Incentives for Incorporating in Marshall Islands
The Republic of the Marshall Islands is a popular jurisdiction for offshore company formation, given the many incentives for incorporating in Marshall Islands including tax benefits. It is, however, very important for entrepreneurs to be aware of the key characteristics of the jurisdictions they consider for incorporation, in order to clearly assess the advantages and disadvantages in relation to their particular business and activities. Given the multitude of tax evasion cases that have taken the forefront in the news headlines over the past few months, it is important to evaluate whether Marshall Islands is a legally compliant and efficient option for your business objectives. Following is a brief summary of common areas of concern for entrepreneurs, such as location, transport, culture, government’s policy, taxes and business factors.
Key Incentives for Incorporating in Marshall Islands
Located in the middle of the Pacific Ocean, just north of the equator, the Republic of the Marshall Islands is a small nation of only 181km2 land surface, split between 29 atolls and 5 islands. For that reason, entrepreneurs who choose to incorporate a company offshore through the Marshall Islands jurisdiction do not usually choose to live there. Virtual office technologies and legislation make it possible to operate a Marshall Islands business from just about anywhere in the world.
Given that most entrepreneurs and companies conducting offshore business through the Marshall Islands jurisdiction do not actually operate or live on the islands, the issue of transport is negligible in offshore business decision-making. That being said, the Republic of the Marshall Islands is accessible by plane, as there is an international airport located on the Majuro Atoll (Marshall Islands), an army airfield on Kwajalein Atoll (Marshall Islands) and various other small private airports.
Within the Marshall Islands, there are paved roads on the main atolls (Majuro and Kwajalein), there are no railways, and there is one port on Majuro.
The people who live on the Marshall Islands are known as Marshallese. There is a total population of about 62,000 people, of which 90% are Marshallese and the remaining 10% are expected to be from US, Filipino, Australian and other ethnicities. The culture is centered on a structure of clans and lineages that link to land ownership.
The official language on the Marshall Islands is Marshallese; however, as the education system introduces English in the fourth grade, most Marshallese adults are fluent in English.
Policy and Taxes
It is well known that policy and taxes are the main attraction for foreign entrepreneurs in the Marshall Islands, and as a result the Republic of the Marshall Islands is often perceived to be a tax haven. The Marshall Islands is one of the countries the OECD has listed on a ‘grey list’. This consists of countries that the OECD may see as a tax haven but have committed to implementing the organizations international tax standards.
Legislation concerning foreign companies and partnerships is the most relevant to international entrepreneurs and is relatively simple. Limited liability companies (LLC) are subject to the Limited Liability Company Act, which is based on US corporate law from the state of Delaware. Other business structures and corresponding legislation on the Marshall Islands are Corporations (Business Corporations Act), Partnerships (Revised Partnership Act) and Limited Partnerships (Revised Partnership Act). Director and shareholder information, where applicable, is kept private as there is no public registry of companies in the Republic of the Marshall Islands.
Marshall Islands is a major center for offshore business activities, specifically in the maritime industry, but is also useful for other business activities as there are few restrictions on what types of activities businesses can engage in. Companies have the possibility of conducting limited third party trading of securities, act as a fund advisor and/or manager, as well as any other legal business activity except online gaming, banking, trust and insurance.
Given that business activities in the Marshall Islands are conducted with the US dollar currency, business in the Marshall Islands is stable, and minimizes foreign exchange fluctuations. This adds to billions in budget, and with the significant influx of tourists expected, business will be thrilled with the newly accessible market.
Company incorporation in Marshall Islands
Marshall Islands company setup is relatively simple and can be done through a professional services firm specialized in offshore incorporation in order to ensure a smooth process and compliance with the law.
A company incorporated in the Marshall Islands as an offshore company is typically structured as an IBC (international business company). Under this structure, a minimum of one director is required, which can be a person or company, resident anywhere in the world and of any nationality. The IBC is also required to have one secretary, foreign or local, and a minimum of one shareholder.
Annual general meetings are also required but can be hosted anywhere in the world. The IBC must keep records of financial accounts but there is no requirement for annual audits.
Overall, Marshall Islands is a highly attractive choice for company incorporation. With zero-tax benefits and no need to move to the location of the business’ jurisdiction, incorporating in the Marshall Islands is a convenient way of setting up a tax-efficient business without having to alter an entrepreneur’s existing daily life. For these reasons it is clear why the Marshall Islands Companies and Maritime Registry is the 5th busiest in the world.