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Palau
We have a team of experienced professionals dedicated to supporting all your business requirements—ensuring smooth operations and full regulatory compliance. This strong foundation enables you to confidently establish and grow your business in Palau with efficiency and assurance.
WHY PALAU?
Palau, officially the Republic of Palau, is an island country located in the Micronesia subregion of Oceania in the western Pacific Ocean. The Republic of Palau consists of approximately 340 islands and is the western part of the Caroline Islands, while the eastern and central parts make up the Federated States of Micronesia.It has a total area of 466 square kilometres (180 sq. mi.), making it the sixteenth smallest country in the world.The most populous island is Koror, home to the country’s most populous city of the same name. The capital, Ngerulmud, is located on the largest island of Babeldaob, in Melekeok State. Palau shares maritime boundaries with international waters to the north, the Federated States of Micronesia to the east, Indonesia to the south, and the Philippines to the northwest.
Palau’s economy consists primarily of tourism, subsistence agriculture, and fishing. Tourist activity focuses on scuba diving and snorkeling in the islands’ rich marine environment, including its barrier reefs’ walls. The government is the largest employer, relying heavily on US financial assistance.Doing business in Palau involves navigating a small, USD-based economy that requires a Foreign Investment Approval Certificate (FIAC) for foreign-owned businesses.
ADVANTAGES
Stable Economy & Currency:
Palau uses the US dollar (USD) as its official currency, which eliminates exchange rate risks and simplifies international transactions.
Strategic Location & Tourism Growth:
Positioned as a premier Pacific destination, there is high demand for foreign investment in eco-tourism, hospitality, and infrastructure.
Foreign Investment Friendly:
The government encourages foreign direct investment (FDI), and the regulatory system generally adheres to international norms, allowing for 100% foreign ownership in many sectors.
Tax Structure:
Corporate tax rates range from 4% to 21% based on income, and personal income tax is progressive, generally facilitating business operations.
Digital Residency Program:
Palau offers a unique Digital Residency program, allowing for easier business setup and, in some cases, extending tourist visa stays for residents to 180 days.
Financial Stability:
The banking system is secure, featuring FDIC-insured banks like the Bank of Hawaii, Bank Pacific, and Bank of Guam.
Democratic Environment:
As a stable, democratic presidential republic, Palau offers a secure, stable political environment for long-term investment.
TAX REGIME
Palau Goods and Services Tax (PGST):
A 10% tax applied to the supply of most goods and services in Palau, replacing the previous Gross Revenue Tax (GRT) for many businesses.
Business Profit Tax (BPT):
A 12% tax on the net income of businesses registered for PGST.
Gross Revenue Tax (GRT):
A 4% tax on total gross income, applicable to businesses with annual earnings over $50,000 that are not registered for PGST.
Small Business Exemption:
Businesses earning less than $50,000 annually are not subject to BPT or GRT, but must pay a $100 annual business license fee.
Non-Resident Tax:
A 5% tax on insurance premiums and 10% on other income (royalties, interest) derived from Palau by non-residents.
Wages and Salary Tax:
Progressive rates apply to salaries, with a 6% tax on income up to $8,000, and 10% for salaries between $8,000 and $50,000.
Tax-Free Zone:
A Capitol Complex Tax-Free Zone exists with special tax concessions, including exemption from BPT for qualified entities.
Social Security:
Employer and employee contributions are required.
PALAU COMPANIES
Private Limited Company:
The most common structure, offering limited liability to shareholders.
Public Limited Company:
Suitable for larger enterprises, regulated under the Corporations Act.
One Person Company (OPC):
A type of private limited company owned by a single individual.
Partnerships (General and Limited):
Governed by Title 12 of the Palau National Code; limited partnerships require at least one general partner with personal liability.
Sole Proprietorship:
Simple structure owned by one person with unlimited personal liability.
Offshore Company:
Tax-efficient entities often used for international business.
Foreign Company:
Any entity formed outside Palau that must register to operate locally.
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Contact Us
Get in touch with the right people to get the right help in setting up your business in Palau.
enquiries@chandrawatpartners.com.