14 September 2020; and
Under this framework Reporting Financial Institutions were required to commence the due diligence procedures in relation to New Accounts from 30 June 2017. With respect to Preexisting Accounts, Reporting Financial Institutions were required to complete the due diligence procedures on High Value Individual Accounts by 31 December 2017 and on Lower Value Individual Accounts and Entity Accounts by 31 December 2018.
Following the initial Global Forum peer review, Vanuatu made various amendments to its legislative framework to address issues identified, the last of which was effective from 14 September 2020.
With respect to the exchange of information under the AEOI Standard, Vanuatu is a Party to the Convention on Mutual Administrative Assistance in Tax Matters and activated the associated CRS Multilateral Competent Authority Agreement in time for exchanges in 2018.
Table 1 sets out the number of Financial Institutions in Vanuatu that reported information on Financial Accounts in 2021 as defined in the AEOI Standard (essentially because they maintained Financial Accounts for Account Holders, or that were related to Controlling Persons, resident in a Reportable Jurisdiction). It also sets out the number of Financial Accounts that they reported in 2021. In this regard, it should be noted that Vanuatu requires the reporting of Financial Accounts held by all non-residents and some accounts may be required to be reported more than once (e.g. jointly held accounts or accounts with multiple related Controlling Persons), which is reflected in the figures below. These figures provide key contextual information to the development and implementation of Vanuatu‘s administrative compliance strategy, which is analysed in the subsequent sections of this report.
Table 2 sets out the number of exchange partners to which information was successfully sent by Vanuatu in the past few years (including where the necessary frameworks were in place, containing an obligation on Reporting Financial Institutions to report information, but no relevant Reportable Accounts were identified). These figures provide key contextual information in relation to Vanuatu’s exchanges in practice, which is also analysed in subsequent sections of this report.
In order to provide for the effective implementation of the AEOI Standard, in Vanuatu:
the Director of Customs and Inland Revenue (the tax authority) has the responsibility to ensure the effective implementation of the due diligence and reporting obligations by Reporting Financial Institutions and for exchanging the information with Vanuatu’s exchange partners;
the technical solutions necessary to receive and validate the information reported by Reporting Financial Institutions were put in place through an online portal (the Multi Data Exchange Solution); and
the Common Transmission System (CTS) is used for the exchange of the information, along with the associated file preparation and encryption requirements.
It should be noted that the review of Vanuatu’s legal frameworks implementing the AEOI Standard concluded with the determination that Vanuatu’s domestic and international legal frameworks are In Place. This has been taken into account when reviewing the effectiveness of Vanuatu’s implementation of the AEOI Standard in practice.
Findings and conclusions on the legal frameworks
The detailed findings and conclusions on the AEOI legal frameworks for Vanuatu are below, organised per Core Requirement (CR) and then per sub-requirement (SR) as extracted from the AEOI Terms of Reference (see Annex C).
CR1 Domestic legal framework: Jurisdictions should have a domestic legislative framework in place that requires all Reporting Financial Institutions to conduct the due diligence and reporting procedures in the CRS, and that provides for the effective implementation of the CRS as set out therein.
Vanuatu’s domestic legislative framework is in place and contains all of the key aspects of the CRS and its Commentary requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (SRs 1.1 – 1.3). It also provides for a framework to enforce the requirements (SR 1.4).
SR 1.1 Jurisdictions should define the scope of Reporting Financial Institutions consistently with the CRS.
Vanuatu has defined the scope of Reporting Financial Institutions in its domestic legislative framework in accordance with the CRS and its Commentary.
SR 1.2 Jurisdictions should define the scope of Financial Accounts and Reportable Accounts consistently with the CRS and incorporate the due diligence procedures to identify them.
Vanuatu has defined the scope of the Financial Accounts that are required to be reported in its domestic legislative framework and incorporated the due diligence procedures that must be applied to identify them in accordance with the CRS and its Commentary.
SR 1.3 Jurisdictions should incorporate the reporting requirements contained in Section I of the CRS into their domestic legislative framework.
Vanuatu has incorporated the reporting requirements in its domestic legislative framework in accordance with the CRS and its Commentary.
SR 1.4 Jurisdictions should have a legislative framework in place that allows for the enforcement of the requirements of the CRS in practice.
Vanuatu has a legislative framework in place to enforce the requirements in accordance with the CRS and its Commentary.
CR2 International legal framework: Jurisdictions should have exchange relationships in effect with all Interested Appropriate Partners as committed to and that provide for the exchange of information in accordance with the Model CAA.
Vanuatu’s international legal framework to exchange the information is in place, is consistent with the Model CAA and its Commentary and provides for exchange with all of Vanuatu’s Interested Appropriate Partners (i.e. all jurisdictions that are interested in receiving information from Vanuatu and that meet the required standard in relation to confidentiality and data safeguards) (SRs 2.1 – 2.3).
SR 2.1 Jurisdictions should have exchange agreements in effect with all Interested Appropriate Partners that permit the automatic exchange of CRS information.
Vanuatu has exchange agreements that permit the automatic exchange of CRS information in effect with all its Interested Appropriate Partners.
SR 2.2 Such an exchange agreement should be put in place without undue delay, following the receipt of an expression of interest from an Interested Appropriate Partner.
Vanuatu put in place its exchange agreements without undue delay.
SR 2.3 Jurisdictions should ensure that the exchange agreements in effect provide for the exchange of information in accordance with the requirements of the Model CAA.
Vanuatu’s exchange agreements provide for the exchange of information in accordance with the requirements of the Model CAA.
Assessed jurisdiction’s comments on the assessment of its legal frameworks
Vanuatu thanks the Global Forum and its staff for the assistance and support given to us to ensure that Vanuatu’s legal framework is in place.
Vanuatu is committed to meeting our international obligations and will work with the Global Forum into the future to ensure our framework stays compliant with international best practice.
Findings and conclusions in relation to effectiveness in practice
The detailed findings and conclusions in relation to effectiveness in practice of AEOI for Vanuatu are below, organised per Core Requirement (CR) and then per sub-requirement (SR) as extracted from the AEOI Terms of Reference (see Annex C).
CR1 Effectiveness in practice: Jurisdictions should ensure that in practice Reporting Financial Institutions correctly implement the due diligence and reporting procedures, which includes a requirement for jurisdictions to have in place an administrative framework to ensure the effective implementation of the CRS.
Vanuatu’s implementation of the AEOI Standard is non-compliant with respect to ensuring that Reporting Financial Institutions are correctly conducting the due diligence and reporting procedures. More specifically, there are fundamental issues in relation to Vanuatu ensuring effectiveness in a domestic context, such as through having an effective administrative compliance framework and related procedures (SR 1.5), and collaborating with its exchange partners to ensure effectiveness (SR 1.6). Vanuatu should continue its implementation process to ensure its effectiveness, including by addressing the recommendations made.
SR 1.5 Jurisdictions should ensure that in practice Reporting Financial Institutions identify the Financial Accounts they maintain, identify the Reportable Accounts among those Financial Accounts, as well as their Account Holders, and where relevant Controlling Persons, by correctly conducting the due diligence procedures and collect and report the required information with respect to each Reportable Account. This includes having in place:
an effective administrative compliance framework to ensure the effective implementation of, and compliance with, the CRS. This framework should:
be based on a strategy that facilitates compliance by Reporting Financial Institutions and which is informed by a risk assessment in respect of the effective implementation of the CRS that takes into account relevant information sources (including third party sources);
include procedures to ensure that Financial Institutions correctly apply the definitions of Reporting Financial Institutions and Non-Reporting Financial Institutions;
include procedures to periodically verify Reporting Financial Institutions’ compliance, conducted by authorities that have adequate powers with respect to the reviewed Reporting Financial Institutions, with procedures to access the records they maintain; and
effective procedures to ensure that Financial Institutions, persons or intermediaries do not circumvent the due diligence and reporting procedures;
effective enforcement mechanisms to address non-compliance by Reporting Financial Institutions;
strong measures to ensure that valid self-certifications are always obtained for New Accounts;
effective procedures to ensure that each, or each type of, jurisdiction-specific Non-Reporting Financial Institution and Excluded Account continue to present a low risk of being used to evade tax; and
effective procedures to follow up with a Reporting Financial Institution when undocumented accounts are reported in order to establish the reasons why such information is being reported.
In order to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures, Vanuatu implemented some of the requirements in accordance with expectations. However, fundamental issues were identified. The key findings were as follows:
Vanuatu has developed a high-level compliance strategy to ensure that Financial Institutions correctly implement the requirements under the AEOI Standard. It has carried out education and outreach activities, such as issuing guidance documents and organising workshops, to ensure that Financial Institutions understand their obligations. However, Vanuatu is still in the process of translating its strategy into a comprehensive plan to ensure compliance in practice. There also does not appear to be a formalised plan or activity undertaken to ensure that the interaction between Vanuatu’s AEOI and AML frameworks always results in reporting in accordance with the AEOI Standard.
Vanuatu has identified some risks based on internal information sources and taken action to address those risks but has not yet fully developed its risk assessment processes.
Vanuatu has worked to effectively understand its population of Financial Institutions, including relevant non-regulated entities, utilising various relevant information sources, such as the Foreign Financial Institution list for FATCA purposes and the Vanuatu Financial Services Commission’s company registers. Vanuatu has taken some actions to ensure Reporting Financial Institutions are categorising themselves correctly under its domestic rules and reporting information as required through sending follow-up letters to Financial Institutions to ensure they report information.
Vanuatu’s Exchange of Information Unit at the Customs and Inland Revenue appears to have the necessary powers to discharge its functions. With respect to resourcing, Vanuatu has assigned the equivalent of two full time staff to monitor and ensure compliance by Reporting Financial Institutions. Furthermore, several part-time staff from other divisions are currently undergoing training to assist with future onsite visits and to maintain the IT systems.
Vanuatu conducted some reviews by which information from Reporting Financial Institutions, including formal statements of compliance, were requested. Vanuatu has also provided guidance on record-keeping. However, Vanuatu has not yet carried out activities to verify compliance by Reporting Financial Institutions and effectively address non-compliance when identified. Vanuatu has plans to carry out verification activities, including desk-based and onsite audits of Reporting Financial Institutions. However, these plans are not fully developed, including in relation to planned activity to review self-certification procedures and to follow up on undocumented accounts. Furthermore, while Vanuatu outlined an overall approach with respect to addressing circumvention of the AEOI Standard by Reporting Financial Institutions, persons, or intermediaries, it does not yet have complete procedures in place. Vanuatu also does not have procedures in place to apply penalties and sanctions for non-compliance when it is identified.
Vanuatu does not seem to have a plan to keep its jurisdiction-specific list of Non-Reporting Financial Institutions under review (it does not have a jurisdiction-specific list of Excluded Accounts).
Table 3 provides a summary of the specific activities undertaken, or that are planned to be undertaken, in relation to each of the key parts of the framework described above.
In terms of the Financial Account information collected and sent by Vanuatu, it was found to include a lower proportion of Tax Identification Numbers with respect to the individuals associated with the accounts when compared to most other jurisdictions. Furthermore, while the collection and reporting of dates of birth is generally higher across jurisdictions, Vanuatu nevertheless reported a much lower rate of collection of dates of birth when compared to other jurisdictions. These are key data points for exchange partners to effectively utilise the information. Vanuatu was not able to confirm that it collects and monitors information on the number of undocumented accounts reported by its Reporting Financial Institutions. This information is crucial to implementing the requirement to follow up on undocumented accounts.
Feedback was also received from Vanuatu’s exchange partners indicating that, compared to what they generally experience in relation to the information received from all of their exchange partners, they achieved a relatively low level of success when seeking to match information received from Vanuatu with their taxpayer database. Furthermore, two exchange partners highlighted issues with respect to the information received, such as missing or invalid Tax Identification Numbers and missing Dates of Birth.
Based on these findings it was concluded that Vanuatu is not meeting expectations in ensuring that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures, including by having in place the required administrative compliance framework and related procedures. More specifically, fundamental issues have been identified, including with respect to Vanuatu’s compliance and enforcement strategy, the risk assessment, and the activities to verify that the information reported is complete and accurate, including with respect to self-certifications and undocumented accounts. Vanuatu should therefore continue its implementation process accordingly, including by addressing the recommendations made.
Vanuatu should further develop and implement an overarching compliance plan, informed by a risk assessment, to underpin its compliance activities.
Vanuatu should expand the scope of its risk assessment process to cover all relevant risks to the effectiveness of its implementation of the AEOI Standard.
Vanuatu should put in place and implement effective verification and enforcement mechanisms to identify and address non-compliance by Reporting Financial Institutions and take enforcement action when non-compliance is identified, including monitoring the interaction between its AML framework and its CRS framework to ensure that the collection and reporting of information is always in accordance with the AEOI Standard.
Vanuatu should implement systems to collect and monitor information on undocumented accounts to inform its compliance strategy and should develop and implement a clearly defined policy to follow up where undocumented accounts are reported by the Reporting Financial Institutions.
Vanuatu should further develop and implement effective procedures to monitor and verify whether Reporting Financial Institutions are obtaining valid self-certifications as required, including dedicated communication activities, with a particular focus on self-certifications obtained after the opening of a Financial Account.
Vanuatu should put in place a clearly defined policy that, where circumvention is identified, action is taken to address it.
Vanuatu should keep its jurisdiction-specific list of Non-Reporting Financial Institutions under review.
SR 1.6 Jurisdictions should collaborate on compliance and enforcement. This requires jurisdictions to:
use all appropriate measures available under the jurisdiction’s domestic law to address errors or non-compliance notified to the jurisdiction by an exchange partner; and
have in place effective procedures to notify an exchange partner of errors that may have led to incomplete or incorrect information reporting or non-compliance with the due diligence or reporting procedures by a Reporting Financial Institution in the jurisdiction of the exchange partner.
It should be noted that, as Vanuatu exchanges information on a non-reciprocal basis and does not therefore receive information, it is not required to have in place procedures to notify its exchange partners. SR 1.6 b) has therefore not been assessed in this case.
While notifications under Section 4 of the MCAA or equivalent have not yet been received, Vanuatu has not developed the necessary systems and procedures to process them when required.
Based on these findings it was concluded that Vanuatu is not meeting expectations in relation to collaborating with its exchange partners to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures. More specifically, fundamental issues have been identified with respect to having systems to collaborate on compliance and enforcement. Vanuatu should continue its implementation process to ensure its effectiveness, including by addressing the recommendations made.
Vanuatu should put in place the systems and procedures to address errors or non-compliance notified by an exchange partner.
CR2 Effectiveness in practice: Jurisdictions should exchange the information effectively in practice, in a timely manner, including by sorting, preparing, validating and transmitting it in accordance with the AEOI Standard.
Vanuatu’s implementation of the AEOI Standard is on track with respect to exchanging the information effectively in practice including in relation to sorting, preparing and validating the information (SR 2.4), correctly transmitting the information in a timely manner (SRs 2.5 – 2.7) and providing corrections, amendments or additions to the information (SR 2.9). The requirements in relation to the receipt of the information (SR 2.8) have not been assessed as Vanuatu exchanges information non-reciprocally, so does not receive information. Vanuatu is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.
SR 2.4 Jurisdictions should sort, prepare and validate the information in accordance with the CRS XML Schema and the associated requirements in the CRS XML Schema User Guide and the File Error and Correction-related validations in the Status Message User Guide (i.e. the 50000 and 80000 range).
Feedback from Vanuatu’s exchange partners did not raise any specific concerns with respect to their ability to process the information received from Vanuatu and therefore with respect to Vanuatu’s implementation of these requirements. Two (or 3%) of Vanuatu’s exchange partners reported rejecting more than 25% of the files received due to the technical requirements not being met, although they did not reject over 50% of files. This is broadly in line with the general experience of other jurisdictions. Vanuatu stated that the returned files have not yet been verified and corrected.
Based on these findings it was concluded that, overall, Vanuatu is meeting expectations in relation to sorting, preparing and validating the information. It was also noted that there is room for improvement with respect to the resubmission of corrected files. Vanuatu is therefore encouraged to continue its implementation process accordingly, including in relation to the area highlighted.
Vanuatu should continue to engage with its partners to address the issues raised.
SR 2.5 Jurisdictions should agree and use, with each exchange partner, transmission methods that meet appropriate minimum standards to ensure the confidentiality and integrity of the data throughout the transmission, including its encryption to a minimum secure standard.
In order to put in place an agreed transmission method that meets appropriate minimum standards in confidentiality, integrity of the data and encryption for use with each of its exchange partners, Vanuatu linked to the Common Transmission System.
Based on these findings it was concluded that Vanuatu is fully meeting expectations in relation to agreeing and using appropriate transmission methods with each of its partners. Vanuatu is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.6 Jurisdictions should carry out all exchanges annually within nine months of the end of the calendar year to which the information relates.
Three exchange partners highlighted delays in the sending of information by Vanuatu (representing 5% of its partners). This represents a relatively high proportion of exchange partners. Furthermore, two partners stated that the information has still not been received. It was noted that Vanuatu successfully addressed all of the issues and sent the information as soon as possible thereafter.
Based on these findings it was concluded that Vanuatu is fully meeting expectations in relation to exchanging the information in a timely manner. Vanuatu is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.7 Jurisdictions should send the information in accordance with the agreed transmission methods and encryption standards.
Feedback from Vanuatu’s exchange partners did not raise any concerns with respect to Vanuatu’s use of the agreed transmission methods and therefore with Vanuatu’s implementation of this requirement.
Based on these findings it was concluded that Vanuatu is fully meeting expectations in relation to sending the information in accordance with the agreed transmission methods and encryption standards. Vanuatu is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.8 Jurisdictions should have the systems in place to receive information and, once it has been received, should send a status message to the sending jurisdictions in accordance with the CRS Status Message XML Schema and the related User Guide.
It should be noted that, as Vanuatu exchanges information on a non-reciprocal basis and does not therefore receive information, it is not required to have in place systems to receive the information and provide status messages. SR 2.8 has therefore not been assessed in this case.
SR 2.9 Jurisdictions should respond to a notification from an exchange partner as referred to in Section 4 of the Model CAA (which may include Status Messages) in accordance with the timelines set out in the Commentary to Section 4 of the Model CAA. In all other cases, jurisdictions should send corrected, amended or additional information received from a Reporting Financial Institution as soon as possible after it has been received.
While it is unclear whether Vanuatu’s approach will ensure that corrected, amended or additional information is provided in a timely manner, it has not been tested and no such concerns were raised by Vanuatu’s exchange partners and therefore with respect to Vanuatu’s implementation of these requirements.
Based on these findings it was concluded that Vanuatu appears to be meeting expectations in relation to responding to notifications from exchange partners and the sending of corrected, amended or additional information. Vanuatu is encouraged to continue to ensure the ongoing effectiveness of its implementation.
Assessed jurisdiction’s comments on the assessment of effectiveness in practice
Vanuatu’s CRS compliance improvement strategy is in its final stages of review. Additional staff are undergoing training from the E-Learning module. SOPs, compliance programs and questionnaires are currently being drafted for the purpose of CRS compliance.
Vanuatu acknowledges the recommendations raised by the peer review group and is making an effort to address those recommendations.