Kiribati Economy Overview

Currency

Australian Dollar (AUD)

Working hours

40 hours/week

Public/bank holidays

12 public holidays

Capital

Tarawa

Languages

Gilbertese & English

Population

134,600

Minimum hourly salary

AUD 1.60 – AUD 1.70 per hour

Tax year

1st Jan – 31st Dec

Date format

DD/MM/YYYY

Misclassification penalties

There are penalties for misclassifying employees as independent contractors, though specific details are governed by Kiribati’s labor laws.

Fun fact

Kiribati is one of the few countries in the world that spans all four hemispheres, with its islands dispersed across a vast area of the Pacific Ocean​ (CIA).

Kiribati is an independent island country with 32 atolls, of which 20 are inhabited. Located in the Central Pacific Ocean, Kiribati’s economy is driven by agriculture, specifically the fishing industry, and shares trade and development assistance programs with Australia.

Kiribati has introduced the Second Inclusive and Resilient Growth Development Policy Operation with the World Bank to support sustainable growth and financial management for residents. 

Despite a low GDP compared to other Oceania countries, Kiribati has partnered with the New Zealand Ministry of Foreign Affairs to build infrastructure and provide consistent financial support. Kiribati’s economy has remained stable since its independence in 1979.

To stimulate the country’s tourism and foreign revenue, the government has created a 2024-2026 policy and strategic plan in support of economic and community initiatives. The majority youth workforce and English as a main language are beneficial to businesses looking to expand in the country. 

Overview of Kiribati's Economy

Kiribati’s economy is led by the public sector because it relies on remittances and international aid. While the island country experienced fairly high inflation in 2008 owing to increases in food and fuel prices, its adoption of the Australian dollar as its currency and lower rice prices reduced inflation rates.

Economic Indicators and Projections
GDP in 2022: $223.4 million
Expected GDP increase in 2024: 5.3%
Projected GDP per capita growth for 2024: 3.6%

The Asian Development Bank (ADB) has provided economic support to Kiribati to improve its fiscal sustainability, including resources to develop infrastructure from renewable energy and transportation to water supply. Businesses interested in investing in Kiribati can benefit from its economic freedoms in property rights, tax, and trade.

Taxes

Employer Tax: 7.5%

Social Security

7.5%

Employee Tax: 7.5%

Social Security

7.5%

Income Tax

Kiribati uses a progressive tax rate for individuals. The exact tax brackets were not detailed in any available sources but typically involve low rates due to the small size and economic structure of the country.

Business Regulation in Kiribati

Kiribati’s labor laws are governed by the Employment and Industrial Relations Code 2015 (EIRC 2015). The code provides a legal framework for employment agreements, dismissals, employee benefits, and the resolution of disputes.

Employee contracts must be written in the main languages of English or Gilbertese (known as Kiribatese). All full-time or permanent workers are entitled to 30 days of annual leave and 20 days of sick leave per year.

Employers must adhere to the country’s minimum wage laws of AUD $1.30 per hour. Salaries are paid every month, and employees are entitled to overtime pay. A standard work week in Kiribati consists of an 8-hour day and a 40-hour week. 

Employers are required to pay a 7.5% social security contribution; however, Kiribati does not offer staff 13th-month pay. Full-time employees can be terminated based on poor performance or misconduct and must be provided sufficient notice based on their years of service with the company.

For example, if an employee has been working for the company for 2 years, they should receive 2 weeks’ notice. Employers are responsible for severance pay in Kiribati based on the terms of the contract.

Businesses looking to establish a company in Kiribati must familiarize themselves with the country’s labor code to uphold the rights of employees and remain compliant. 

Benefits of Doing Business in Kiribati

Establishing a business in Kiribati opens a world of opportunities. Companies can take advantage of the lower cost of living in addition to affordable wages for employees.

The location in the Central Pacific means that Kiribati’s time zone is compatible with countries in Asia and the United States. Businesses can benefit from uninterrupted online and telecommunication services with a team in the Pacific. 

Kiribati’s regulations make it easier for investors and entrepreneurs to establish businesses. The country offers initiatives to businesses, particularly foreign companies, to encourage international investment. 

Lower cost of living and more affordable wage rates compared to other countries can help businesses save on overhead costs. Kiribati provides tax benefits for new businesses or startups that may qualify for full or partial tax exemption.

Small companies receive a reduction in corporate tax to encourage sustainability and growth. In addition to tax exemptions, small businesses that require imported goods to conduct their operations will not have to pay import duties on specific items.

Businesses can take advantage of investment allowances by investing in machinery and infrastructure in the country.

Downsides of Doing Business in Kiribati

Kiribati focuses on attracting international investment with tax incentives and lower operational rates; however, awareness of the challenges businesses may encounter in the country can help them navigate potential limitations. Due to its location, the import and export of goods to and from Kiribati take a fair amount of time. Companies must make provision for extended shipping times and possible delays in transportation. 

The small population of 133,515 as of 2023 means that businesses have access to a restricted market for sales and brand building. Fortunately, strong trade ties with Australia and New Zealand make it easier for companies to expand into these markets without complications. 

Business Expansion Options in Kiribati

To establish a business in Kiribati, you must determine which company structure will work best for your brand and services, along with the types of entities legally permitted in the island country. Setting up a subsidiary, branch, and PEO/EOR in the country is as follows:

Kiribati Employer of Record (EOR)

An EOR is a legal entity in the country that is able to represent the business and act as the sole employer. This gives the EOR the right to onboard employees, negotiate and oversee employment contracts, and facilitate various HR tasks, including payroll and benefits. Most importantly, an EOR will ensure that their client adheres to the Labor Code, 2015.

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Recruitment Agencies

A Kiribati recruitment agency can help you source employees in Kiribati quickly and cost-effectively. Kiribati recruiters often work in tandem with Professional Employer Organizations or Employers of Record to ensure that your Kiribati team is hired and paid in full compliance with local laws. 

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Kiribati Professional Employer Organization (PEO)

If you do not want to register a business in Kiribati but you are looking for assistance with HR processes and legal compliance, then hiring a professional employer organization (PEO) or an employer of record (EOR) can help. A PEO acts on behalf of the employer to manage its HR, find talented employees, and administer worker benefits. 

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Subsidiary Incorporation

In Kiribati, you can open a private limited liability company, partnership, sole trader, or cooperative. The next step is to determine the tax laws and business regulations of the business structure you wish to incorporate. 

Once you are ready to set up a business, the required share capital must be deposited into the commercial bank, ANZ Bank, in Kiribati. The next step is to register a unique business name and obtain a certificate of registration. If the revenue of the company is more than $5000, the business must register for tax. 

Employers must register with the Kiribati National Provident Fund and apply for a business license from the Betio Town Council or the Teinainano Urban Council. The company should be registered by the Registrar’s Office, and the relevant business documents should be submitted to register for tax.v 

Branch Registration

Kiribati does not provide regulations on establishing a branch in the country. Business entities that are permitted include an LLC, sole trader, and partnership.

Business Opportunities in Kiribati

Kiribati may be a small island country, but with big ambitions. The government has taken steps to establish trade agreements with Australia, making it easier for businesses to expand into the local and international markets. Despite the challenges of longer shipping and transportation, Kiribati offers new companies tax incentives, allowing these businesses to focus on sustainability and growth. 

Business Opportunities Reasons
Sustainable Tourism Kiribati’s pristine beaches, crystal-clear waters, and unique cultural heritage offer significant potential for sustainable tourism development. With a growing global demand for eco-friendly and authentic travel experiences, businesses can invest in the construction of eco-resorts, the development of cultural tours, and the promotion of water-based activities such as snorkeling, diving, and fishing. The government’s efforts to promote sustainable tourism practices and protect the country’s natural resources further enhance the attractiveness of this sector.
Fisheries and Aquaculture As an island nation with a vast exclusive economic zone, Kiribati boasts abundant marine resources. The country’s rich fishing grounds present opportunities for businesses involved in the sustainable harvesting, processing, and export of high-value seafood products. Additionally, the development of aquaculture projects, such as fish farming and seaweed cultivation, can contribute to food security, employment generation, and economic diversification. The government’s initiatives to promote sustainable fishing practices and attract foreign investment in the fisheries sector further support the growth of this industry.
Renewable Energy Kiribati’s geographic location and exposure to abundant solar and wind resources make it an attractive destination for renewable energy investments. The country’s reliance on imported fossil fuels and its commitment to reducing greenhouse gas emissions create a favorable environment for businesses involved in the development and deployment of solar, wind, and other clean energy technologies. Opportunities exist in the construction of small-scale solar power plants, the installation of solar panels on residential and commercial buildings, and the introduction of energy-efficient solutions to reduce the country’s carbon footprint.
Infrastructure Development As Kiribati continues to face challenges related to its infrastructure, particularly in the areas of transportation, water supply, and waste management, there are significant opportunities for businesses involved in infrastructure development projects. The government’s efforts to secure international funding and attract private sector participation in infrastructure projects create a conducive environment for construction companies, engineering firms, and project management consultants. Businesses can contribute to the development of roads, ports, airports, water treatment facilities, and waste management systems, thereby improving the country’s economic prospects and quality of life for its citizens.

The political stability and lower cost of living provide attractive conditions for small to medium businesses looking to establish a dynamic and youthful workforce. Kiribati encourages investment in its renewable energy, technology, and transportation.

Whether a private LLC or a larger corporation, foreign businesses can take advantage of the incentives, government, and international support services, as well as the strength of the currency, to expand in Kiribati.