Capital city: Vatican City
Currency: Euro (€)
GDP $308 m USD (2014)
Vatican City is the smallest sovereign state in the world by both area and population and is a walled enclave within the city of Rome. With an area of only 110 acres, and a population of 842, it is a sacerdotal-monarchical state (a type of theocracy) ruled by the Bishop of Rome – the Pope.
Vatican City is distinct from the Holy See (which dates back to early Christianity) and is the main episcopal see of 1.2 billion Latin and Eastern Catholic adherents around the globe. The independent city-state, on the other hand, came into existence in 1929 by the Lateran Treaty between the Holy See and Italy.
There are no taxes, no restrictions on the import or export of funds, and no customs or excise duties payable in the Vatican City. Employees of the Vatican pay no income tax and no custom’s duty on goods that they buy in the Vatican.
The Institute for Works of Religion, also known as the Vatican Bank, is a bank situated in the Vatican that conducts worldwide financial activities. It has an ATM with instructions in Latin, possibly the only such ATM in the world. With so many of its transactions conducted using cash, and with such a strong veil of secrecy surrounding its activities, the Vatican Bank has been called a natural tax haven. For Italians it is effectively an offshore bank in the middle of Rome that can be entered by merely crossing the street. Over the last three years Vatican auditors have closed around 5,000 suspect Vatican bank accounts following a three year investigation into illegal financial activity including insider trading and tax evasion.
"You’d be stupid not to try to cut your tax bill and those that don’t are stupid in business"
- Bono: U2