Update September 2026: progress on 15% VAT to replace Sales Tax
Finance Minister Gordon Darcy Lilo has reaffirmed that the Solomon Islands Government intends to bring VAT legislation before Parliament as part of its broader tax reform programme. The reforms will sit alongside the new Tax Administration Act, a rewrite of the Income Tax Act and wider reviews of excise and resource taxation. No new implementation dates or technical details have been announced
Value Added Tax (VAT) Bill in debate since July 2025
The Solomon Islands has taken a major step toward modernising its tax system with the introduction of a Value Added Tax (VAT) Bill, signalling a shift from its current fragmented sales tax regime. Currently 176 countries have VAT.
Currently, the Solomon Islands imposes a 15% sales tax on imported goods and a 10% sales tax on locally produced goods. The new VAT framework aims to unify and broaden the tax base by levying a staged tax on most goods and services, ultimately taxing final consumption.
Although the Bill was initially expected to be tabled in April 2025, delays pushed its introduction, but the public release of the draft indicates it is now close to parliamentary debate.
Key provisions of the VAT Bill include:
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15% VAT rate: A single rate of 15% will apply to taxable supplies made by registered persons, taxable imports, and imported services. This uniform rate is designed to replace multiple existing taxes, including import duties (with exceptions), the current goods and sales tax, stamp duty, and the accommodation levy.
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Registration threshold: Businesses must register for VAT if their annual turnover exceeds SBD $2,000,000. Financial institutions must also register. Additionally, all businesses with turnover over SBD $600,000 must register to charge and claim VAT. Smaller businesses under this threshold will not charge VAT, although they will still pay VAT on imports and purchases from VAT-registered suppliers.
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Filing requirements: Registered businesses will be required to submit VAT returns within 30 days after the end of each VAT period.
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Imports and domestic supplies: Customs will collect VAT on imports, while businesses will generally charge VAT on sales of goods and services unless explicitly exempt or zero-rated under the Act.
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Exempt and zero-rated supplies: Certain essential sectors will receive relief. Exemptions include education, medical services, church groups, some financial services, and local buses and taxis (though not hire cars or tourist buses). Meanwhile, zero-rated supplies (listed exhaustively in Schedule 3) allow businesses to reclaim input VAT, helping to minimize cascading tax effects.
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Approval process for exemptions: Unlike the previous system where ministerial discretion allowed VAT exemptions, the new regime requires any exemptions to be formally approved by Parliament as amendments to the VAT Act.
Some existing taxes — such as excise duties, mining royalties, and export duties — will remain unchanged.
If passed, the VAT system is expected to roll out over the next 18-24 months, with extensive stakeholder consultations planned to refine the framework. Ultimately, this transition is positioned to create a simpler, more transparent, and robust tax environment, aligning the Solomon Islands with international best practices and providing a stable revenue base for national development.