Cross-Border Taxation in Marshall Islands

As a major international finance center and ship registry, the Marshall Islands has developed a cross-border tax framework designed to facilitate international business while maintaining compliance with global tax standards. This guide covers the key aspects of cross-border taxation for businesses and individuals operating in the Marshall Islands.

Residence and Source Taxation

The Marshall Islands taxes residents on their worldwide income. Non-residents are taxed only on Marshall Islands-source income. A company is considered resident if it is incorporated in the Marshall Islands or has its place of effective management in the country. Individuals are resident if they spend more than 183 days in the Marshall Islands in a tax year.

Withholding Taxes

The Marshall Islands imposes 0% withholding tax on all cross-border payments:

Double Taxation Treaties (DTTs)

The Marshall Islands has entered into a limited number of double taxation treaties. These treaties generally follow the OECD Model Tax Convention and provide:

In the absence of a treaty, domestic rates apply. Given the 0% withholding tax rates, treaty benefits are primarily relevant for establishing permanent establishment thresholds and exchange of information.

Transfer Pricing

The Marshall Islands has transfer pricing rules aligned with the OECD Transfer Pricing Guidelines. Key requirements include:

Penalties for transfer pricing non-compliance can be significant.

Controlled Foreign Company (CFC) Rules

The Marshall Islands does not currently have specific CFC legislation. However, the tax authorities may apply general anti-avoidance provisions in certain circumstances.

Permanent Establishment (PE) Risk

A foreign enterprise may create a PE in the Marshall Islands through:

Foreign Exchange Controls

The Marshall Islands uses the United States Dollar (USD) as its official currency. There are no restrictions on:

Compliance Obligations