Nauru: Pacific Microstate with Modern Tax System

Nauru is one of the world's smallest countries, a tiny Pacific island nation with a population of approximately 12,000. Located in Micronesia, northeast of Australia, Nauru transitioned from a tax-free jurisdiction to implementing income taxation in October 2014.

Living in Nauru

Nauru is a single island of just 21 square kilometers, making it the third smallest country in the world by area. The island was devastated by extensive phosphate mining which once made it one of the richest countries per capita. Today, the economy relies heavily on Australian aid and hosting an Australian immigration detention center.

English is the official language alongside Nauruan. Infrastructure is limited, with basic healthcare and education facilities. The tropical climate is consistently warm year-round. Transportation options are limited, with Nauru Airlines providing the main international connection.

Doing Business in Nauru

Nauru introduced income taxation through the Business Tax Act 2016 and Employment and Services Tax Act 2014, ending decades as a tax-free jurisdiction. The current tax regime includes:

• Corporate tax: 30% on business profits
• Personal income tax: 20% flat rate with AUD 250,000 tax-free threshold for residents
• Small Business Tax: 2.5% on gross revenue for non-residents with revenue under AUD 250,000
• Non-Resident Tax: 20% on interest, royalties, and insurance premiums
• Telecommunications Tax: 15% on gross revenue from telecom services

Importantly, Nauru has no capital gains tax, no inheritance tax, and no wealth tax.

Company Formation

Company registration is handled through the Nauru Corporate Registry, which is not publicly accessible online. The process is relatively simple, requiring minimum one shareholder and one director. Nominee services may be available through registered agents.

The Australian dollar is the official currency, providing currency stability and eliminating exchange rate concerns for businesses dealing with Australia.

Historical Context

In the early 2000s, Nauru was a prominent offshore financial center with over 400 "shell banks" registered. Following international pressure and concerns about money laundering, the offshore banking sector collapsed. The Financial Action Task Force (FATF) placed Nauru on its blacklist until the country implemented significant reforms.

Today, Nauru's financial services sector is extremely limited. The country has worked to rebuild its reputation but banking infrastructure remains minimal.

License Frameworks

Crypto License

Nauru does not have a cryptocurrency licensing framework. The jurisdiction's extremely limited banking infrastructure makes it impractical for crypto businesses. Any virtual asset operations would require bespoke regulatory arrangements that do not currently exist.

Gambling License

Nauru does not have an established gambling licensing framework. The country's small size and limited infrastructure make it unsuitable for gambling operations. Historical offshore activities have largely ceased.

Financial Services

Nauru's financial services sector is extremely limited following the collapse of its offshore banking industry in the early 2000s. No meaningful path to financial services licensing currently exists. The country has no domestic commercial banks, relying on Bendigo Bank (Australia) for basic banking services.

Considerations

Banking access is extremely limited, with virtually no international banking infrastructure. The remote geographic location significantly increases operational costs and limits connectivity. Historical reputation issues may affect international acceptance of Nauru-incorporated entities.

The very small economy offers no local market. Professional services availability is minimal. Businesses seeking Pacific presence would generally find more suitable options in other jurisdictions.

This jurisdiction is primarily of historical interest rather than practical consideration for most business purposes.