Tax in Marshall Islands

Who administers Marshall Islands taxes?

The Division of Revenue, Customs and Taxation (RCT) under the Ministry of Finance, Banking and Postal Services administers RMI's national tax framework. The ministry is based in Majuro, the capital atoll.

The legal foundation rests on the Marshall Islands Revenue and Taxation Code. This covers personal income tax, corporate tax, and gross revenue tax obligations for residents and businesses.

RMI is a member of the Pacific Islands Forum. It adopted the Common Reporting Standard (CRS) for automatic exchange of financial account information, and maintains Tax Information Exchange Agreements (TIEAs) with the US, UK, Australia, and Nordic countries.

Compact of Free Association — RMI and the United States

The Compact of Free Association is the foundational legal relationship between RMI and the United States. It shapes currency, defense, migration, and fiscal aid — all of which have downstream tax implications.

The Compact is not a double tax agreement. RMI citizens earning income in the US face US federal income tax at US rates. RMI-domiciled persons face RMI income tax at RMI rates. No formal mechanism reduces double-imposition where the same source income is claimed by both systems.

What is the tax year and when are returns due?

RMI's standard tax year is the calendar year — 1 January to 31 December. Businesses may elect a fiscal year with RCT approval.

Employers withhold PAYE from employee wages monthly and remit to RCT. GRT-registered businesses file quarterly estimates and an annual return.

Who counts as an RMI tax resident?

An individual is a tax resident of RMI if either test applies:

• You are domiciled in RMI (permanent home, centre of life)
• You are physically present in RMI for 183 or more days in the tax year

Residents are taxed on RMI-source income. Worldwide income rules may apply to domiciled residents. Non-residents are taxed only on RMI-source income.

RMI citizens living and working in the US under the Compact are subject to US federal income tax at US rates. The Compact permits residence but does not create a tax exemption. A qualified professional can map the correct filing obligations for a split-year or cross-border RMI-US situation.

What are the personal income tax rates?

RMI applies a progressive personal income tax with a base exemption:

The 12% top marginal rate is among the lowest in the Pacific region. PAYE is withheld monthly from wages by employers. Self-employed individuals file annual returns and make estimated payments.

How does corporate tax work?

RMI applies a gross-revenue-based corporate tax rather than a traditional net-profit CIT. The rate structure is tiered by turnover:

RMI has not adopted the OECD Pillar Two global minimum tax. RMI is not an OECD Inclusive Framework member. The Marshall Islands International Business Companies Act provides a separate IBC vehicle historically used for offshore holding structures.

Gross Revenue Tax — the local business levy

RMI imposes a 5% Gross Revenue Tax on most local business activities. Like FSM's GRT, this is a turnover-based charge applied to gross receipts, not net profit. A business running at a loss still owes GRT.

There is no input-tax credit mechanism under the GRT. Businesses cannot recover GRT the way they would reclaim input VAT. This is a key structural difference from the VAT systems common throughout the OECD.

Currency — USD as sole legal tender since 1944

Dollarization removes exchange-rate risk for US-source income flows but eliminates RMI's ability to use monetary policy. It also directly links RMI government revenue to the fiscal health of the USD economy.

World's largest ship registry — the MEC maritime engine

The Marshall Islands ship registry, administered by the MEC International Registries, Inc. (headquartered in Reston, Virginia, USA), is consistently ranked as the world's first or second-largest ship registry by total gross tonnage — rivalling Liberia for the top position in UNCTAD and Lloyd's List rankings.

Maritime registry fees are a primary non-tax revenue stream for the RMI government. Companies registering vessels under the Marshall Islands flag do so through MEC, not through RMI domestic tax administration. Tax obligations for the vessel-owning entities depend on their structure — IBC vehicles, captive insurance, and foreign-managed companies have different RMI tax profiles.

SOV national digital currency — attempted and dormant

In 2018 RMI passed the Sovereign Currency Act, establishing the Sovereign (SOV) as the world's first attempt at a national legal-tender digital currency by a sovereign state. The project drew global attention and generated significant interest from cryptocurrency markets.

For tax purposes, SOV has no current relevance — no SOV income, SOV gains, or SOV transactions exist in practice. Practitioners advising clients on RMI cryptocurrency holdings should apply general RMI income tax principles under existing USD-denominated rules.

How are cryptoassets taxed?

RMI has no dedicated cryptoasset tax legislation. Where cryptoasset gains are declared, they are assessed under general income tax principles administered by RCT.

Meet a Marshall Islands taxpayer

CoFA diaspora in the United States

Approximately 22,000 RMI-origin people live in the United States under Compact of Free Association migration rights. That is nearly half the size of RMI's domestic population of around 42,000. Primary US settlement hubs are Arkansas, Hawaii, Washington state, and Oklahoma.

RMI citizens in the US are subject to US federal income tax and state income tax in the state where they reside. The Compact is a political arrangement, not a tax treaty. Marshallese community members who return to RMI after years in the US often face a transition-year dual-filing obligation.

Bikini Atoll — nuclear legacy and fiscal-aid context

Bikini and Enewetak atolls were the sites of 67 US atmospheric nuclear weapons tests between 1946 and 1958. The environmental and health consequences shaped the Compact's financial structure — the agreement includes a Nuclear Claims Tribunal framework and compensation provisions for affected communities.

The nuclear legacy does not directly change RMI's tax framework. It is context for understanding why US fiscal aid is a structural part of RMI government revenue.

Climate vulnerability — sea-level context

RMI's 29 coral atolls and 5 isolated islands have an average elevation of approximately 2 metres above sea level. Sea-level rise is among the most significant existential long-term risks facing the country. International climate finance and resilience funding are active areas of RMI government engagement.

What is the treaty network?

RMI has a very thin bilateral tax treaty network in the OECD sense. The Compact of Free Association with the US provides a governance and financial framework but is not a double tax agreement. TIEAs have been signed with the US, UK, Australia, Norway, Sweden, Denmark, Finland, Iceland, and other Nordic and European partners under the CRS multilateral framework.

RMI is not an OECD member and has not signed the OECD Multilateral Instrument (MLI). The Pacific Islands Forum provides a political framework but not a treaty network. Non-Compact cross-border income faces full RMI withholding rates with no bilateral treaty reduction available.

Where does RMI sit in the Pacific cohort?

RMI is a member of the Pacific Compact states alongside FSM (Federated States of Micronesia) and Palau. The broader Pacific splits into several distinct tax archetypes:

Common pitfalls and compliance traps

Foreign investors and RMI-connected individuals encounter recurring compliance traps:

When should you speak with an RMI tax professional?

Some situations are straightforward under RMI's low-rate PIT framework. Others require qualified professional input:

• You are an RMI citizen living in the US and receiving US-source income — US federal and state tax apply at full US rates
• You are returning to RMI after US residence — the transition year creates dual-filing risk
• Your business revenue exceeds USD 80,000 — higher GRT-plus-CIT tiers apply
• You have cross-border income from Japan, Australia, or EU countries — no treaty reduction is available
• You received an RCT notice, assessment, or inquiry
• You are registering an IBC, captive insurance entity, or ship-owning vehicle under the MEC framework
• You are a US citizen resident in RMI and need to maintain full IRS compliance under FATCA and FBAR

Qualified practitioners in RMI can be found through the directory below.

This page is general reference information. It is not personal guidance for your specific situation. Tax rules change. Verify current figures with RCT or a licensed RMI practitioner before filing.