Published on and written by Cyril Jarnias
Setting up or structuring part of one’s wealth in the Marshall Islands is attracting more and more expats, entrepreneurs, and retirees looking for a light tax environment. But behind the image of an offshore paradise, the reality is more nuanced, especially when it comes to income tax, “property tax,” and real estate ownership for foreigners.
Good to know:
This guide details the tax system for expats, covering three key points: the income tax system, real estate taxation (property tax and rental income), and the specific constraints related to land ownership. It offers a practical overview for expatriation, investment, or setting up a structure in the archipelago.
A Territorial and Heavily “Offshore” Tax Environment
The Marshall Islands operates on a key principle: the territoriality of taxation. In other words, only income sourced within the territory is taxed locally. Foreign-source income is, in practice, excluded from the tax base, both for companies and for many non-resident taxpayers.
Tip:
For international structures, the Marshall Islands regime offers very extensive tax relief on foreign activities. This includes: no tax on profits from abroad, no withholding tax on foreign dividends, and no tax on foreign capital gains. This logic makes it a sought-after offshore jurisdiction for optimizing holding companies, shipping companies, as well as vehicles dedicated to crypto-assets and DAOs.
For expatriate individuals, this same territorial principle means that the key issue is not so much the nominal rate level but rather the location of the income source: salaries, fees, rent, or dividends received in the archipelago are not treated the same as income received via a portfolio in Europe or Asia.
Tax Resident Status: The Famous 183-Day Rule
To determine which regime applies to you, it all starts with tax residency. In the Marshall Islands, the rule is relatively simple: physical presence of more than 183 days in a calendar year makes you a tax resident.
In practice, this means that an expat who spends more than six months a year in the archipelago falls into the resident category. Those who stay less than that remain, in principle, non-residents and are taxed only on their locally sourced income.
Official doctrine states that residents are “generally” taxable on their worldwide income, but the reality of the system remains focused on Marshall Islands-source income. For a non-resident, however, the rule is clear: only income originating from the Marshall Islands is included in the tax base.
Marshall Islands Tax Doctrine
For an expat, this boundary is crucial. It determines how a local salary, consultant fees, rent, or dividends will be treated by the local tax administration and by the country of origin.
Income Tax: How the Wage and Salary Tax Works
Personal income tax primarily takes the form of a withholding tax on wages, called the Wage and Salary Tax (WST). It is deducted directly by the employer from gross pay and then remitted to the administration.
Several rate schedules coexist in available sources, reflecting successive reforms and sometimes differences between “federal” and local frameworks. To summarize, we can distinguish two main progressive rate structures that appear regularly.
The Main Wage Taxation Schedules
Information converges around two progressive tax brackets. The following table summarizes the most frequently mentioned brackets for residents and non‑residents on locally sourced income.
| Annual Income Bracket (USD) | Mentioned Tax Rate | Source / Context |
|---|---|---|
| Up to 10,000 | 8% | Standard WST, several consistent sources |
| 10,001 – 20,000 | 12% | Progressive bracket variant |
| Above 20,000 | 16% | Progressive bracket variant |
| Up to 10,000 | 8% | Simplified bracket “≤ 10,000” |
| Above 10,000 | 14% | Binary simplified bracket |
| Up to 11,000 | 6% | Another scale mentioned as “federal” |
| Above 11,000 | 10% | Same alternative scale |
Some comments also mention a marginal rate that could go up to 34% for certain residents, suggesting the existence of surtaxes or specific brackets in particular cases. For a “standard” salaried expat, the brackets 8% – 12% – 16% remain the most commonly cited framework.
Deductions and Allowances for Employees
The WST is not applied to gross pay without considering family situation. Employees can benefit from allowances that reduce their taxable income before applying the rate schedule:
Example:
The calculation of income tax for a U.S. taxpayer may include several elements. They first benefit from a fixed annual personal exemption. Additional allowances may apply for dependents. A standard deduction of USD 2,000 per member of the tax household is also provided. Finally, there is the possibility of deducting certain specific expenses, such as medical or educational costs, to reduce the taxable base.
Concretely, a married expat with two children and a modest salary will see their taxable base reduced by several thousand dollars, which significantly limits the local tax bill, especially in the lower brackets.
How Is the Tax Calculated and Withheld?
On a practical level, the employer calculates the WST on each pay period. The most commonly described method relies on annual projection:
Attention:
The calculation of the employee’s withholding tax is done in three steps: the employer first annualizes the gross salary for the period, then applies the progressive income tax rate schedule to obtain a theoretical annual amount, and finally divides this amount by the number of pay periods to determine the withholding due for the current period.
Information regarding allowances (family situation, number of dependents) must be communicated to the employer, via a form comparable to a “W‑4” in the Anglo-Saxon world. The taxable base is then adjusted based on this data.
This mechanism allows a salaried expat to avoid filing a complex tax return, as the tax is already largely withheld at source. However, in the case of additional income (consulting, rentals, local dividends), it may be necessary to settle matters through other filing obligations.
Social Security Contributions: 16% Charges, but Capped
The other pillar of payroll deductions is the Marshallese social security contribution, managed by the Marshall Islands Social Security Administration (MISSA). Here again, the mechanism relies on a withholding at source shared between employer and employee.
The rate is simple:
| Contributor | Rate on Gross Salary | Payment Method |
|---|---|---|
| Employer | 8% | Paid by employer to MISSA |
| Employee | 8% | Withheld from salary then paid by employer |
| Total | 16% | Total charge, with an annual cap |
Contributions are based on gross salary, but only up to a certain annual cap, set and updated each year by MISSA. Above this threshold, additional compensation no longer incurs local social charges.
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Nominal percentage of social charges for expatriate employees in France, with a real impact varying according to the level of compensation.
Other Taxes: No VAT, but Consumption and Import Taxes
Unlike most developed countries, the Marshall Islands does not have a VAT in the classic sense. Instead, the archipelago applies:
– a sales tax, generally between 2% and 4%;
– customs duties on imports, often in a range of 5% to 12% of the value of goods.
Taxation and Cost of Living Abroad
Understanding the impact of indirect taxes on expats’ budgets in an importing country.
Import Duties
Taxes levied on imported goods, directly increasing their final selling price.
Sales Tax
Tax applied to consumption, added to the price of goods including imports.
Apparent Tax Pressure
Direct taxation on income may be low, masking the real weight of indirect taxes.
High Cost of Living
The accumulation of taxes makes consumer prices high relative to average local incomes.
Wealth Taxation: No Wealth Tax or Inheritance Tax
On the wealth side, the environment is particularly light. Available information converges to indicate that there is no wealth tax, no inheritance tax, no gift tax for non-resident companies, and more broadly, no specific tax levied in this regard.
Capital gains, especially those realized through offshore structures on foreign assets, are not taxed at the Marshallese level. This point explains the archipelago’s appeal for international investment vehicles and family holding companies seeking to limit taxation on the transfer and sale of securities.
For a French or European expat, this does not mean that the overall bill will be zero: you must take into account the rules of your country of origin, possible reclassification of tax residency, listing as “non-cooperative states,” and the lack of a bilateral tax treaty in many cases.
Real Estate Ownership: No Full Ownership for Foreigners
One of the most sensitive points, often misunderstood by candidates for expatriation, is the issue of land ownership. In the Marshall Islands, land has a central cultural, social, and customary dimension, which translates into a very strict legal lock.
The rules are clear:
Good to know:
All land belongs to Marshallese citizens. Foreigners, whether individuals or legal entities, cannot own it. There is no public domain available for classic acquisitions. The only way for a non-Marshallese to access land use is by entering into a lease.
In practice, an expat who wants to “buy” a house or invest in a real estate project encounters a system where you never become the owner of the land in the continental sense of the term, but rather a long-term tenant. Transactions therefore revolve around leases, often multi‑decade, negotiated directly with the owning families or clans.
Land Leases and Registration: The Real Tool for the Expat Investor
Leases, whether residential or commercial, are at the heart of the real estate relationship for foreigners. They are open to individuals as well as companies, subject to compliance with local regulations, particularly regarding foreign investment.
The main characteristics are as follows:
Good to know:
Long-term leases provide visibility for real estate projects. Conditions (rent, indexation, renewal, improvements, subletting) are negotiable directly with the owner. To be enforceable, these contracts must be registered with local authorities.
In terms of investment, this means that the “security” of the right depends on the quality of the lease contract and the strength of the relationship with local owners, rather than on a classic property title. Large-scale projects (hotels, tourist infrastructure) are built on these same legal foundations.
Property Tax: A Tax on Land Value Paid by the Owner
Despite the specificity of the land regime, there is indeed a form of property tax in the Marshall Islands. An annual tax is due by land owners, calculated on the estimated value of the land.
The essential elements are as follows:
| Tax Concerned | Taxable Base | Indicated Rate |
|---|---|---|
| Annual property tax | Estimated land value | 1% |
This rate of 1% applies to the estimated land value, and not to the built-up value as a whole. The term “property tax” should therefore be understood here as a tax on the land itself, rather than on any building erected on it.
Good to know:
For an expat tenant, the property tax remains legally the responsibility of the local owner. However, its cost may be passed on indirectly to the tenant, either through an increase in rent or via contractual clauses for reimbursement. It is crucial to check the terms of the lease in this regard.
Rental Income Taxation: A 3% Tax on Real Estate Leases
Beyond the property tax paid by the owner, rental income is also subject to specific taxation. A tax on real estate leases is applied to rents, with a rate of 3% mentioned repeatedly.
To summarize:
| Real Estate Transaction | Tax Concerned | Applied Rate |
|---|---|---|
| Income from real estate leases | Tax on rents / leases | 3% of gross rent |
When a Marshallese owner leases their land or property, they are therefore subject to this 3% tax on gross rental income. When it comes to land leased to foreigners, references also appear to a reduced rate of 3% on income from leasing out one’s own land.
Good to know:
For an expat operating a rented property (restaurant, tourist structure, etc.), this tax is an unavoidable cost. It is either borne directly if the lease so stipulates, or included and passed on in the rental price set by the owner.
Can We Really Talk About “Property Tax for Expats”?
The initial question – “property tax in the Marshall Islands for expats” – is a bit misleading. Legally, the local property tax targets the landowner, i.e., a Marshallese citizen. An expat cannot, in principle, be directly liable for this tax, since they cannot own the land.
However, in practice:
Good to know:
The owner may include the property tax in recoverable charges or in the rent amount. Additionally, a 3% tax on rental income may apply, the cost of which can be indirectly passed on to the expat tenant. Some contracts include specific clauses requiring the expat to contribute to property taxes.
It is therefore more accurate to speak of “real estate taxation” for expats in the Marshall Islands, revolving around leases and taxes on rents, rather than a “property tax” that would be directly imposed on them.
Taxation of Companies and Offshore Structures: A Very Favorable Ecosystem
Although the core of this dossier concerns income tax and real estate taxation, it is hard not to mention the treatment of companies, as this aspect attracts expats who combine personal relocation with wealth structuring.
For resident companies, several levels of taxation are mentioned:
| Type of Company / Income | Indicated Rate or Range |
|---|---|
| Corporate tax (resident) | 0.8% to 3% of annual gross income (depending on sources) |
| Mentioned flat rate | 3% of turnover under certain regimes |
| Heavily taxable local entities | Reference to a rate “around 30%” on income, in some cases |
| Domestic income of non-resident companies | 10% on income generated in the archipelago |
| Foreign-source income of companies | 0% (full exemption) |
International Business Companies (IBCs) benefit from a particularly attractive regime when they do not engage in activity within the domestic economy:
Tip:
Offshore structures offer several major tax advantages, including: exemption from tax on profits generated abroad, no withholding tax on foreign-source dividends, interest, and capital gains, as well as exemption from inheritance and gift taxes on assets held within these structures.
For an expat entrepreneur or investor, it is possible to combine a more or less effective personal residence in the Marshall Islands with the use of these companies at near-zero taxation on international flows. However, this setup must be weighed against the anti-abuse rules of the home country, potential blacklists, and the lack of a tax treaty with France or the European Union.
International Agreements: Few Treaties, but Participation in the CRS
Another element to factor into the equation is the international position of the Marshall Islands. The country has concluded few bilateral tax treaties. These include:
– double taxation agreements with the United States and Japan;
– a tax information exchange agreement with the United States.
Good to know:
There is no tax treaty between France and this country, nor with the European Union. For a French expat, this means that no treaty mechanism clearly defines the allocation of taxing rights. France therefore applies its domestic law, which may include specific measures if the country is classified as a non-cooperative jurisdiction.
The Marshall Islands does, however, participate in the Common Reporting Standard (CRS) for the automatic exchange of financial information. Financial institutions must identify the tax residence of their clients and transmit data to partner administrations. For an expat who thought they could remain “discreet” by taking refuge in an offshore paradise, this participation in the CRS significantly changes the game in terms of tax confidentiality.
Cost of Living, Local Incomes, and Daily Reality
To properly assess the real impact of taxation, it must be placed within the economic context. The average net monthly income, after tax and deductions, is around USD 489. This is insufficient to cover the average consumption basket, which pushes many local residents to severely restrict imported goods and rely on family solidarity.
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The cost of living for a North American expat is on average 40% lower than in the United States for a comparable standard of living.
Basic utilities for an apartment of 85 m² (water, electricity, waste, possible heating/air conditioning) range between 133 and 250 USD per month. Electricity often operates via a prepaid card system (“Cash Power Cards”), which expats must regularly top up.
In this context, the nominal tax pressure on wages may seem moderate, but this does not mean that an expat will have high purchasing power if they are paid at local standards. Those who fare best are usually those who receive foreign income, sometimes untaxed locally thanks to the territoriality principle.
Expatriation, No Residence-by-Investment Program, and Practical Constraints
Unlike some popular destinations, there is no “golden visa” or formal residence-by-investment program in the Marshall Islands. Staying on the ground relies on standard mechanisms:
– work visas, linked to work permits issued to the employer after demonstrating the absence of qualified Marshallese candidates;
– stays for family, studies, or business;
– foreign investment licenses for economic projects carried by non‑citizens.
Good to know:
Work permits in the Seychelles are generally valid for one or two years and are renewable. However, they do not automatically guarantee access to permanent residence or naturalization. Additionally, any company controlled by foreigners must obtain a Foreign Investment Business License (FIBL) to establish itself in the archipelago.
Geography also works against mass expatriation: extreme remoteness, weak infrastructure, and a restricted real estate market make the idea of living there year-round much less appealing for many candidates. Many investors therefore use the Marshall Islands more as a structuring jurisdiction than as an actual place of residence.
For a French Expat: Double Taxation, NCCT List, and Essential Planning
An expat coming from France must also look beyond the internal rules of the Marshall Islands. France taxes its residents on their worldwide income, and non-residents on their French-source income. In the absence of a treaty with the Marshall Islands, coordination relies on French domestic law and mechanisms such as tax credits or, where applicable, retaliatory tax measures for states considered non-cooperative.
Attention:
The Marshall Islands appears on the European list and the French list of Non-Cooperative States and Territories (NCCTs). This status leads, on the French side, to the application of very restrictive tax and administrative measures.
– non-deductibility of certain payments to these jurisdictions;
– withholding tax rates that can reach 75% on certain outbound flows.
Even if the situation has evolved over time, the mere possibility of an unfavorable classification is enough to make certain arrangements very risky for a French taxpayer. A projection of tax residence in the Marshall Islands must therefore be developed with a tax advisor possessing dual expertise, both in Marshallese law and French law, in order to avoid reclassifications and unpleasant surprises.
What an Expat Should Remember: Operational Summary
At the end of this overview, a few key ideas stand out for an expat considering the Marshall Islands as a destination for living or as a link in a wealth strategy:
Good to know:
Income tax is withheld at source (WST) with moderate progressive rates and allowances. Social charges are capped. There is no wealth tax, inheritance tax, or classic VAT, but there are sales and import taxes. A 1% property tax exists for citizen landowners, and a 3% tax applies to rents. Foreigners cannot own land and must use land leases. IBC companies benefit from near-zero taxation on foreign flows, but this advantage is tempered by the lack of tax treaties and participation in the CRS, which imposes transparency.
The Marshall Islands remains a singular jurisdiction, very advantageous on paper for international income and assets, but practically constraining for daily life, mobility, and land ownership. For an expat, the challenge is to thoroughly understand this gap between the simplified image of a tax haven and the legal, economic, and practical realities on the ground, in order to build a settlement and investment strategy that is both effective and compliant.
Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
