Marshall Islands legal and accounting and tax considerations in 2023
Since 2003, Healy Consultants Group assists our Clients with timely completion of their annual legal, accounting and tax obligations in the Marshall Islands.
- Marshall Islands companies are exempt from all income tax, dividends, interest, rents, royalties, and capital gains from the sale of company shares.
- Although companies suffer no income tax, they are taxed on the gross revenue derived from carrying out a trade or business in the Marshall Islands. This amounts to i) $80 for the first $10,000 of gross revenue per year and ii) 3% per year on all gross revenue that exceeds $10,000.
- Personal income tax in the Marshall Islands is i) 8% for the first $10,400 of income and ii) 12% on any income exceeding $10,400. Salaries received by United States contractor personnel in the Marshall Islands are subject to 5% tax.
- Individuals carrying out a business or profession in Marshall Islands are also subject to Gross Revenue Tax of 3%.
- A 3% tax is applicable on gross rental income from property in the Marshall Islands.
- A 10% withholding tax is imposed on income derived by non-residents for services in the Marshall Islands, and a 3% withholding tax applies on gross income from the leased immovable property, exclusive of buildings and other improvements on land.
- It is important our Clients are aware of their personal and corporate tax obligations annually. Let us know if you need Healy Consultants’ help to clarify your annual reporting obligations.
Social Security Contributions
- Employers in the Marshall Islands are required to make social security contributions at the rate of 8% of an employee’s gross earnings up to a maximum of $10,000 per quarter.
- Employers are required to contribute 3.5% of an employees’ gross earnings to their health fund, up to a maximum of $5,000 per quarter.
Income Tax Treaties
- The Marshall Islands has two income tax treaties (with Australia and New Zealand). They are limited in scope, but these agreements are the directions for Australia and New Zealand’s taxpayers on the information exchange between these countries which involves tax issues.
Tax reporting, accounting and auditing considerations
- According to Marshall Islands Association Law of 1990, Marshall Islands companies don’t have to file annual tax return to the authorities and no audited of accounting is required.
- Since 2011, Australia and the Marshall Islands have signed an Tax Information Exchange Agreement (TIEA) which represents the standard of effective exchange of information for the purposes of the OECD’s initiative on harmful tax practices.
- In addition to the above, Australia and the Marshall Islands signed an Additional Benefits Agreement (ABA) which is Agreement between the Government of New Zealand and the Government of the Republic of the Marshall Islands for the allocation of taxing rights with respect to certain income of individuals and to establish a mutual agreement procedure in respect of transfer pricing adjustments.
- Deregistering a company in the Marshall Islands takes a minimum of six months. Healy Consultants’ fee to project manage Marshall Islands company deregistration is US$1,450. During this six-month period it is mandatory to maintain a resident company secretary and a legal registered office in the Marshall Islands.
Legal and compliance
- From 1 January 2020, all Marshall Islands LLCs must comply with substance requirements where a company must have an adequate i) number of qualified employees ii) physical presence in the country and iii) amount of expenditure incurred locally. Failure to comply with the above substance requirements exposes the shareholders and directors to the risk of i) a fine up to US$10,000 and ii) dissolution of their Company. Refer to this page (click link) for more details.
- As the international standards continue to evolve, the Marshall Islands jurisdiction developed the Economic Substance Reporting requirement to ensure that the jurisdiction aligns with OECD and EU standards.
- All non-resident domestic entities and foreign maritime entities, which i) meet the definition of a “relevant entity” and ii) derive income from a “relevant activity” must file an Economic Substance Report. All reporting are done through a secure online portal through the Marshall Islands International Registry website.
- A non-resident domestic entity is considered a “relevant entity” if the entity is a tax resident in Marshall Islands, unless the entity can provide evidence that it is a tax resident in another jurisdiction outside of Marshall Islands.
- Income derived from a “relevant activity” are limited to income from i) distribution and service center ii) financing and leasing iii) fund management iv) headquarters v) holding company vi) intellectual property vii) shipping viii) banking and ix) insurance activities.
Refer to this page for further information.
- Once the Client settles Healy Consultants Group’s Marshall Islands renewal fees, one of the ATD team members will settle i) the Annual Corporate Maintenance Fee and ii) Annual Economic Substance Reporting Compliance Fee to the registrar of Marshall Islands.
- Thereafter, we will request our Client to confirm if their entity is dormant or active during the financial period. Following their confirmation, we prepare the required forms for Client’s review and approval which is inclusive of the director’s details for the economic substance return submission. This form follows a prescribed format and includes i) confirmation of whether the company conducted any business activity in the reporting period ii) confirmation of whether the company has local staff or office and iii) the name, address and phone numbers of the company directors.
- Upon Client’s confirmation and approval of the form, we submitted the Economic Substance Returns to the Marshall Island Authority.
- Thereafter and within a day, we received an email from the government on the confirmation of economic substance submission together with an updated economic substance certificate.
- Thereafter, we supplied the same to our Client with an engagement completion email.