INVESTMENT CONSIDERATIONS

GOVERNMENT POLICY

The Solomon Islands' Government welcomes and encourages investors whose development proposals are compatible with its national aims and objectives in respect of the environment and social structure. In addition, the Government has developed a list of desired investment areas for potential investors. This can be obtained from the Investment Board.

The Government recognises the important role that overseas investment can play in broadening the country's economic base. The assessment process for overseas investment also pays particular attention to the impact of the proposal on:

• strengthening the technical and marketing expertise of the private sector;
• use of local raw materials;
• net export income;
• import cost savings; and
• employment and training, especially in regional areas.

RESTRICTIONS ON FOREIGN INVESTMENT

There are several sectors of the economy reserved for Solomon Islanders. To date, there has not been a strict application of this policy. At present, the new government is reviewing these sectors so these restrictions may be lifted in the near future.

REPATRIATION OF CAPITAL AND PROFITS

Approval for repatriation of funds is required under the Exchange Control Act 1976 and the Exchange Control Regulations 1977. The Central Bank of the Solomon Islands administers the exchange control policy and authorises cornmercial banks to deal and process applications for remittance of foreign exchange.

Exchange control approval is required on importation of capital; repatriation of capital; transfer of profits; dividends, interest and royalties; borrowing of overseas funds; repayment of interest or a loan to a non-resident lender; crediting of non-resident accounts; transfer of property, goods, right to I services etc to non-residents; operation and settlement of inter-company accounts; transfer overseas of sale proceeds of Solomon Islands assets; direct investment overseas and lending of Solomon Islands currency outside the Solomon Islands. Exchange control approval is also required for companies incorporated in the Solomon Islands to issue and register shares in the name of non-residents and to dispatch the scrip from the Solomon Islands.

TAXATION

Individuals
Tax is payable on total income less personal exemptions, with all individuals being taxed at the following rates:

Witholding Taxes
Withholding tax on dividends paid to non-residents by companies incorporated in the Solomons is 35 percent and 20 percent on dividends paid to residents. Gross dividends are a deductible expense of the paying company.

INVESTMENT PROTECTION

While investment protection is a priority, there are no formal laws or regulations in place to provide expropriation and compensation for foreign investments. A Trade Dispute Panel has been set up to hear and settle disputes. The Panel has been vested with the necessary powers under the law to settle disputes. All foreign investors in Solomon Islands are entitled to:

• repatriation of dividends on a current basis
• repatriation of capital, incorporated into their rights to sell their shares in a local operation
• access to and use ofthe country's stock of foreign reserves in accordance with the policies and procedures governing such use
• liberal and flexible levels of shareholding and directorships
• enjoy the benefits and rewards of all legitimate entrepreneurial efforts including payments for patents, technology, management, technical assistance as well as other special provisions
• work permits and residential permits for approved levels of foreign workers under conditions governing the granting of such permits
• all rights under the Solomon Islands constitution and before the law
• the settlement of disputes in accordance with intemationally agreed criteria and the laws of Solomon Island

INVESTMENT INCENTIVES

The Solomon Islands Investment Board is empowered by the Solomon Islands Investment Act to negotiate investment incentive packages tailored for individual proposals. The incentive package includes:

• up to 10 years tax free holiday;
• the capacity to carry forward losses (limited to five years only);
• depreciation on capital expenditure of 40% in the first year and 5% per annum thereafter for factory expansions (a special rate of 50% is allowed for tourist developments)
• double deduction for expenditure on apprenticeships and tertiary eduction;
• 150 percent deduction for cost of inter-province transport of raw materials;
• 150 percent deduction for export promotion expenditure;
• duty free entry for capital equipment and drawback on re-exported items;
• special additional incentives for tourism developments; and
• free movement of capital and profit remittances.