VAT and Sales Tax in Micronesia

The Federated States of Micronesia (FSM) does not impose a Value Added Tax (VAT) or any general sales tax. This makes Micronesia one of the few jurisdictions with no broad-based consumption tax.

No VAT / Sales Tax

FSM has no VAT, no GST, and no general sales tax at the national level. There is no consumption tax added to goods or services at the point of sale. This applies to all transactions within the country.

Revenue Sources

Instead of a consumption tax, the FSM government raises revenue primarily through:

• Personal income tax (progressive PIT 0-10%)
• Corporate income tax (30% standard, 21% small business)
• Social Security contributions (FSM Social Security System)
• Import duties and customs tariffs
• Business license fees and other administrative charges

Import Duties

While there is no VAT, goods imported into Micronesia may be subject to customs duties and import taxes. These are collected at the border by the customs authority. The rates vary depending on the type of goods.

Gross Revenue Tax

Some business activities in Micronesia may be subject to a gross revenue tax rather than a consumption tax. This is a tax on business turnover, not a VAT. The rate varies by business type.

Comparison with Other Countries

Most countries in the Pacific region and globally impose a VAT or sales tax. Micronesia's absence of such a tax can be a competitive advantage for businesses and consumers:

• No VAT burden on consumer purchases
• Simpler compliance for businesses (no VAT returns)
• No input VAT recovery issues
• Lower effective prices for goods and services

Future Developments

There have been discussions about introducing a consumption tax in Micronesia to broaden the tax base and reduce reliance on import duties. As of 2026, no VAT legislation has been enacted, and the 0% rate remains in effect.