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Q:
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What is the Economic Substance requirement in the Marshall Islands?
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A:
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The Marshall Islands Economic Substance Regulations mandate that all relevant entities carrying out a relevant activity in the Marshall Islands must satisfy reporting requirements regarding their actual level of Economic Substance in the jurisdiction.
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Q:
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What are the relevant activities and who need to satisfy the requirement of Economic Substance?
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A:
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The relevant entities which carry the following relevant activities are required to satisfy the requirement of Economic Substance:
1.
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Distribution and Service Centre Business;
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2.
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Financing and Leasing Business;
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3.
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Fund Management Business;
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4.
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Headquarters Business;
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5.
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Holding Company Business;
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6.
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Intellectual Property Business;
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7.
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Shipping Business;
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8.
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Banking Business; and
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9.
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Insurance Business.
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Despite the fact that Banking and Insurance Business are falling into the category of relevant activities, the RMI Associations Law prohibits all non-resident domestic entities and foreign maritime entities to carry on the business of banking or granting policies of insurance or assuming insurance risks.
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Q:
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When and how to report the information of Economic Substance to the Registrar in the Marshall Islands?
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A:
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All the entities are required to file an annual Economic Substance declaration to Registrar within 12 months from the anniversary date of the entity, the declaration is to confirm if the entity is conducting relevant activities.
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Q:
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What is the impact of failure to satisfy and meet with the Economic Substance requirement?
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A:
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If the entity is failed to comply with the reporting requirements or not meeting with the Economic Substance test for a financial period as required, it shall be fined up to USD50,000 or lead to a revocation and dissolution.
For the next financial period, if the in-scope entity still does not pass the Economic Substance test, as determined by the Registrar, then the financial penalty can be added up to USD100,000 or revocation of its formation documents and dissolution, or both.
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Q:
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What information need to demonstrate in the Economic Substance declaration?
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A:
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The entities are required to clarify whether it is a relevant entity and whether it has any income derived from the relevant activity. The in-scope entities should provide the below required information in the Economic Substance declaration:
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1.
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Business type;
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2.
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Amount and type of gross income;
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3.
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Amount and type of expenses and assets;
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4.
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Premises;
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5.
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Number of employees; and
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6.
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Information on core income-generating activities.
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Q:
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Does the entity need to satisfy the Economic Substance requirement during liquidation or otherwise ceasing to carry on relevant activities?
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A:
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A relevant entity in liquidation which carrying on a relevant activity is required to satisfy the Economic Substance requirement. When the entity ceases to undertake the relevant activity, the entity will no longer be subject to the Economic Substance requirement.
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Q:
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Will the Marshall Islands Government share the information regarding Economic Substance of my Marshall Islands IBC to the authorities in another jurisdiction?
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A:
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In accordance with relevant international standards and scheduled agreements, if determines an Entity has not met the applicable Economic Substance Requirements in respect of its relevant activities, the Registrar is required to provide that information to counterpart in the relevant EU member state or other jurisdiction, in which the relevant Entity has its holding entity, its ultimate parent entity, or beneficial owner to be resident for tax purposes.
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FAQ
