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Tonga

 
   

Executive Summary
The Kingdom of Tonga consists of 169 islands located in the South Pacific Ocean. Only 36 of the archipelago islands are inhabited. Tonga lies not far from New Zealand, Samoa and Hawaii. Tonga covers a total area of 748 sq km. It is the only sovereign monarchy among the islands of in the Pacific Ocean, and is the only one which has not been colonized in the past.

Nuku’alofa is the capital of Tonga; Tongan and English are its official languages. Tonga is a constitutional monarchy, and any type of the monarch’s criticism is retained contrary to the local culture and etiquette. There is a significant inequality in wealth distribution among the population, which is determined by the access to education, medicine and land tenure. Obligatory education is guaranteed to people up to fourteen years. Tonga has a high literacy rate reaching 98%.

Large business enterprises such as telecommunications, as well big land territories belong to the royal family and nobles. Manufacturing sector which consists of handicrafts brings only 3% to the GDP. Coconuts, bananas, vanilla and coffee beans are main agricultural products. Tonga aims to develop its fishing industry, as well as it plans to use its forests which cover 35% of the country’s territory, as coconut trees can provide a good quality timber.

The Pa’anga (TOP) is the national currency of Tonga.

Geography
Islands of Tonga are of two types: some territories represent coral formations with a limestone base, while others have a volcanic base overlaid by limestone. Tonga has a subtropical climate. A period from December to April has hot temperatures, averaging at +32 degrees C, while May-November is a cool season with temperature changing from +23 to +27 degrees C. March is usually the rainiest month. Average humidity is around 80%.

Current deforestation policy results in always more territories usable for agricultural activities. A too aggressive hunting activity represents a threat to sea turtles.

Map, Flag and Coat of Arm

 


Types of Company

Sole Proprietorship

This structure is fully owned by one person. It does not need to be registered, but a relative business license should be obtained, in order to get a permit to conduct a business activity.

Partnership
Two or more entities can create a partnership, in order to operate under a single name, Partnerships need not be registered, but must obtain a business license.

A Branch of a Foreign Company
In order to operate in Tonga, a foreign company should first of all obtain a foreign investment certificate and then apply for a specific business license. After these documents have been received, a foreign company may start a registration procedure with local authorities in Tonga by submitting all the requested documentation. Foreigners cannot buy or sell land in Tonga, as well as they are not allowed to participate in business activities in certain market segments. In addition, when starting a business, foreigners have to deal with too complicated and time-ineffective bureaucratic procedures.

Local Company
Even though Tongan Companies Act is largely based upon New Zealand’s model, it still has many gaps and inefficiencies. Local commercial legal framework is complex: some of its areas, such as the labour market, are understandable and lightly regulated, while other segments are hard to understand and comprise many uncovered gaps. Such a legal environment makes it much harder and more risky to conduct a business in Tonga than in many other jurisdictions.

In order to be registered as a Tongan company, the majority of shareholders must be Tongan nationals.

Taxation

Personal
Personal income tax is charged at a rate of 10%, but there is a number of incentives and exemptions.

Corporate
A standard corporation tax is levied at 30%. Several exemptions can be granted. Main indirect taxes comprise custom duties, port and serviced taxes, which bring 68% of tax revenue to the government.

 
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