Key Takeaways
- Companies operating through the Marshall Islands face a gross revenue tax rather than a conventional corporate income tax, with the charge depending on residency status.
- Non-resident IBCs benefit from a zero-tax position on foreign-sourced income, while exemptions and sector-specific relief may apply in other cases.
- Filing, quarterly payment, and compliance obligations apply to companies within the charge, and non-compliance carries penalties.
- Foreign-owned businesses should weigh the OECD global minimum tax (Pillar Two) when assessing the outlook for Marshall Islands structures.
Corporate Tax in the Marshall Islands: What Companies Need to Know
The Marshall Islands does not impose a corporate income tax in the conventional sense. What the Republic operates instead is a territorial system: a Gross Revenue Tax (GRT) on businesses trading within its borders, alongside a 10% withholding levy on non-resident service providers. For a foreign owner, the practical effect is that income sourced outside the country falls entirely outside the charge, a position confirmed in a 2019 EU Council assessment.
This article explains how that framework works, what the GRT covers, which companies fall within it, and where international developments such as the OECD global minimum tax may still reach an entity that pays nothing locally. It is written mainly for non-resident business owners, investors, and their advisers weighing incorporation in or compliance with the jurisdiction.
Does the Marshall Islands Have a Corporate Income Tax? The Gross Revenue Tax Explained
No corporate income tax exists here. The levies actually collected are the Gross Revenue Tax on domestic businesses and a withholding charge on non-resident persons supplying services to local clients, neither of which meets the standard definition of a tax on corporate profits.
The GRT is assessed on gross revenues rather than on net earnings. A business with annual gross revenue up to USD 10,000 pays a flat USD 80; revenue above that threshold is taxed at 3%.
For an entity that conducts no business inside the territory, the position is simpler still. Such companies are exempt from all charges, with zero tax on income, profits, dividends, royalties, compensation, or any other receipt.
The GRT taxes gross receipts with no deduction for costs. A loss-making business that trades locally can still owe tax, because the base is revenue, not margin.
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Legal Basis: The Business Corporations Act 1990 and the Revenue & Taxation Act
Two statutes do most of the work. The Business Corporations Act 1990 governs how companies are formed, managed, and wound up, and it applies to every resident and non-resident domestic corporation as well as to foreign corporations doing business in the Republic. The Revenue and Taxation Act 1989 supplies the authority for the GRT and confirms that non-resident companies are not subject to withholding on dividends, interest, or royalties paid to non-residents.
Section 12 of the corporations statute carries the heading "Exemptions for non-resident entities". It disapplies the charges under the Income Tax Act 1989 and any other revenue law from qualifying non-resident entities, and, as amended, exempts distributions of interest, dividends, royalties, rents, and compensation paid by a non-resident corporation to other non-residents.
One design choice matters for foreign owners and their counsel. The corporations law is built to be construed uniformly with the laws of Delaware and other US states with similar provisions, which gives advisers a familiar reference point when interpreting corporate powers and obligations.
Filing and payment timing has since been adjusted. The Income Tax (Amendment) Act 2022 revised the periodicity provisions of the 1989 Act, a point that affects the cadence of payment rather than the substance of the charge.
Gross Revenue Tax Rates and How the Tax Base Is Calculated
The GRT base is straightforward because nothing is deducted from it. "Revenue" means all gross receipts, and the taxpayer need not be a legal person to fall within the charge.
| Annual gross revenue | Charge |
|---|---|
| First USD 10,000 | USD 80 (flat) |
| Excess above USD 10,000 | 3% |
| Non-resident service providers | 10% withholding on gross service income |
The 3% rate bites only on the portion of revenue exceeding USD 10,000 in a year. Because there is no allowance for the cost of goods, salaries, or overheads, the effective burden on a low-margin trading business can be materially higher than the headline rate suggests.
A separate charge reaches across the border. Non-resident persons providing services to clients in the Republic face a 10% withholding tax on the gross income from those services, a liability that sits with the supplier rather than the local business.
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Resident vs. Non-Resident Companies: Who Falls Within the Charge
Status here turns on activity, not on a label you choose. A company registered through one of the international registries qualifies as non-resident only so long as it conducts no business within the territory.
That non-resident status is the structural basis for the zero-tax outcome. An entity incorporated domestically but trading exclusively abroad, the Non-Resident Domestic Entity, keeps its income wholly outside the local framework; the moment it begins domestic trading, it becomes resident and falls within the 3% GRT.
The numbers show how the system is used in practice. The EU assessment recorded roughly 353 resident domestic corporations and 12 resident domestic LLCs, against tens of thousands of non-resident entities.
The transition from non-resident to resident is automatic, not elective. Commencing any domestic commercial activity moves your company into the GRT charge regardless of how it was set up.
The Zero-Tax Position on Foreign-Sourced Income for IBCs
For an International Business Company, foreign-sourced income attracts no local charge. Fees, royalties, dividends received, and profits from international contracts all sit outside the Republic's tax framework when the company conducts no domestic business.
This is not a holiday or a negotiated rate. The exemption is a structural feature of non-resident status under the corporations law, so it does not expire and is not conditioned on application or renewal.
The result is a 0% effective rate on income earned abroad. No withholding applies to dividends, interest, or royalties paid to foreign shareholders; no sales tax touches offshore activity; and gains on the disposal of foreign assets are untaxed locally. Under the Associations Law of 1990, every non-resident company is exempt from corporate, income, capital gains, withholding, and stamp duty taxes.
The trade-off is a hard boundary on what the company may do. An IBC cannot trade or carry on commercial activity inside the Republic, and it is barred from regulated lines such as banking, insurance, reinsurance, trust services, fund management, and collective investment schemes.
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Exemptions, Investment Incentives, and Sector-Specific Relief
Several charges that foreign owners expect elsewhere simply do not arise. The Stamp Duty Act 1992 imposes no stamp duty on transfers of shares or other corporate transactions involving offshore companies, and the Trusts Act 1994 means the Republic levies no estate, inheritance, or gift tax.
A few specific points are worth flagging:
- An IBC with authorised share capital above USD 50,000 faces a one-time capitalisation tax; the precise rate is not published in available sources.
- Non-profit corporations are generally outside the corporate tax charge, provided their activity stays within the stated non-commercial purpose.
- Local authorities apply a domestic retail sales tax of 2% to 4%, which does not reach offshore or IBC operations.
Sector-specific relief is thin by design. No special economic zones or defined tax-holiday programmes were identified in the source material, which is consistent with a system where the baseline position for non-resident entities is already zero.
One historical caveat affects financial businesses. The Republic had excluded banking and insurance from parts of its 2018 Economic Substance Regulations at the time of the EU review, an exclusion later examined by the European Commission.
Filing, Quarterly Payment, and Compliance Obligations for Companies
Obligations diverge sharply by status. A non-resident IBC carries no requirement to file financial statements, tax returns, audited accounts, or annual returns, and need not follow prescribed accounting standards.
A company that trades domestically faces real reporting duties. The GRT is computed on annual gross revenue but settled in instalments, and the 2022 amendment moved certain payment references from quarterly to monthly, pointing toward a more frequent payment cycle for some obligations.
Record-keeping applies broadly to anyone doing business in the Republic. Sales and other transactions must be kept in legible, accurate form, in English and in standard accounting format, and the Marshall Islands Revenue Authority conducts audits to test compliance.
Two requirements bind every company regardless of where it trades:
- A registered office address within the territory.
- A local registered agent to accept legal documents.
In-scope entities also carry economic substance filings, introduced so that companies are taxed where they actually do business.
Penalties and Consequences of Non-Compliance
Sanctions range from modest fines to enforcement that can reach a company's assets. Under the Income Tax Act 1989, an offence on conviction draws a fine of up to USD 1,000, with possible imprisonment for a natural person, alongside the civil penalties the statute provides. Interest accrues on unpaid amounts, so delay raises the total owed.
Employment tax failures carry a sharper edge. An employer that fails to withhold or remit those taxes can face a lien over its entire assets, taking priority over other claims in real property.
The non-resident services charge has its own teeth. A non-resident who fails to pay the 10% tax is barred from appearing before any court, tribunal, or government agency in the Republic, and any professional licence held there may be cancelled.
Initial economic substance penalties can reach USD 50,000, with significantly higher charges and further legal action for continued failure.
A taxpayer who disputes an assessment or penalty may contest it by filing a written objection with the revenue authority.
The OECD Global Minimum Tax (Pillar Two) and the Outlook for Marshall Islands Companies
A 0% local rate does not always mean zero tax across a group. Under the OECD Inclusive Framework, Pillar Two sets a global minimum effective tax rate of 15% for multinational groups with consolidated revenue above EUR 750 million, with the Income Inclusion Rule applying from the start of 2024 in implementing jurisdictions.
The Republic has not enacted domestic GloBE legislation and does not appear in the OECD central record of qualified transitional rules. That does not insulate in-scope groups, however.
Where a constituent entity's effective rate falls below 15%, the rules require a top-up tax to close the gap. For an RMI company inside a large group, that shortfall can be collected in the parent jurisdiction through the Income Inclusion Rule, or in third countries through the Undertaxed Profits Rule, even though the Republic itself charges nothing.
Pillar Two operates as a "common approach". Members need not adopt the rules, but they must accept other members applying them, which is why the top-up can be levied elsewhere on RMI-sourced profits.
Two further signals bear on the outlook. The introduction of economic substance requirements shows the jurisdiction responding to OECD and EU expectations, and its placement on the EU list of non-cooperative jurisdictions for tax purposes may affect banking access and counterparty risk for companies registered there.
Pillar Two is relevant only to entities within multinational groups above the EUR 750 million revenue threshold. Smaller foreign-owned structures are outside its scope and retain the standard zero-tax position on foreign income.
Conclusion
For a foreign business owner, the real decision turns not on the zero-tax position itself but on whether that position will hold under the home jurisdiction's controlled-foreign-corporation rules and the advancing Pillar Two framework. The gross revenue tax structure and IBC exemptions are only as valuable as the compliance discipline that keeps them intact.
The single most productive next step is a jurisdiction-by-jurisdiction review that tests the Marshall Islands structure against the tax rules of wherever the beneficial owner actually pays tax, before any filing obligation falls due.
How Expanship Can Help Your Business in the Marshall Islands
Expanship supports foreign owners on the full corporate tax position here, from confirming whether your activity triggers the Gross Revenue Tax to managing the obligations that attach once it does, and the same team handles the wider needs of a non-resident entity from formation onward.
- Company formation and registration through the appropriate registry
- Registered agent and registered office services within the jurisdiction
- Tax registration and filing where domestic activity brings you into charge
- Ongoing compliance and economic substance management
- Accounting and bookkeeping in the required English, standard-format records
- Introductions to banking partners
To discuss your situation and the right structure for it, contact Expanship Marshall Islands.
Frequently Asked Questions
No. The Republic does not levy a corporate income tax; it applies a Gross Revenue Tax on businesses trading domestically and a 10% withholding charge on non-resident service providers. Income earned outside the territory by a non-resident company is not taxed at all.
A domestic business pays a flat USD 80 on the first USD 10,000 of annual gross revenue and 3% on the excess. The base is gross receipts, with no deduction for costs, so the tax is calculated on turnover rather than profit.
No. A non-resident IBC is not required to file financial statements, tax returns, audited accounts, or annual returns, nor to follow prescribed accounting standards. It must still maintain a registered office and a local registered agent within the jurisdiction.
It applies only if your company is part of a multinational group with consolidated revenue above EUR 750 million. In that case, a top-up tax to the 15% minimum can be collected in the parent or other jurisdictions, even though the Republic charges 0% locally; standalone or smaller structures are unaffected.
The provider is prohibited from appearing before any court, tribunal, or government agency in the Republic, and any professional licence held there may be cancelled. Interest also accrues on the unpaid amount over time.
The exemption depends on conducting no business inside the territory. As soon as an entity begins domestic commercial activity, it becomes resident and falls within the 3% Gross Revenue Tax charge, regardless of how it was originally incorporated.
Legal Disclaimer
The information provided in this article is for general informational purposes only and does not constitute legal, tax, or professional advice. While we strive to ensure the accuracy and timeliness of the content, laws and regulations are subject to change, and the application of laws can vary widely based on specific facts and circumstances.
Readers should not act upon this information without seeking professional counsel tailored to their individual situation. Expanship and its authors disclaim any liability for actions taken or not taken based on the content of this article.
For specific advice regarding your business setup, compliance requirements, or any legal matters, please consult with qualified legal and tax professionals in the relevant jurisdiction.
