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New Palau pushes for "high-end" tourism with tax breaks

Koror-- Palau President Tommy Remengesau Jr. has signed a measure into law offering tax credits to wealthy foreign investors with the intention of promoting tourism that brings in more revenue to the government with less negative impacts on the environment.

“With the signing of these amendments, we once again show that Palau is committed to the development of high-end, high-value, low-impact tourism,” Remengesau stated in his signing statement.

Water bungalows in Palau Pacific Resort and considered one of the handful of "high-end" accommodations in Palau. Photo Supplied

Under the new law, foreign investors investing in high -end accommodations are given a tax credit of up to 40 percent.

The new law also aims to keep foreign investors out of “low-end” accommodations, leaving this area to local businesses.

“These amendments provide clear guidance and direction to the Foreign Investment Board, letting it know exactly what kind of foreign investment should be prioritized in order to encourage and attract high-quality investments into the Republic,” Remengesau stated in his signing statement to the Congress leaders.

RPPL 10-20 will provide a tax credit to foreign investors who will come in with their own designed water treatment system, power backups, and renewable energy sources to lessen the strain to the environment and existing infrastructure of the country.

The Foreign Investment Board will be tasked to come up with regulations that will serve as a reputable classification and rating systems for different forms of accommodations, from luxury resort hotels to eco-lodges.

The law also aims to weed out foreign investment in low-quality facilities, budget facilities, or facilities which would likely only qualify for a low rating under reputable and independent accommodation rating systems.

“This will help send a clear message to high-end investors and developers that Palau welcomes their business,” Remengesau stated.

The law will only cover foreign investors. Palauan businesspeople wanting to open a new hotel or other accommodations will not have to go through this process.

It also intends to curb “front businesses” or foreign companies using a Palauan front by clarifying the definitions of “owner,” “part-owner,” and “short-term lodging facility,” ensuring that the foreign investment approval certificate process works as intended.

It also clarifies the penalties for violating the statute by explaining that in addition to any criminal penalties, violators of this law will be subject to a fine of up to $25,000.

Palau is focusing its strategy on quality over quantity visitors, discouraging visitors who spend little money locally.

In the past years, Palau has been popular among Chinese tourists, traveling to the country on a package tour. As a result, hotels, restaurants, and guides in Palau are now catering to the Chinese market.

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