On
this Page:
- MARSHALL
ISLANDS GROSS REVENUE TAX
- MARSHALL ISLANDS WAGES AND
SALARIES TAX
- MARSHALL ISLANDS SOCIAL SECURITY
TAXES
- MARSHALL ISLANDS COMPACT
OF FREE ASSOCIATION
The
Marshall Islands
statutorily exempts all non-resident (i.e. offshore)
companies from taxes. Any company formed through
one of International Registries, Inc.’s worldwide
offices is a non-resident Marshall
Islands company.
Thus, all foreign-owned companies and partnerships
are exempt if they do not do business in the Marshall
Islands.
This
page of the site deals with taxation as it applies
to domestic businesses only and has no effect
on Marshall Islands
non-resident (“offshore") companies.
The
Government applies the same rules to foreign and
local owners of domestic businesses and requires
foreign investors to make an application, using
a prescribed form, to the Social Security Administration
to register their business and obtain a Tax Identification
Number. The register is used to monitor the payment
of taxes.
Local
governments apply sales taxes, at rates between
2% and 4%.
To
help meet its private sector objectives, the Government
offers investments in selected sectors exemptions
from paying taxes and duties. The exemptions are
equally available to both non-citizen and citizen
investors and can be applied for by submitting
a letter to the Minister of Finance. Investors
intending to establish in the following export-oriented
sectors can be exempted from paying gross revenue
tax for a five-year period:
- Off-shore
or deep sea fishing;
- Manufacturing
for export, or for both export and local use;
- Agriculture;
- Hotel
and resort facilities.
In
order to qualify for an exemption, the investor
must make an investment of at least USD1.0 million,
or provide employment and wages in excess of USD150,000
per annum to citizen workers.
The
government also offers investments in seabed hard
mineral mining in the country’s exclusive economic
zone an exemption from paying all taxes, duties
and other charges except taxes on wages and salaries,
individual income tax and social security contributions.
In order to qualify for the exemption investors
must pay the Government a royalty, production
charge or combination of production charge and
a share of net proceeds accruing from the mining
activity.
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Marshall
Islands Gross Revenue Tax
All
business entities "doing business"
in the Marshall Islands (i.e. “onshore”) are
subject to a gross revenue tax of $80.00 per
year on the first $10,000.00 of gross revenue
and 3% of the gross revenue in excess of $10,000.00
per year.
Gross
revenue is defined as the gross receipts derived
from a trade, business, commerce or sale and
receipts accruing from or by reason of the capital
of the business, including interest, discounts,
rentals, and the like.
No
deduction is given for any expenses of doing
business; however, excluded from the definition
of gross revenue are refunds, rebates, and returns;
monies held in a fiduciary capacity; and income
in the form of wages and salaries taxed under
the Income Tax Act 1989, as amended.
The
gross revenue tax is assessed and collected
quarterly.
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Marshall Islands Wages And Salaries Tax
With
respect to their employees, resident businesses
are required to withhold and pay to the National
Government a tax imposed on the employee's wages
and salaries.
The
wages and salaries tax is 8 % per annum on the
first $10,400.00 of taxable income earned by the
employee, and 12% thereafter.
Employees
whose gross annual wages and salaries are $5,200.00
or less are allowed an exemption of $1,040.00
per year (or $20.00 per week).
The
tax is payable every four weeks.
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Marshall Islands Social Security Taxes
With
respect to employees, resident businesses are
also required to make quarterly social security
contributions on "covered earnings",
defined as the compensation paid to employees
up to $5,000 per quarter.
From
the employee’s wages, the employer is to withhold
and pay to the Social Security Administration
7% of covered earnings.
From
the employer's revenues, the employer is to contribute
to the Social Security Administration for the
benefit of the employee another 7% of covered
earnings.
Businesses
are required to make quarterly health insurance
contributions on covered earnings. From the employee's
wages, the employer is to withhold and pay to
the Social Security Administration 3.5 % of covered
earnings.
From
the employer's revenues, the employer is to pay
to the Social Security Administration for the
benefit of the employee another 3.5 % of covered
earnings.
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Marshall Islands The Compact of Free Association
Incentives
under the Compact of Free Association with the
United States
include duty exemptions.
As
a general rule, all articles wholly grown, made
or produced in the Republic of the Marshall
Islands have
duty-free access into the United
States except
for the following categories of products:
- Watches,
clocks and timing apparatus provided for in
Chapter 9.1 of the Harmonized Tariff Schedule
of the United
States;
- Buttons
(whether finished or not finished) provided
for in item 9606.21.40 of the above named Tariff
Schedule;
- Textile
and apparel articles which are subject to textile
agreements;
- Footwear,
handbags, luggage, flat good, work gloves, and
leather wearing apparel which were not eligible
for the Generalized System of Preferences in
the Trade Act of 1974, and; Tuna canned in oil.
Articles
exported from the RMI qualify for this duty-free
treatment if the sum of the cost or value of the
materials produced in the RMI, and the direct
costs of processing operations performed in the
RMI are not less than 35% of the appraised value
of the merchandise at the time of its importation
into the United
States. As much
as 15% of the value of the product may be contributed
to this 35% added-value requirement when materials
produced in the customs territory of the United
States are used.
The
cost of processing operations in the RMI can include
the following:
- All
actual labor costs involved in the growth, production,
manufacture, or assembly of the specific merchandise,
including fringe benefits, on-the-job training,
and the cost of engineering, supervisory, quality
control, and similar personnel;
- Dyes,
molds, tooling, and depreciation. Oil machinery
and equipment which are allocable to the specific
merchandise;
- Research,
development, design, engineering, and blueprint
costs insofar as they are a allocable to the
specific merchandise, and;
- Costs
of inspecting and testing the specific merchandise.
Products
produced in the RMI are also not presently subject
to any quota restrictions into the US
market. This is particularly relevant in the area
of textile production. Textile imports into the
US
are generally subject to highly restrictive quotas
based on the country of origin.
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