Published on and written by Cyril Jarnias
Moving to the Solomon Islands isn’t just about finding a turquoise lagoon and a stilted bungalow. For an expatriate, the real question arises very quickly: how does the local tax system work, particularly concerning income and real estate, and what are the risks of double taxation with the home country?
The tax system is simpler than in many developed countries but has important local specificities, particularly concerning land ownership and tax residency status. It is essential to understand it before accepting a contract, starting a business, or signing a long-term lease.
Understanding the General Framework: A Common Law Country Without a Wealth Tax
The Solomon Islands form a sovereign state in the South Pacific, a member of the Commonwealth, whose legal system is based on English common law. English is the official language, the currency is the Solomon Islands dollar (SBD), and tax administration is handled by the Inland Revenue Division (IRD), under the Ministry of Finance in Honiara.
From a tax perspective, several structuring elements are of direct interest to expatriates:
The Solomon Islands tax system is characterized by the absence of a general wealth tax, inheritance tax, and gift tax between individuals. There is also no general capital gains tax, although gains from the sale of depreciated business assets may be treated as taxable income. Taxation relies mainly on personal income tax, corporate tax, various withholding taxes, and indirect duties and taxes (customs duties, goods and services taxes, stamp duties, etc.).
For a foreigner, the first step is to clarify their tax status: resident or non-resident. This status determines the scope of taxation in the Solomon Islands.
Tax Residency for Expatriates: The Six-Month Threshold and the Reality of Presence
The tax legislation of the Solomon Islands does not create a specific tax status for expatriates. A foreigner is simply classified as a resident or non-resident based on several objective criteria and the assessment of the Commissioner of Inland Revenue.
An individual is considered a tax resident when one of the following conditions is met:
To be considered a tax resident in the Solomon Islands, an individual must meet one of the following criteria: be ordinarily resident in the country (with temporary absences deemed reasonable), be physically present in the territory for more than 183 days during the tax year, demonstrate the intention to reside there for at least six months (e.g., via an employment contract), or come to perform a contract of employment exercised primarily locally and lasting at least six months.
However, the Commissioner has discretionary power: even if an expatriate technically meets these conditions, they may, in some cases related to the nature of the contract and payment method, be treated as a non-resident.
In summary, for an expatriate:
– beyond six months of actual or planned presence, the risk of becoming a tax resident is high;
– the location of “real life” (primary residence, family, center of economic interests) may also be taken into account in borderline cases.
Once tax residency is established, the scope of taxation changes radically.
Resident or Non-Resident: What Impact on the Taxable Base?
The tax regime clearly distinguishes between:
The tax system distinguishes two statuses: the resident, taxable on their worldwide income, and the non-resident, taxable only on Solomon Islands-sourced income.
In practice, this means that an expatriate who becomes a tax resident will, in principle, have to declare:
– their salaries and bonuses received locally;
– their professional profits or dividends from local or foreign companies;
– rental income received abroad;
– interest and international investments, subject to double tax treaties and foreign tax credits.
Conversely, a non-resident expatriate will only be taxed on income attributable to the Solomon Islands (employment exercised locally, local real estate income, dividends from Solomon Islands companies, etc.).
Personal Income Tax: Brackets, Exemptions, and Withholdings for Expatriates
The personal income tax system is based on a progressive scale in Solomon Islands dollars. Rates vary by source and period, but the general structure remains the same: several brackets, with a top marginal rate of 40%.
Income Tax Brackets and Rates
The most frequently cited scales for residents are structured as follows (in SBD):
| Annual Income Bracket (SBD) | Tax Calculation Method for Residents | Marginal Rate Applied |
|---|---|---|
| 0 – 15,080 | Exempt (personal allowance) | 0% |
| 1 – 15,000 (old formula) | 11% of income in the bracket | 11% |
| 15,001 – 30,000 | 1,650 SBD + 23% of the amount over 15,000 SBD | 23% |
| 30,001 – 60,000 | 5,100 SBD + 35% of the amount over 30,000 SBD | 35% |
| Over 60,000 | 15,600 SBD + 40% of the amount over 60,000 SBD | 40% |
Official documents also mention a general exemption threshold around 15,080 SBD (with historical variations at 7,800 SBD or 30,080 SBD depending on categories and years). This threshold is reduced if the activity is only exercised for part of the year.
For non-residents, the same marginal rates are generally applied, but without the benefit of the personal exemption threshold.
The practical effect for a well-paid expatriate employee is simple: once annual income exceeds 60,000 SBD, the portion above this amount is taxed at 40%, placing the taxation of high incomes in the upper average range for the region.
What is Considered Taxable Income
For an expatriate, most of the tax pressure will come from the treatment of compensation and benefits provided by the employer. The following are considered employment income:
This section details the various elements, in addition to base salary, that are considered taxable employment income under tax regulations.
Salaries, wages, overtime, bonuses, and commissions received in the course of employment.
Leave allowances, bonuses, gratuities, and all allowances related to cost of living, housing, school fees, utilities (electricity, water), transport, clothing, food, or entertainment, unless proven to be used exclusively for employment purposes.
Reimbursements of private expenses (rent, domestic expenses, leisure) covered by the employer, as well as benefits in kind such as a vehicle, company housing, or payment of bills, even if not convertible to cash.
Termination payments, severance payments (“golden handshakes”), pensions, or annuities paid in respect of former employment.
Only a short list of employer-provided coverages is explicitly exempt from tax:
– the cost of the employee’s round-trip tickets and, in some cases, those of their family between the Solomon Islands and their home country;
– medical care expenses borne by the employer;
– employer contributions paid to an approved pension fund or the Solomon Islands National Provident Fund (SINPF), up to 15% of the employee’s annual income.
For an expatriate with a comprehensive package (housing, air tickets, school fees, vehicle, etc.), it is crucial to distinguish what constitutes a taxable benefit in kind from what can be structured as a reimbursement of business expenses or covered under the provided tax exemptions.
Withholding Taxes: PAYE and Specific Withholdings
As in many systems inspired by the British model, tax on salaries is withheld at source via the PAYE (Pay As You Earn) mechanism. The employer must:
– calculate the monthly withholding based on the progressive scale;
– deduct the tax from each paycheck;
– remit the amounts collected to the IRD by the 15th of the following month.
In principle, an employee whose only income is salary taxed via PAYE does not have to file an annual return, unless they are self-employed or receive other income (rents, interest, dividends, fees).
Other withholdings concern frequent types of income for expatriates:
| Type of income paid by a Solomon Islands entity | Resident Beneficiary | Non-Resident Beneficiary | Specifics for Expatriates |
|---|---|---|---|
| Dividends from a local company | 20% | 30% | For non-residents, this withholding is usually final. |
| Interest | Variable rates (e.g., 10%) | Generally 15% | The first 5,000 SBD of local interest may be exempt for a resident. |
| Rents and rental income | 10% | 15% | The withholding is credited against the resident’s final tax, often final for a non-resident. |
| Royalties | 10% | 15% | Often applied to intellectual property or natural resources. |
| Technical/management services for non-resident | – | Up to 35% | Targets consulting or management services billed from abroad. |
An expatriate who is a shareholder or creditor of a Solomon Islands company must factor these withholdings into their structuring strategy, especially if no double tax treaty applies with their home country.
Foreign Tax Credits and Double Taxation
Solomon Islands domestic law provides for a foreign tax credit mechanism for tax residents who suffer taxation abroad on the same income. The credit is capped at the amount of tax that would be due locally on that income.
In practice:
– an expatriate who is a tax resident of the Solomon Islands but taxed in their home country on a foreign dividend can credit the foreign tax against their Solomon Islands tax, up to the limit of the latter;
– the situation is more delicate for citizens of countries with worldwide taxation (like the United States), who remain taxable in their home country on their worldwide income, including income already taxed in the Solomon Islands. In these cases, tax credits or treaties from the home country often prevent double taxation.
Only one double tax treaty is in force: the “Arrangement for the Avoidance of Double Taxation” signed with the United Kingdom, with roots dating back to the colonial era. It governs the taxation of dividends, interest, pensions, salaries, and business profits between the two jurisdictions.
For nationals of other countries (France, Australia, New Zealand, etc.), the absence of a bilateral treaty means relying on each state’s unilateral mechanisms to eliminate double taxation.
Corporate and Self-Employed Taxation: What Expatriate Entrepreneurs Need to Know
Many expatriates in the Solomon Islands are not just employees: some set up a local entity, become independent consultants, or invest in a tourism or agricultural project. Here too, the tax framework is specific.
Company Status and Tax Rates
A company is considered resident if:
– it is incorporated in the Solomon Islands; or
– if, although incorporated abroad, it carries on business there and has its central management and control there or has resident shareholders who control its voting power.
The corporate tax rate is:
– 30% on the profits of resident companies (on a worldwide basis);
– 35% on the Solomon Islands-sourced profits of non-resident companies.
To this can be added specific withholdings on certain flows (dividends, interest, royalties, management fees…) paid to non-residents, sometimes at high rates (up to 35% for some management services).
Determination of Taxable Profit and Depreciation
The taxable profit is determined by deducting from revenue all expenses incurred “exclusively and wholly” for producing the income. The following are generally deductible:
Main categories of business expenses that can be deducted from a company’s taxable result.
Rent, equipment leasing costs, purchase of goods, transport and freight costs.
Salaries, statutory social charges, and employee training costs.
Interest on business loans, telecoms, electricity, water, banking, and accounting/legal fees (excluding acquisitions).
Repair and maintenance expenses not capitalizable, business insurance, and losses on irrecoverable debts.
On the other hand, the following are not deductible:
– capital expenditure (purchase of buildings, land, vehicles, equipment, etc.) – these give rise to depreciation;
– personal or family expenses;
– expenses incurred abroad without authorization from the Commissioner.
Depreciation (tax depreciation) follows predetermined rates:
| Asset Category | Indicative Annual Depreciation Rate |
|---|---|
| Buildings, permanent structures, bridges, wharves | 5% |
| Vehicles, ships, aircraft, machinery, tools | 25% |
| Specific assets related to forestry concessions or employee housing | up to 35% |
| Certain plantations (coconut, palm, cocoa) and agricultural infrastructure | 100% deductible in the first year |
Upon the sale of a depreciated asset, the so-called “balancing charge” gain is taxable as ordinary income, which constitutes, in practice, a targeted form of taxation of business capital gains.
Loss Treatment and Minimum Tax
Operating losses can, subject to maintaining shareholding, be carried forward and offset against future profits for five years. If a company accumulates losses without generating profits, a minimum tax called “turnover tax” may apply, at a rate of 0.5% of turnover, with a cap around 20,000 SBD.
This mechanism ensures that a local expatriate business never contributes to the public budget, despite significant turnover.
Provisional Tax: Mandatory Quarterly Installments
Companies (and self-employed individuals) must pay income tax installments, called provisional tax. They are generally calculated as one-quarter of the tax due for the last tax year and are payable on the following dates:
| Provisional Tax Installment | Payment Deadline |
|---|---|
| 1st installment | March 20 |
| 2nd installment | June 20 |
| 3rd installment | September 20 |
| 4th installment | December 20 |
Newcomers starting a business must estimate their expected profit to determine the initial amount of these installments. Adjustments are possible, but significant underestimation may lead to penalties.
Property and Real Estate: A “Land Paradise” That Isn’t Really One
For an expatriate, real estate taxation in the Solomon Islands is not simply a percentage applied to the value of a house. It is intimately linked to the land ownership regime, dominated by customary land.
Customary Land, Perpetual Estates, and Long-Term Leases
Approximately 87% of the territory consists of Customary Land, collectively owned by indigenous communities. This land:
– cannot be sold to foreigners;
– is often ineligible for classic titling;
– can be subject to negotiated leases with communities, involving lengthy consultations and complex customary agreements.
The remainder consists of Perpetual Estate, held mainly by the State or nationals. Foreign investors cannot become direct owners of this land, but they can obtain:
– Fixed Term Estates (FTE), i.e., long-term leases, which can go up to 75 years, sometimes renewable;
– leases on government land made available under investment policies.
For an expatriate, most property-holding situations take the form of a long-term lease rather than full ownership in the strict sense.
Is There a “Property Tax” in the Solomon Islands?
The French concept of “property tax” (taxe foncière) does not have a single, simple equivalent in the Solomon Islands. Several levels and types of taxation coexist:
1. Tax on Rental Income
Rents received from property located in the Solomon Islands, whether an apartment in Honiara or a tourist resort on an island, constitute taxable income under income tax or corporate tax. They are also generally subject to a withholding tax (10% for resident owners, 15% for non-residents).
2. Local Property Taxes in Honiara
The Honiara City Council levies a local property rate (Property Rate) calculated on the unimproved value of the land, at the following indicative rates:
| Type of Land in Honiara | Calculation Base | Indicative Rate |
|---|---|---|
| Residential | Unimproved land value | 0.37% |
| Commercial / Industrial | Unimproved land value | 0.50% |
This tax is payable by the owner or leaseholder and funds municipal services (waste collection, markets, clinics, schools). It is independent of rents and resembles, in spirit, a local property tax.
Legislation provides for a national tax on net real estate wealth, applicable above a high threshold. This tax primarily concerns holders of large estates, whether nationals or foreigners.
– the first 40,000,000 SBD of net value (after deducting debts) is exempt;
– the next bracket of 20,000,000 SBD is taxed at 0.5%;
– the excess portion above that is taxed at 0.75%.
Example: a net real estate wealth of 105 million SBD incurs:
| Calculation Elements | Amount (SBD) | Rate | Tax (SBD) |
|---|---|---|---|
| Exempt portion | 40,000,000 | 0% | 0 |
| Next bracket | 20,000,000 | 0.5% | 100,000 |
| Remainder (105m – 60m) | 45,000,000 | 0.75% | 337,500 |
| Total Property Tax | – | – | 437,500 |
This is far from a small company house: this tax targets large groups and major investors.
4. Ancillary Duties and Transaction Taxes
For each transaction, the following are added:
Several taxes and fees may apply to real estate transactions and projects. These include stamp duty on lease contracts and transfers of property or real rights, registration fees for leases (such as fixed-term estates or concessions), possible commercial property rates (especially if a commercial use is identified), and development levies on construction projects.
For an expatriate simply renting accommodation to live in, the main issue will be the level of rents, rather than the local rate, which falls directly on the lessor. For someone investing in a hotel, tourism project, or commercial structure, the combination of tax on rents, local property rate, stamp duties, and potential wealth tax must be integrated into the business plan.
Penalties and Interest for Non-Payment of Property Taxes
As with income tax, local property rates are subject to penalties and interest in case of late payment. In Honiara, an unpaid Property Rate:
– incurs a 5% penalty on amounts unpaid by the due date of each quarter;
– accrues late payment interest at a rate of about 10% per annum.
In cases of persistent non-payment, the law allows, as a last resort, the seizure and sale of the property or movable assets to recover the debt, an option rarely used but provided for.
Taxation for Expatriate Property Owners: Rents, Capital Gains, Withholdings
When an expatriate invests in real estate in the Solomon Islands, even in the form of a long-term lease, they face several levels of taxation.
Taxation of Rental Income for Expatriates
Rental income falls into the category of gains from the use or possession of property. They are:
– taxable under income tax (for an individual) or corporate tax (for a company);
– subject, in practice, to a withholding tax of 10% (resident) or 15% (non-resident) deducted by the tenant or manager, who must remit it to the IRD.
For an expatriate tax resident, the withholding tax on rents received in France is credited against their final income tax. They must declare net rents, i.e., receipts reduced by deductible expenses. Typically allowed expenses include management fees, repairs, property taxes, and insurance premiums.
– repairs and routine maintenance of the property;
– insurance premiums, management fees;
– loan interest related to the property;
– local property rate and municipal charges.
Acquisition or extension costs are not deductible as such but may give rise to depreciation (notably for the building part).
For a non-resident expatriate, the 15% withholding on rents may be considered final in many cases, which simplifies compliance but sometimes limits the ability to deduct expenses.
Absence of a General Tax on Real Estate Capital Gains
There is no general regime for taxing real estate capital gains in the Solomon Islands comparable to that in many Western countries. However:
If the sold property is part of a business’s assets (like a hotel or rental building held by a company), the sale may trigger tax on the recapture of depreciation claimed. Furthermore, certain capital gains, particularly those related to mining rights or specific concessions, are explicitly subject to tax.
For a long-term expatriate investor, the exit from a real estate asset is therefore, in principle, in a rather favorable environment, provided a clear distinction is made between what constitutes a simple capital gain (not taxed) and what corresponds to depreciation recapture or specific rights (taxed).
Other Elements Not to Overlook: Social Security, Indirect Taxes, Exchange Controls
The overall tax burden for an expatriate is not limited to income tax and property taxes.
Contributions to the Solomon Islands National Provident Fund (SINPF)
The Solomon Islands’ social security system is based on the SINPF, a mandatory capitalization scheme, funded by:
– 7.5% of gross salary paid by the employer;
– 5% deducted from the employee’s salary.
These contributions are not considered a tax, but:
– the employee’s share is in principle deductible from taxable income;
– the employer’s share is exempt for the employee up to 15% of gross income (beyond that, it may potentially be reclassified).
Expatriates on local contracts are generally affiliated with the SINPF. However, some seconded expatriates may be exempt or subject to special regimes, depending on applicable secondment agreements.
Indirect Taxes: Goods, Services, Customs
The Solomon Islands system also includes: Santa Cruz Islands, Rennell and Bellona Islands, and various atolls and islets.
– customs duties with four main ad valorem rates: 5%, 10%, 15%, and 20% on most imports, with many exemptions for investments, raw materials, or certain essential goods;
– taxes on goods and services (goods tax and sales tax) which, in the absence of a generalized VAT, play a similar role on certain categories of goods and services;
– excise duties on products like alcohol, tobacco, or beer.
For an expatriate, a devaluation of the local currency generally increases the cost of living, notably through higher prices for imported goods, and can raise the cost of investments requiring foreign equipment. However, some investment projects may benefit from exemptions through specific incentive schemes.
Exchange Controls and Fund Transfers
The prudential framework imposes restrictions on outward capital transfers:
– beyond certain thresholds (for example 30,000 SBD for an individual, 100,000 SBD for a company), transferring funds abroad requires authorization from the central bank (CBSI);
– obtaining a tax clearance certificate from the IRD may be required for transfers of dividends, interest, or other income abroad.
An expatriate wishing to repatriate their rents, dividends, or sale proceeds must therefore anticipate both the tax impact and exchange formalities.
Investment Incentives: Tax Holidays, Exemptions, and Accelerated Depreciation
The Solomon Islands government seeks to attract foreign capital into certain sectors deemed strategic: tourism, agriculture, fishing, responsible forestry, export industries, infrastructure projects. To do this, it can grant, on a case-by-case basis, significant tax advantages.
Among the tools available to the Minister of Finance are:
The regulatory framework provides several tax incentives for investments, including: periods of total exemption from profit tax (tax holidays) of 3 to 10 years for projects of national interest or high impact; exemptions or reductions of customs duties on the importation of capital goods, construction materials, and industrial vehicles; accelerated depreciation regimes (150% deduction of certain expenses or full depreciation in the first year); and partial tax exemptions for young domestic companies on limited profit brackets.
For an expatriate investor, these schemes can transform the profitability of a real estate or tourism project, provided they:
– obtain a foreign investment certificate from the Foreign Investment Division;
– negotiate the conditions with the Exemption Committee and the Ministry of Finance;
– scrupulously comply with reporting obligations and the conditions attached to exemptions (level of local employment, export volumes, etc.).
Non-Compliance Risks and Penalties: The Hidden Face of the “Tax Haven” That Isn’t One
The apparent relative simplicity of the system should not lead to underestimating the rigor of the administration in case of non-compliance. The Inland Revenue Division systematically applies:
Maximum fine amount in SBD for tax fraud or deliberate false declaration, which may be accompanied by imprisonment.
The IRD can also: can
– effect offsets against other government payments;
– freeze bank accounts or seize assets;
– rely on information from other departments or, through the anti-money laundering network, from international partners.
An expatriate who simply “turns a blind eye” to their local obligations on the grounds that their primary link remains their home country clearly puts themselves at risk, including in the event of a future return or naturalization project.
Aligning Local Taxation and Home Country Taxation
For an expatriate, the question is never solely about how much they will pay in the Solomon Islands. It is always twofold:
1. what will they actually have to pay to the Inland Revenue Division and, where applicable, to local authorities (Honiara City Council, etc.)? 2. to what extent will these taxes be recognized as creditable or deductible by their home country, and vice versa?
Nationals of countries with territorial taxation for non-residents (some European countries) may sometimes neutralize the tax due in their home country on purely Solomon Islands income, subject to anti-abuse rules.
Citizens of countries with worldwide taxation (like the United States) must, however, manage:
– the combination of Solomon Islands income tax, withholding taxes, and property taxes;
– detailed reporting in their home country, using foreign tax credits, or even foreign earned income exclusion schemes, where such regimes exist in their national law.
Two technical points deserve particular attention:
– the timing of payments: some countries credit foreign taxes on the date of actual payment, which can create a timing difference between tax paid in the Solomon Islands and its offset abroad;
– the characterization of income: a dividend or rent may be treated differently by the two countries, leading to discrepancies in the creditable amount.
In complex situations (restructuring, holding via a company, significant real estate project), recourse to a tax advisor familiar with both Solomon Islands practice and the law of the home country is not a luxury but a necessity.
In Practice: How Should an Expatriate Organize Themselves?
Without claiming to substitute for individual advice, a few reflexes can significantly reduce risks:
For expatriates or investors in the Solomon Islands, it is crucial to: map days of presence to anticipate the shift to local tax residency; clarify in the employment or service contract the breakdown between salaries, allowances, benefits in kind, and expense reimbursements, taking into account exemption rules; structure any real estate activity via a suitable vehicle (local company, joint venture, long-term lease) and verify the effects regarding withholdings, corporate tax, and local property rates; closely monitor payment deadlines (PAYE, withholding taxes, provisional tax, Property Rate in Honiara) and keep solid supporting documents; anticipate significant fund transfers abroad, integrating both exchange control constraints and the need to obtain, if necessary, a tax clearance.
The Solomon Islands do not offer a “tax haven” in the caricatural sense of the term. They instead offer a hybrid environment: absence of a general wealth tax and broad capital gains tax, but a progressive scale going up to 40% on income, significant withholding taxes, and fragmented property taxation across several levels.
For an expatriate who takes the time to understand this landscape, properly structure their contracts and investments, and maintain dialogue with the Inland Revenue Division, the country can offer a predictable tax framework, compatible with long-term projects, especially in the real estate and tourism sectors.
Disclaimer: The information provided on this website is for informational purposes only and does not constitute financial, legal, or professional advice. We encourage you to consult qualified experts before making any investment, real estate, or expatriation decisions. Although we strive to maintain up-to-date and accurate information, we do not guarantee the completeness, accuracy, or timeliness of the proposed content. As investment and expatriation involve risks, we disclaim any liability for potential losses or damages arising from the use of this site. Your use of this site confirms your acceptance of these terms and your understanding of the associated risks.
Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
