Unregulated Companies in the Marshall Islands
The Marshall Islands, a Pacific Ocean state associated with the United States, comprises 29 atolls and numerous small islands. Despite its status as a business hub, companies incorporated in the Marshall Islands are under no obligation to prepare and file financial and tax reports, leaving them largely unregulated.
Lack of Financial Record-Keeping Requirements
According to the Business Corporations Act of 1990, which governs company activities in the Marshall Islands, firms are not required to submit financial statements or tax accounts to government authorities. However, experts recommend that companies maintain accounting records and prepare management accounts for their own benefit, as well as for investors and analysis purposes.
Economic Substance Legislation
The Marshall Islands introduced economic substance legislation on January 1, 2019, which applies to non-resident companies and foreign maritime companies controlled within its territory. Starting from July 2020, these entities are required to annually submit a report confirming they meet all economic substance requirements. The report must include information on the company’s financial results.
Reporting Requirements
The report must be filed within 12 months after the end of the reporting period, with late filing resulting in penalties or potentially even striking the company off the register. It is worth noting that audit services are not mandatory, and companies are also exempt from preparing consolidated reports.
Consequences for Non-Compliance
Overall, the lack of strict regulations and reporting requirements makes the Marshall Islands an attractive destination for businesses seeking flexibility and minimal compliance burdens. However, it is essential for companies to maintain accurate accounting records and consider economic substance reporting to avoid potential penalties and reputational damage.
- Companies must ensure they meet all economic substance requirements to avoid penalties or striking off the register.
- Audit services are not mandatory, but maintaining accurate accounting records is recommended.
- The lack of strict regulations makes the Marshall Islands an attractive destination for businesses seeking flexibility.