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Nauru

Country Name: Republic of Nauru
Currency: Australian Dollar (AUD)
Primary Tax Authority: Nauru Revenue Office (NRO)
Key Legislation:

  • Business Tax Act
  • Employment and Services Tax Act
  • Customs Act
  • Offshore Banking Act

Fiscal Authority Allocation

Centralized Fiscal System:
Nauru operates a centralized tax system, with the Nauru Revenue Office (NRO) responsible for administering and collecting taxes, including business income tax, employment tax, and customs duties. There are no local government taxes, as all revenue collection is managed by the central government.

Corporate Income Tax (CIT)

Standard Rate: 20%
Nauru imposes a business income tax rate of 20% on the net taxable income of both resident and non-resident companies operating within the country.

Corporate Forms and Taxation:

  1. Domestic Companies: Taxed at the standard rate of 20% on their worldwide income.
  2. Branches of Foreign Companies: Non-resident companies are taxed on Nauru-sourced income at the same 20% rate.

Exemptions and Incentives:

  • Investment Incentives: Nauru offers certain tax holidays and exemptions to businesses investing in priority sectors, such as infrastructure development, renewable energy, and fisheries. These incentives are granted on a case-by-case basis.
  • Offshore Financial Sector: Although Nauru’s offshore banking sector has been largely wound down, some incentives for specific international financial activities remain in place, particularly for trusts and asset management companies.

Goods and Services Tax (GST) / Value-Added Tax (VAT)

No GST or VAT:
Nauru does not levy a goods and services tax (GST) or value-added tax (VAT). The government primarily relies on business taxes, customs duties, and levies to generate revenue.

Personal Income Tax (PIT)

Employment and Services Tax:
Nauru does not impose a traditional personal income tax. Instead, the country levies an Employment and Services Tax (EST) on income earned from employment and services provided within Nauru.

  • Standard Rate: 10% on employment income and services provided in Nauru.

Exemptions:
Income earned from specific government-related activities and certain foreign aid projects may be exempt from the Employment and Services Tax.

Additional Mandatory Contributions

Social Security Contributions:
Nauru does not have a formal social security or pension contribution system. The government provides welfare services through direct funding and public services.

Withholding Taxes

  • Dividends: No withholding tax on dividends.
  • Interest: No withholding tax on interest.
  • Royalties: No withholding tax on royalties.
    Nauru’s tax system does not currently include withholding taxes on dividends, interest, or royalties.

Transfer Pricing Rules

Nauru does not have formal transfer pricing regulations. However, the government expects international transactions to be conducted fairly, in line with international best practices, especially for large multinational entities operating in the country.

Special Tax Regimes

  • Offshore Banking and Financial Services: While Nauru’s offshore banking industry has been significantly reduced due to international pressure to combat money laundering, the country still offers limited incentives for international financial services, such as trust formation and wealth management.
  • Phosphate Mining: Nauru’s economy has historically been reliant on phosphate mining. Although the sector has declined, companies involved in any ongoing resource extraction projects may qualify for reduced business tax rates and import duty exemptions.

Other Taxes

  • Customs Duties: Import duties are levied on goods brought into Nauru. The rates vary by product type, with basic commodities, machinery, and raw materials often benefiting from reduced rates or exemptions.
  • Excise Taxes: Excise duties are applied to certain products, such as alcohol, tobacco, and fuel.

Double Taxation Agreements (DTAs)

Nauru does not currently have any double taxation agreements (DTAs) with other countries. As such, withholding taxes do not apply, and cross-border income is generally subject to the tax rules of the respective countries involved.

Local Taxes

Local governments in Nauru do not have authority to impose taxes. All revenue collection is centralized under the Nauru Revenue Office (NRO).

Compliance and Reporting

Annual Filing:
Companies are required to file their business income tax returns annually. The filing deadline is typically set by the Nauru Revenue Office. Individuals subject to the Employment and Services Tax must also report and remit their taxes annually.

Penalties for Late Filing:
Penalties for non-compliance or late filing include fines and interest on unpaid taxes. The interest rate on overdue taxes is typically set at 1.5% per month.

Recent Developments

Infrastructure and Economic Diversification:
Nauru is focusing on diversifying its economy through infrastructure development and promoting foreign investment. Tax incentives, including reduced corporate tax rates and customs duty exemptions, are available for companies investing in critical infrastructure such as ports, renewable energy, and transportation.

Tourism Sector Development:
The government is attempting to develop Nauru’s tourism industry to reduce reliance on phosphate mining. Tax holidays and reduced business tax rates are available for investors in tourism-related infrastructure, such as hotels and resorts.

Offshore Financial Sector:
Despite international pressures and the winding down of its offshore banking sector, Nauru continues to offer a limited range of offshore financial services, including trust formation and asset management, albeit on a much smaller scale than in the past.

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