Key Takeaways
- The Marshall Islands has no national sales tax, VAT, or GST, though local governments such as Majuro and Kwajalein impose their own sales taxes.
- Foreign-owned businesses may face a gross revenue tax that functions as a cascading, sales-type charge alongside any applicable local sales taxes.
- Compliance under local sales taxes involves registration, returns, and payment, with specific treatment for non-resident and digital suppliers.
- A proposed consumption tax could introduce a VAT-style system in future, making the outlook for sales taxation worth monitoring for investors.
Understanding Sales Tax in the Marshall Islands: No National VAT or GST
The Marshall Islands levies no national sales tax. Its government imposes neither a value-added tax (VAT) nor a goods and services tax (GST) on goods and services at the federal level.
What exists instead is a turnover charge known as the Gross Revenue Tax (GRT), also called the Business Gross Receipts Tax (BGRT). This is a tax on business revenue rather than a transaction-stage consumption tax, and it sits alongside import duties and a personal income tax in a relatively simple national system.
The framework derives from the Income Tax Act 1989, codified at Title 48 of the Marshall Islands Revised Code. For a fuller view of how this fits the broader fiscal picture, the IMF report on consumption and income tax reform is a useful reference.
This article explains what consumption-type taxation actually applies, where local sales taxes bite, and what recent legislation signals for the future. It will matter most to foreign owners weighing incorporation, and to advisers assessing the cost of doing business across the atolls.
Legal Basis: Why There Is No Nationwide Sales Tax
The tax structure traces back to the Trust Territory era. It was built around turnover taxes, import tariffs, and a wage-based income tax, with no consumption tax layer ever inserted at the national level.
The governing statute is the Income Tax Act 1989 (P.L. 1989-50). It imposes the gross revenue tax on businesses and income tax on wages, and contains no provision for a national VAT or GST.
A second feature shapes the picture for foreign owners. Under the Business Corporations Act 1990, International Business Companies, known locally as Non-Resident Companies, are exempt from local taxation, and the country operates a territorial system that does not reach income earned abroad.
Reform has been attempted before. Authorities planned a substantial overhaul in the early 2010s that was never carried through, and renewed interest has produced a phased process backed by fresh legislation.
That legislation is now on the books. The Nitijela, the national parliament, has enacted the Consumption Tax Act 2025 (PL 2025-47), the Net Profit Tax Act 2025 (PL 2025-38), the Excise Tax Act 2025 (PL 2025-46), and the Tax Administration Act 2025 (PL 2025-48), with commencement dates still to be confirmed in the official gazette.
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Local Government Sales Taxes in Majuro and Kwajalein
National absence does not mean total absence. Two local governments, Majuro and Kwajalein, levy and collect their own sales taxes, and these are the charges a foreign-owned business is most likely to encounter at point of sale.
In Majuro, a 4 percent rate applies to retail sales. Kwajalein applies a 10 percent rate, levied on wholesalers rather than at the retail counter.
| Local government | Rate | Applies to |
|---|---|---|
| Majuro (MALGOV) | 4% | Retail sales |
| Kwajalein (KALGOV) | 10% | Wholesalers |
These taxes are administered locally, not by the national revenue body. Majuro local government collects roughly USD 2.8 million from its retail tax, while Kwajalein raises about USD 1.2 million from its wholesale levy.
Both jurisdictions also tax so-called sin goods and fuel, and both they and the national government tax daily hotel room rates. Because each sets its own tobacco rates, the pattern across the country is uneven and opens room for intra-country cross-border shopping.
One political fact is worth carrying forward. Local governments guard their taxing rights closely, a point that proved a sticking point in earlier reform efforts.
How Local Sales Tax Rates Apply to Goods and Services
Majuro applies several distinct rates. The figures below set out what a business or consumer faces within that atoll.
- Retail sales: 4 percent
- Professional services: 3 percent
- Tobacco and liquor products: 35 percent
- Hotel room tax: USD 3 per room per day
Kwajalein operates differently, applying its 10 percent charge to wholesalers rather than splitting rates by category. Both governments additionally tax gasoline, alcoholic beverages, and hotel rooms at rates that vary.
The Majuro retail tax reaches all retail sales within the local jurisdiction. No publicly confirmed exemptions for basic foodstuffs appear in authoritative sources, and the full scope for services beyond professional services is governed by local ordinances whose complete text is not publicly retrieved.
Because Majuro and Kwajalein each legislate their own sales taxes, confirm the applicable rate and base with the relevant local government before pricing goods or services.
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The Gross Revenue Tax as a Cascading Sales-Type Charge
The closest national equivalent to a sales tax is the gross revenue tax. It is a turnover charge, not a corporate income tax, and it falls on every business operating in the country.
The structure is simple. A flat USD 80 per year applies to the first USD 10,000 of gross revenue, and a 3 percent rate applies to revenue above that threshold, as set out in the Income Tax Act. Payment is made quarterly.
The economic problem lies in how it compounds. Because the tax applies to total gross receipts at each business stage with no credit for tax paid on inputs, it produces tax-on-tax along the supply chain, a structural inefficiency the IMF has flagged directly.
This is why the GRT behaves like a cascading sales-type charge rather than a clean consumption tax. The IMF's preferred remedy is to replace import tariffs, the business turnover tax, and local sales taxes with a broad-based VAT, selected excises, and a profit tax.
Incentives exist for larger investors. Those who commit at least USD 1 million, or pay annual wages above USD 150,000 to Marshallese citizens, can secure a five-year exemption from gross revenue tax and import duties in certain sectors.
What the Absence of a National Sales Tax Means for Businesses and Investors
For a foreign owner, the headline is favourable on the consumption side. No national sales tax or VAT applies to goods and services, which removes a layer of registration, collection, and remittance that exists in most jurisdictions.
Several adjacent features reinforce the appeal. There are no export taxes, International Business Companies are exempt from corporate tax, and no capital gains tax applies to profits from selling shares, real estate, or other assets.
The Revenue and Taxation Act framework also shields offshore companies from withholding tax on dividends, interest, and royalties paid to non-residents. Taken together, these points support export-oriented and holding structures.
The qualification is local. A business trading physically in Majuro must treat the 4 percent retail tax and the 3 percent professional services tax as transaction costs at the point of sale, even though no national consumption tax exists.
One administrative detail helps with planning. The Ministry of Finance segments businesses for tax purposes by annual gross revenue, not by headcount.
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Compliance: Registration, Returns, and Payment Under Local Sales Taxes
Two compliance tracks run in parallel, and they answer to different authorities. National taxes, including the gross revenue tax, are administered by the Division of Customs, Treasury, Revenue and Taxation (DCTRT) within the Ministry of Finance.
On the national side, the practical obligations are limited. The gross revenue tax is filed and paid quarterly, with businesses grouped by annual revenue rather than employee numbers.
Local sales taxes follow their own path. They are levied and collected by the Majuro and Kwajalein local governments, not by DCTRT, and the filing frequency, return forms, and payment deadlines are set by each local government's own ordinances rather than published in central sources.
Enforcement remains a known weakness. Non-compliance is estimated at 25 to 50 percent, and the IMF has identified taxpayer registration, operating procedures, staffing, IT systems, and compliance monitoring as priorities for administrative reform.
Treatment of Non-Resident and Digital Suppliers
Non-resident suppliers should focus on one national charge rather than any sales tax. A 10 percent withholding tax applies to gross income earned by a non-resident person for services provided to a client in the country, imposed under section 17 of the Income Tax Act.
The picture is lighter for passive income. No withholding tax is levied on dividends, interest, or royalties paid to non-residents.
For digital businesses, the absence of a national VAT is decisive. There is no reverse-charge rule and no digital services registration mechanism for non-resident digital suppliers, simply because no national VAT or GST exists to trigger one.
Local ordinances do not fill that gap in any documented way. No public source confirms that the Majuro or Kwajalein sales taxes extend to cross-border digital or e-commerce supplies, and as ordinances that predate modern digital frameworks, they are unlikely to address such supplies explicitly.
The Proposed Marshall Islands Consumption Tax (MICT): A Future VAT
The legal position is in active transition. The Nitijela has enacted the Consumption Tax Act 2025 (PL 2025-47) alongside companion Acts on net profit, excise, and tax administration, with effective dates pending confirmation in the official gazette.
The design draws on earlier reform proposals and the IMF's 2025 technical assistance work. A rate of 10 percent was proposed, and only businesses with annual turnover above USD 100,000 would fall within the system.
The mechanics describe a genuine value-added tax. It would be collected at each stage of the supply chain in proportion to value added, with registered taxpayers crediting tax paid on inputs against tax collected on sales, so that the final consumer bears the charge.
The proposal would repeal existing general import duties and the BGRT, substituting the consumption tax plus a business profits tax of 20 percent for firms above the turnover threshold. Treatment of specific supplies would follow defined rules:
- Residential rent: excluded
- Property resales: excluded
- Sales of new construction: subject to tax
- Excise goods, electricity, and passenger transport: subject to tax under IMF recommendations
- Fee-based financial services: subject to tax
A political condition sits behind all of this. Securing local government agreement would require a revenue-sharing arrangement ensuring Majuro and Kwajalein receive a portion of the proceeds.
Outlook for Sales and Consumption Taxation in the Marshall Islands
The enactment of the Consumption Tax Act 2025 and the Tax Administration Act 2025 marks the largest shift in the country's tax history. The effective dates and detailed implementation rules still need verification from official sources, so the timeline is not yet fixed.
Reform was sequenced in phases. Personal income tax revisions were legislated in October 2024, while the more involved stage covering a VAT and profit tax was foreseen for October 2026.
The fiscal logic is clear in the IMF's estimates. A 10 percent broad-based VAT could raise around 4.34 percent of GDP, roughly USD 12.14 million in 2024 terms, offsetting the revenue lost by abolishing import duties (about 2.43 percent of GDP) and local sales taxes (about 1.58 percent of GDP).
Two obstacles will shape execution. A revenue-sharing deal with Majuro and Kwajalein is needed to replace the local sales taxes they guard, and a public awareness effort is regarded as essential, since past attempts failed largely through poor understanding of the reforms. Foreign owners should monitor the gazette, because the consumption tax position described here may change once commencement dates are confirmed.
Conclusion
What actually determines compliance exposure here is not the absence of a national sales tax but the layered effect of local sales taxes in Majuro and Kwajalein sitting on top of a gross revenue tax that compounds at each stage of a transaction. A non-resident or digital supplier cannot assume that a zero federal VAT rate translates into a low tax cost on Marshall Islands revenues.
The single most consequential thing to watch is the proposed consumption tax, because its passage would restructure the entire indirect tax position overnight for any business already operating there. Monitoring that proposal, and confirming current local registration obligations before transacting, is the practical next step.
How Expanship Can Help Your Business in the Marshall Islands
Expanship supports foreign-owned entities with the consumption and turnover tax questions specific to this jurisdiction, from confirming whether local Majuro or Kwajalein sales taxes apply to your activity to handling gross revenue tax filings, and the same team covers the wider compliance needs of operating a company in the country.
- Company incorporation and structuring for non-resident owners
- Registered agent and registered office services
- Tax registration and quarterly return filing
- Ongoing compliance management and statutory upkeep
- Accounting and bookkeeping aligned to local requirements
- Banking introductions for operational and holding entities
To discuss your situation and next steps, contact Expanship Marshall Islands.
Frequently Asked Questions
No national sales tax, VAT, or GST is levied on goods and services. The national system relies instead on a gross revenue turnover tax, import duties, and a personal income tax, while two local governments operate their own sales taxes.
Majuro applies a 4 percent tax on retail sales and a 3 percent tax on professional services, plus higher rates on tobacco, liquor, and hotel rooms. Kwajalein applies a 10 percent rate, levied on wholesalers rather than at the retail level.
The Gross Revenue Tax, also called the Business Gross Receipts Tax, is a turnover charge of USD 80 per year on the first USD 10,000 of revenue and 3 percent on revenue above that figure. It is paid quarterly and applies to total receipts at each stage with no credit for input tax, which causes compounding along the supply chain.
There is no national VAT, so no reverse-charge or digital services registration applies to non-resident digital suppliers. Non-residents providing services to clients in the country are instead subject to a 10 percent withholding tax on gross income under the Income Tax Act 1989.
The Nitijela has enacted the Consumption Tax Act 2025, which sets out a value-added tax proposed at 10 percent for businesses with turnover above USD 100,000. Commencement dates require confirmation from the official gazette, and the broader VAT stage was foreseen for October 2026.
International Business Companies, treated as Non-Resident Companies, are exempt from local taxation and operate under a territorial system. Local sales taxes generally arise only where a business sells goods or services physically within the Majuro or Kwajalein jurisdictions.
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.
