Capital Gains Tax in Marshall Islands for Non-Residents

Understanding Capital Gains Tax in the Marshall Islands: Does It Exist?Copy link to section

The Marshall Islands levies no capital gains tax. Profits from the sale of shares, real estate, and other investments fall outside the reach of any local charge, and the position is set out plainly in legislation rather than left to interpretation.

For a non-resident owner, the rate that matters is simple: 0%. There is no separate capital gains statute, no holding-period test, and no carve-out that quietly reintroduces a charge on foreign-source gains.

This article explains the legal foundation for that treatment, how it applies to companies, individuals, and non-resident investors, and the narrow edge cases worth checking before you assume a disposal is entirely free of cost. It is most relevant to foreign business owners, investors, and their advisers weighing an offshore holding or shipping structure, and to anyone already holding a Marshall Islands entity who needs to confirm the tax outcome of a sale. The jurisdiction's standing with international bodies has shifted over time, including its delisting from the EU's list of non-cooperative jurisdictions in October 2023, a point this guide returns to later.

The Legal Basis for the Absence of Capital Gains TaxCopy link to section

The exemption rests on the Business Corporations Act of 1990, the cornerstone of the country's offshore framework and a statute modelled closely on Delaware corporate law. Under it, non-resident companies are exempt from local taxation on income earned outside the jurisdiction, capital gains included.

The territorial design does the heavy lifting. Only income sourced within the country is taxable locally, so gains realised abroad never enter the domestic tax base in the first place.

Several supporting laws round out the picture. The Revenue and Taxation Act of 1989 confirms the absence of withholding taxes on dividends, interest, and royalties paid to non-residents; the Stamp Duty Act of 1992 leaves transfers of shares in offshore companies free of stamp duty; and the Trusts Act of 1994 underpins estate planning by confirming that no estate, inheritance, or gift taxes apply.

A non-resident domestic company sits within the Marshall Islands Associations Law of 1990, which exempts such entities from local tax of any kind. The result is not a tax preference layered onto a normal regime but the absence of a capital gains regime altogether.

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What "No Capital Gains Tax" Means When Disposing of Assets (Shares, Real Estate, and Other Investments)Copy link to section

When a non-resident entity sells an asset, the gain attracts no local tax. That covers shares, foreign real estate, and other investments without distinction between asset classes.

The figure is precise rather than approximate: 0% on income, profits, dividends, capital gains, and interest earned outside the country. This is a different statement from "low tax," and it removes the usual mechanics of a gains charge.

Because no regime exists, none of its familiar features appear either:

• No short-term versus long-term rate split
• No minimum holding period to qualify for relief
• No indexation of acquisition cost for inflation
• No rollover or deferral provisions, because none are needed

The practical effect is that an offshore company can realise a profit on a disposal and retain it in full at the local level. For shipping operators and international holding entities, the combined absence of capital gains tax and stamp duty is a large part of the appeal.

One area carries less certainty. Sources do not confirm how proceeds from the sale of domestic Marshall Islands real estate by a resident are treated under the domestic gross revenue tax; in principle that tax could touch business proceeds, but no source confirms a specific capital gains charge on local property disposals.

Capital Gains Treatment for Companies and Offshore Holding StructuresCopy link to section

A Non-Resident Domestic Corporation pays 0% corporate income tax, 0% capital gains tax, and 0% withholding tax on dividends, interest, and royalties sent abroad. Such companies also fall outside estate, gift, and stamp duties on international transactions.

The jurisdiction is used heavily for international holding structures, including Pure Equity Holding Companies whose only asset is shares in other businesses. A holding company of this type can earn dividends and capital gains while facing a light-touch economic substance test.

That light-touch test matters for planning. A pure equity holding company is not required to be directed and managed locally, nor to conduct its core income-generating activity in the country, unlike entities engaged in other relevant activities.

Resident companies that actually trade within the country sit in a different position. They face the gross revenue tax, charged at USD 80 on the first USD 10,000 of revenue and 3% on the excess (rate as of 2021), and no capital gains carve-out within that domestic charge is confirmed by available sources.

The wider stability of the model comes from its funding base. The economy runs on registration fees rather than taxation, so there is little fiscal incentive to tax passive income the way other jurisdictions have felt compelled to do.

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Capital Gains and Individual Investors: Sale of Property and SecuritiesCopy link to section

For individuals, no personal income tax applies to income earned outside the country, whether the person is resident or not. That exemption extends to capital gains, dividends, and interest alike.

The sale of shares produces no local tax charge, which is part of what draws investors to structure activity here. Estate and gift taxes are absent as well, supporting wealth-transfer planning across generations.

Personal income tax does exist, but only on employment income. It is levied at 8% on earnings up to USD 10,400 and 12% above that, with a USD 1,040 annual exemption for those earning under USD 5,200 a year, and the employer withholds it every four weeks.

Investment gains do not fall within that payroll charge. The distinction is worth holding onto: salary earned locally can be taxed, while a capital gain on securities is not.

Treatment of Non-Residents on Capital GainsCopy link to section

Non-resident entities pay no local tax on foreign-source income, capital gains, or dividends. A company registered in one of the international registries qualifies as non-resident provided it conducts no business within the country.

Reporting is a separate matter from taxation. The jurisdiction participates in FATCA and the Common Reporting Standard, so account information flows to the investor's home tax authority, and a non-resident remains taxable wherever they are personally resident.

The exchange network is concrete. Thirteen Tax Information Exchange Agreements are in place, covering Australia, Denmark, the Faroe Islands, Finland, Greenland, Iceland, Ireland, Korea, the Netherlands, New Zealand, Norway, Sweden, and the United States.

On the multilateral side, the country signed the CRS Multilateral Competent Authority Agreement on 29 October 2015, with automatic exchange starting in September 2018. It has not signed the BEPS Multilateral Convention.

One charge can reach non-residents, though not gains: income from services provided to clients within the country is subject to 10% withholding tax. That is a charge on fee income, not on capital gains, and it does not arise from a disposal of assets.

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Narrow Charges and Edge Cases That Could Touch Gains on DisposalsCopy link to section

A handful of levies sit near, but not on, asset sales. The 10% service withholding tax can apply to fee income earned from local clients, yet it does not convert a capital gain into a taxable event.

Local authorities apply sales tax of 2% to 4% on goods and services, which bears on ordinary transactions rather than the disposal of an asset. Stamp taxes and annual franchise or renewal fees are generally symbolic.

Economic substance reporting is the obligation most likely to carry real cost if neglected. Relevant entities must file an annual Economic Substance Report through an online portal within 12 months of the fiscal year end.

• First-offence penalties can reach USD 50,000
• Continued non-compliance can reach USD 100,000
• Persistent failure can lead to dissolution or revocation

These are administrative penalties, not a tax on gains. At the local level there is no exit or departure tax, no controlled foreign corporation regime, no thin-capitalisation rule, and no domestic transfer pricing regime confirmed by available sources.

The more consequential exposure usually sits abroad. Liabilities in the country where the ultimate beneficiary lives must be assessed on their own terms; fully taxable individuals in Turkey, for instance, may be required to declare income from Marshall Islands structures under certain conditions.

Why the Marshall Islands Levies No Capital Gains Tax: Policy and ContextCopy link to section

The fiscal model is a product of history. Independence came in 1986 through a Compact of Free Association with the United States, which provided financial assistance and defense in return for operational rights, and that dependence on aid pushed authorities to develop alternative revenue.

The answer was registration, not taxation. In 1990 the country enacted corporate law modelled on Delaware's and began promoting itself as an offshore centre, building income from fees rather than from a tax on profits or gains.

The latest Compact, signed in 2023 and effective in 2024, runs the relationship through 2043 and guarantees USD 2.3 billion in assistance over two decades. With that base secured and registration fees flowing, there is little fiscal pressure to introduce a gains charge.

External demands have reshaped procedure without altering the core. The country adopted economic substance requirements under EU and OECD pressure, but the principle of zero taxation on foreign income stayed intact, a deliberate choice to adjust compliance rather than the underlying model.

Outlook: Will the Marshall Islands Introduce a Capital Gains Tax?Copy link to section

Recent history points away from a new charge. In February 2023 the jurisdiction was added to the EU blacklist, the concern being that a zero or nominal corporate rate was attracting profits without real activity under criterion 2.2.

The response was enforcement, not taxation. Delisting followed on 17 October 2023 after substance requirements were tightened, and as of the February 2026 revision the country does not appear on the EU blacklist.

That sequence is telling. The jurisdiction met external pressure by sharpening transparency and substance rules rather than by raising or inventing a rate, and the zero-tax structure remained in full force throughout.

No announced proposal, budget measure, or bill to introduce a capital gains tax appears in available sources. Given a revenue model built on registration fees and Compact aid, and a delisting achieved through substance enforcement rather than rate changes, no near-term introduction looks likely on present evidence.

ConclusionCopy link to section

For a non-resident owner weighing where to hold assets or structure a disposal, the absence of any capital gains charge is not merely a detail but the central economic fact about the Marshall Islands tax position. The decision-relevant question is therefore not whether the zero rate applies today, but how much weight to place on an outlook that remains uncertain.

Given that certainty of treatment at the point of disposal drives after-tax returns more than almost any other variable, the one thing worth examining before committing to a structure is the credibility of that outlook and whether the narrow edge cases identified in the article could touch the specific assets or transaction type being planned.

How Expanship Can Help Your Business in Marshall IslandsCopy link to section

Expanship confirms how the zero capital gains position applies to your specific structure and keeps the entity in good standing so that the treatment holds, then supports the wider compliance picture a foreign-owned company faces, from formation through annual reporting.

• Company formation, including non-resident domestic corporations and holding structures
• Registered agent and registered office services
• Tax registration and filing where local obligations arise
• Ongoing compliance management, including economic substance reporting
• Accounting and bookkeeping aligned to your reporting needs
• Introductions to banking partners for account opening

To discuss your structure and next steps, contact Expanship Marshall Islands.

Frequently Asked QuestionsCopy link to section