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Is Marshall Islands a Tax Haven? Complete Guide to Opening an Offshore Company Here in 2023

Are you interested in registering an offshore company? We invite you to read this article and learn about the key advantages provided by the Marshall Islands offshore jurisdiction.

Our experts are ready to assist you with registering an offshore company in this tax haven. We provide comprehensive legal support for opening a corporate account, purchasing a ready-made business, or investing in foreign real estate. To receive a consultation or order our services, please contact us in any convenient way.

Marshall Islands

Is Marshall Islands a tax haven?

In February 2023, the Republic of the Marshall Islands was added to the European Union’s list of non-cooperative jurisdictions under the Code of Conduct. The so-called blacklist of tax havens now includes 16 states and territories. Consequently, the European Union has officially recognized Marshall Islands as a tax haven.

Why do businesspeople choose the Marshall Islands for company registration?

The Republic of the Marshall Islands is a small but convenient tax haven for creating offshore companies. It is located just north of the equator in the Pacific Ocean. Global entrepreneurs and investors have the opportunity to access a variety of offshore financial products within this jurisdiction.

The regulations established by the Marshall Islands Business Corporations Act provide a unique advantage to international business corporations (IBCs) or non-resident entities, as they are exempt from any local taxes. Furthermore, opening offshore bank accounts is a relatively straightforward process for non-residents in this jurisdiction. The corporate legislation of the Marshall Islands is designed to facilitate the use of this tax haven for virtually any type of business, which has resulted in the influx of foreign entrepreneurs since the 1990s.

The features that distinguish the Marshall Islands from other tax havens are that corporate legislation allows for the registration of public companies, as well as the raising of capital and conducting of trading activities.

Thanks to the favorable tropical climate, the absence of agreements on the exchange of tax information, and confidentiality laws, the Marshall Islands have become a popular choice for individuals and entities wishing to open an offshore company in a tax haven.

Benefits of a Marshall Islands offshore company

Incorporating an offshore company within the tax haven of the Marshall Islands can provide a multitude of benefits, such as:

  • zero tax rates for IBCs
  • only one director is required, and sole ownership is possible
  • modern corporate legislation
  • flexible corporate structures
  • no public register of company officers
  • English as the official language
  • wide range of opportunities for private businesses
  • confidentiality for directors and beneficial owners
  • no reporting requirements to government agencies
  • no tax information exchange agreements with other countries
  • no need to provide financial or audit reports
  • no currency control
  • stable economic and political situation
  • offshore market with a good reputation.

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Detailed information on offshore jurisdiction

Marshall Islands location

The Marshall Islands is an archipelago consisting of 24 coral atolls located in the Pacific Ocean and covering an area of 181 square kilometers. This territory is a tax haven located south of Wake Island and north of Nauru. The country’s capital, Majuro, is the most densely populated of the coral atolls.

Political structure

Until 1874, these lands were part of East India, a Spanish colony later sold to the Germans and then occupied by the Japanese. During World War II, the United States took them back from Japan. In 1979, the United States granted self-government to the state, which was a part of the Pacific Islands. Full sovereignty and tax haven status were granted in 1986 under the Compact of Free Association with the United States.

The Marshall Islands is a presidential republic that has a unique administrative structure, with defense and social services overseen by the United States. Elections to the Nitijela, the lower house of parliament, are held every four years.

The President is both the head of state and government in the Marshall Islands. The President is elected by 33 senators, who also make up the Nitijela. The Nitijela holds legislative power within the Marshall Islands, while the Council of Iroij serves as an advisory body comprising 12 tribal chiefs.

Within the tax haven of the Marshall Islands, the executive branch is headed by the President, who appoints a Cabinet consisting of ten members. Additionally, the jurisdiction boasts a multi-party political system, with four distinct political parties vying for influence and representation within the government:

  • Aelon̄ Kein Ad (AKA)
  • United People’s Party (UPP)
  • Kien Eo Am (KEA)
  • United Democratic Party (UDP).

Economy and infrastructure of the offshore jurisdiction

The economy of the Marshall Islands is heavily reliant on the service sector, with fishing and agriculture playing a relatively minor role. This distribution is explained by the almost complete absence of natural resources on the islands. Moreover, the jurisdiction benefits significantly from financial aid from the United States, which accounts for a substantial 60% of the country’s GDP. The official currency of the Marshall Islands is the US dollar.

  • The service sector, agriculture, and industry are the main sources of the Marshall Islands’ GDP, accounting for 60%, 22%, and 18% respectively. The largest export commodities are coconut oil and copra cake. Main trading partners of this tax haven are:
  •  the United States
  • Japan
  • Australia
  • New Zealand
  • Guam
  • Singapore.

Agriculture on the islands includes the cultivation of coconuts, bananas, taro, pandanus, melons, and breadfruit. Modern sectors of the economy are represented by organizations located in the urban centers of Majuro and Ebey:

  • banking
  • insurance
  • service
  • tourism
  • food industry.

In addition, fishing remains an essential component of the offshore jurisdiction’s economy, providing it with food products. The islands offer broadband internet access services.

There is only one international airport on the Marshall Islands, located in Majuro, as well as several small airports and runways in nearby areas.

Population, language, and culture of the Marshall Islands

The majority of the tax haven’s population are descendants of local tribes, although there are also migrants from the Philippines and other Pacific countries. In this region, there are two official languages: English and Marshallese. Marshallese belongs to the Malayo-Polynesian language group. According to estimates from 2021, the population of the Marshall Islands stood at around 59,610 individuals, with a population density of roughly 295 people per square kilometer.

Type of legislation

The Marshall Islands utilize a mixed legal system that incorporates elements of both US and British legal systems as well as local norms and regulations. For example, the tax haven’s corporate legislation is based on the corporate law of the US states of Delaware and New York.

Corporate legislation of the Marshall Islands

The corporate legislation of the Marshall Islands is detailed and codified in the Associations Law of 1990, which includes the following laws governing the establishment of offshore and non-resident companies:

  • Business Corporations Act
  • Limited Partnership Act
  • Limited Liability Company Act
  • Partnership Act (in the new edition).

Taxation of offshore companies

The offshore regime of the Marshall Islands offers a range of tax exemptions for both local and foreign corporations engaged in business activities outside the jurisdiction:

  • corporate income tax
  • dividend tax
  • personal income tax
  • capital gains tax
  • inheritance tax
  • gift tax
  • stamp duty.

However, the Marshall Islands does impose taxes on its residents who trade within the country. For instance, companies that earn over USD 10,000 in the Marshall Islands are required to pay a 3% tax on their income. If a company’s income falls below USD 10,000, it will be subject to a fixed tax amount of USD 80.

If non-residents provide services within the tax haven, they pay a 10% withholding tax at the supply source. When renting out their own land, the tax rate on gross income is reduced to 3%.

Restrictions on offshore companies in the Marshall Islands

Offshore companies in the Marshall Islands are prohibited from:

  • engaging in commercial trade relations with resident companies
  • hiring resident individuals for organization management
  • acquiring local real estate properties
  • acting as registration agents for resident companies.

Since 2020, all limited liability companies registered in the Marshall Islands tax haven must ensure economic substance by:

  • hiring sufficient qualified personnel
  • having a physical address (rented office)
  • incurring certain costs within the jurisdiction.

If a company fails to comply with the above requirements, its shareholders and directors may be fined up to USD 10,000. The ultimate measure would be the dissolution of the legal entity. Reports on substance must be regularly filed through a registration agent.

The Marshall Islands has developed economic substance requirements that comply with the standards of the European Union and the Organization for Economic Cooperation and Development. Despite this, the EU has included it in the list of non-cooperative jurisdictions.

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If you have any questions or want to book a consultation, please contact our experts at [email protected].

What are the conditions for establishing an offshore company in the Marshall Islands?

Citizens of any country can register an offshore company in this jurisdiction in the form of an International Business Corporation (IBC). Regarding its rights and obligations, an IBC is similar to a limited liability company and can engage in any activities permitted by the legislation of the Marshall Islands. However, for this purpose, the company must have a registered office and agent in the Marshall Islands, as well as comply with the offshore legislation and ensure economic substance.

What documents are required to register an offshore company in the Marshall Islands?

Foreign individuals need a standard list of documents to register an offshore company in the Marshall Islands. This list includes:

– passport copy
– document confirming the shareholder’s registered address
– Articles of Incorporation and Memorandum of Association
– trust declaration, a general power of attorney, and a letter of resignation from the professional director with an empty date (in case of using professional officers’ service)
– resolution indicating the appointed director.

What are the registration terms for an offshore company in the Marshall Islands?

The process of setting up an offshore company with the registrar in the Marshall Islands typically takes 2-3 days. However, it is necessary to spend a week on preparation before that. After the initial consultation with our experts, a client makes a decision and signs a service agreement, and then pays for the services. Next, we provide detailed consultation and assist them in assembling the necessary document list. Once all the necessary preparations have been completed, a client submits an online application for the registration of an offshore company with our assistance.

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