Your Own Company in the Marshall Islands: Pros and Cons

The Marshall Islands sits in the middle of the Pacific Ocean just above the equator. It is one more paradise on earth that attracts many tourists. Whichever island you visit, you will find fine coral sand there. The main reason why many people choose to fly to the remote islands is to find peace and solitude. There is practically nobody on most of the islands!

There are some interesting places to see in the Marshall Islands, however. There you can find the following tourists attractions, among others:

  • Alele museum on Majuro with exhibits showing the life of the early settlers and the culture of the aboriginal peoples.
  • Kwajalein coral atoll – an extremely narrow strip of land surrounding a huge lagoon. The maximum width of the atoll is 120 meters but its length is 130 kilometers! This is the cultural center of the Marshall Islands and the custodian of the region’s historical traditions.
  • Mili atoll – a Japanese military base in the times of WWII that attracts tourists by remnants of military airplanes and old guns and bombs scattered all around the place.  
  • Mejit atoll – a small piece of land with only 450 inhabitants. The nature is beautiful there: coconut trees, breadfruit trees and, of course, California Beach and the lagoon, whose waters are completely free of poisonous fish.
  • An uninhabited island of Bikini infamous for nuclear tests in the 20th century. Those who are not afraid of radiation take diving tours to the region to swim in a ‘densely populated’ lagoon: nobody has been fishing there for more than 60 years.

The Marshall Islands: a tropical paradise and a tax haven

The insular state in the Pacific Ocean offers a wide range of opportunities for business and tax optimization. Buying or registering a company in the Marshall Islands can bring you multiple benefits. The corporate legislation of the country is tailored to the interests of international entrepreneurs.

For a business person, payment of taxes often constitutes a large portion of the overall costs. Registering a company in the Marshall Islands can help you reduce the costs because you will be able to legally save on taxes. If you buy or register a company in the country, you will gain the following main benefits:

  • Zero taxes;
  • Confidentiality;
  • Protection against raider seizures;
  • Low IPO costs;
  • No reporting requirements;
  • No currency control;
  • Protection against lawsuits.

A foreign national from any country is entitled to buy or register a company in the Marshall Islands. A company can be registered very fast there, approximately within 5 to 7 business days. The registration fee is lower in the Marshall Islands than it is in most other jurisdictions and the same holds for the registration extension fee. The EU does not blacklist the Marshall Islands any longer.

The only mandatory fee is the annual company registration extension fee. The Marshall Islands don’t impose any taxes: this includes no income tax, capital gains tax or inheritance tax as well as no royalties taxes and dividend taxes on dividends received or royalties payable from dividends paid out from royalties paid.

Requirements for registering a company in the Marshall Islands

You have to meet the following requirements to be able to set up a company in the Marshall Islands:

  • To start a company, one person is enough. He or she can be the company owner, director, and secretary simultaneously.
  • One US dollar is enough for the authorized capital.
  • The company shall have a legal address in the jurisdiction.
  • A registered agent shall be hired to register a company in the Marshall Islands.

Most companies registered in the country do business in the following spheres:

  • Asset management;
  • International trade;
  • Trade in securities;
  • Capital management;
  • Property management;
  • Inheritance planning;
  • Intellectual property management;
  • Marine vessel management;
  • Construction.

All types of business activities not prohibited in the legislation are legal in the Marshall Islands.

Foreign companies registered in the Marshall Islands are NOT authorized to do the following:

  • Provide banking, trust, and insurance services as well as engage in gaming/ gambling (licenses are required for these types of business activities);
  • Purchase real property in the jurisdiction;
  • Make business deals with residents of the Marshall Islands (with the exception of accountants, notaries, lawyers, investment consultants, and company managers);
  • Provide company registration services (act as registered agents);
  • Involve resident organizations in company management.

Please be aware that having a company Secretary in the Marshall Islands is mandatory; even though company owners can fill this position themselves. Furthermore, your company name should stand out among all others registered within your jurisdiction.

More pleasant news is that it is legal to issue shares with no par value in the Marshall Islands. In addition, locally registered companies can bank in any country of the world.

Economic substance requirements in the Marshall Islands

Since January 1st 2019 Economic Substance Regulations have been in force in the Marshall Islands. Locally registered companies must abide by an additional set of requirements:

  • The company managers have to meet in the jurisdiction from time to time to make strategic business decisions.
  • The meetings have to be quorate;
  • Minutes of the meetings have to be kept;
  • The company managers have to be knowledgeable about business management procedures;
  • Minutes and records of all meetings have to be kept in the Marshall Islands.

Depending on the size of the company, several other requirements may have to be met:

  • A sufficient number of people on the staff;
  • A physical office in the Marshall Islands;
  • Adequate operational expenditures in the jurisdiction.

If a foreign company in the Marshall Islands fails to meet the economic substance requirements, it may be dissolved and a fine of US$ 50,000 may be levied on the company owners.  

Key advantages and disadvantages of the Marshall Islands

The main advantages of the jurisdiction include the following ones:

  • Zero taxes;
  • Fast company registration;
  • Easy company maintenance;
  • Company re-domiciliation is possible;
  • Apostille services are included in the price of company registration;
  • Confidentiality;
  • Political stability in the country;
  • Company capital can be in any currency;
  • No audits;
  • Protection against raider takeovers;
  • A single company owner is allowed;
  • The jurisdiction is not blacklisted;
  • The country is under US protection;
  • The country’s legislation is based on US and British law.
  • The Republic is a signatory to the Hague Convention;
  • There is no currency control;
  • You can set up a US-type or a UK-type company in the Marshall Islands.

The main disadvantages of the Marshall Islands include the following ones;

  • Some national states blacklist the country;
  • The Marshall Islands is economically dependent on the USA;
  • Economic substance reports need to be filed annually;
  • Opportunities for banking in the Marshall Islands are limited.

The Marshall Islands is an offshore jurisdiction but the word ‘offshore’ should not be associated with illegal business activities any longer. Offshore-registered companies do legal business and make use of legal instruments that allow reducing their tax burdens.

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