Understanding the Tax System in the Marshall Islands

The Marshall Islands, an island country located near the equator in the Pacific Ocean, is an area that may not be well-known, but it has a distinctive tax system that sets it apart from the rest of the world.

Geographical Overview

Described as a chain of volcanic islands and coral atolls, the Marshall Islands consists of two archipelagic island chains of 29 atolls, each made up of many small islets. The island nation is recognized worldwide for its magnificent marine life and pristine underwater environments, making it a top destination for divers. It also holds a tragic yet significant history, being a former nuclear testing site by the United States after World War II.

Political and Economic Landscape

Politically, it’s significant to note that the Marshall Islands is a democratic nation with executive, legislative, and judicial branches of government, although it maintains a Compact of Free Association with the United States. This political arrangement significantly influences the economic activities in the country as well.

When it comes to economic ebb and flow, the nation’s economy is mainly based on services and industries such as copra, tuna processing, handicrafts, tourism, and remittances from abroad. The economy also benefits from aid provided by the United States.

Tax System Overview

The unique tax system in the Marshall Islands is an integral part of its socio-economic functioning. The nation follows a territorial tax system. This means that the citizens of the Marshall Islands who reside in the country and perform a job or run a business are liable to pay income tax to the government. However, those who live abroad and earn are not required to pay this tax, regardless of their nationality.

Income Tax

The income tax in Marshall Islands is imposed on a sliding scale ranging from 8% to 12%. The individual income tax applies to all residents, and businesses who earn income through activities performed in the Marshall Islands.

Business Tax

Business taxation is a crucial aspect of the tax system in the Marshall Islands. The standard corporate tax rate is a flat 3%. It’s particularly beneficial to companies that register under the Marshall Islands Business Corporations Act, as they’re exempt from all forms of taxation.

VAT/GST

There is currently no Value Added Tax (VAT) or Goods and Services Tax (GST) implemented in the Marshall Islands.

It’s essential to familiarize yourself with various aspects of the local tax system whether investing, starting a business, or planning to move to the Marshall Islands. As with any tax system, it can be somewhat complex and might require professional guidance. However, the potential for growth and opportunity in this unique country can easily offset the complexities of navigating its tax landscape.


RMI Ministry of Finance
Pacific Islands Legal Information Institute
Deloitte
PwC
KPMG
International Monetary Fund (IMF)
World Bank
OECD
Inland Revenue New Zealand
Asia Pacific Tax