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 USD1.0m, 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 US$80 per year on
the first US$10,000 of gross revenue and 3%
of the gross revenue in excess of US$10,000
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 US$10,400 of
taxable income earned by the employee, and 12%
thereafter.
Employees whose
gross annual wages and salaries are US$5,200 or
less are allowed an exemption of US$1,040 per
year (or US$20 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 US$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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