{"id":3014,"date":"2020-07-07T15:35:28","date_gmt":"2020-07-07T15:35:28","guid":{"rendered":"https:\/\/r02fi4ct8m.wpdns.site\/marshal-islands-economic-substance-regulations\/"},"modified":"2025-05-30T11:59:19","modified_gmt":"2025-05-30T11:59:19","slug":"marshal-islands-economic-substance-regulations","status":"publish","type":"post","link":"https:\/\/www.gstaxconsultants.com\/ru\/marshal-islands-economic-substance-regulations\/","title":{"rendered":"Marshal Islands: Economic Substance Regulations"},"content":{"rendered":"<p>Marshall Islands (RMI) have followed the other offshore jurisdictions with the introduction of economic substance regulations (the \u201cESRs\u201d) which were entered into force on 1 January 2019 and were further amended on 21 February 2019 and 29 August 2019. They are applicable to all \u201crelevant entities\u201d engaged in a \u201crelevant activity.\u201d Compliance with the ESRs is required for financial periods commencing on or after 1 January 2019, with reporting requirements commencing in 2020.<\/p>\n<p><!--more--><\/p>\n<p>As from 1 July 2020, the Republic of the Marshall Islands Economic Substance&nbsp;Regulations, 2018&nbsp;(ESR) Reporting Portal is open for reporting and the legal entities NRDEs (non-resident domestic entities&nbsp; and FME (foreign maritime entities&nbsp;)&nbsp;will have 12 months to file their ESR report with which they will declare if relevant activity is carried out from which income is derived and economic substance is required.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Relevant activities <\/strong><\/p>\n<p>Relevant activities are limited to:<\/p>\n<p>(a) distribution and service center business;<\/p>\n<p>(b) financing and leasing business;<\/p>\n<p>(c) fund management business;<\/p>\n<p>(d) headquarters business;<\/p>\n<p>(e) holding company business;<\/p>\n<p>(f) intellectual property business;<\/p>\n<p>(g) shipping business;<\/p>\n<p>(h) banking business; and<\/p>\n<p>(i) insurance business.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Economic Substance Requirements <\/strong><\/p>\n<ol>\n<li>A relevant entity must, for each financial period in which it derives income from a relevant activity, have economic substance in the Republic in relation to that relevant activity.<\/li>\n<li>Economic substance test. A relevant entity has economic substance in the Republic in relation to a relevant activity if the relevant entity:<\/li>\n<\/ol>\n<p>A. is directed and managed in the Republic in relation to that relevant activity<\/p>\n<p>B. having regard to the level of relevant activity carried out in the Republic:A has an adequate number of qualified employees in the Republic (whether or not employed by the relevant entity or by another entity and whether on temporary or long-term contracts);<\/p>\n<ul>\n<li>has an adequate physical presence in the Republic; and<\/li>\n<\/ul>\n<ul>\n<li>has an adequate amount of expenditure incurred in the Republic; and<\/li>\n<\/ul>\n<p>C. it carries out core income-generating activity in relation to that relevant activity in the Republic as set forth in Section 5 of these Regulations.<\/p>\n<ol start=\"3\">\n<li>Directed and managed test. The test in paragraph (2)(a) is met if:<\/li>\n<\/ol>\n<ul>\n<li>the relevant entity&#8217;s governing body meets in the Republic at an adequate frequency given the level of decision-making required of the body;<\/li>\n<li>at meetings described in sub-paragraph (a), there is a quorum physically present in the Republic;<\/li>\n<li>the minutes of meetings described in sub-paragraph (a) record the making of strategic decisions of the relevant entity at the meeting;<\/li>\n<li>the governing body of the relevant entity, as a whole, has appropriate knowledge and expertise to discharge its duties as a governing body; and<\/li>\n<li>the minutes of all governing body meetings and appropriate records of the relevant entity are kept in the Republic.<\/li>\n<\/ul>\n<ol start=\"4\">\n<li>A relevant entity satisfies the test in paragraph (2)(c) in relation to a relevant activity if its core income-generating activities in relation to that relevant activity are conducted by any other person only if:<\/li>\n<\/ol>\n<ul>\n<li>the relevant entity is able to monitor and control from the Republic the carrying out of the core income-generating activity by the other person;<\/li>\n<li>the core income-generating activity is carried out in the Republic; and<\/li>\n<li>the economic substance of the other person will not be counted multiple times by multiple relevant entities when evidencing their own substance in the Republic.<\/li>\n<\/ul>\n<ol start=\"5\">\n<li>Pure equity holding companies. A pure equity holding company is subject to a reduced economic substance test which is satisfied if the relevant entity confirms that it:<\/li>\n<\/ol>\n<ul>\n<li>complies with its statutory obligations under the Business Corporations Act, Revised Partnership Act, Limited Partnership Act, or Limited Liability Companies Act, as appropriate; and<\/li>\n<li>has adequate human resources and premises in the Republic for holding and managing equity participations in other entities.<\/li>\n<\/ul>\n<ol start=\"6\">\n<li>High risk IP business. In relation to a high risk IP business, the test in paragraph (2)(c) is presumed not to be met during a fiscal period unless the relevant entity provides sufficient evidence to rebut this presumption as provided in Section 6 of these Regulations.<\/li>\n<\/ol>\n<ol start=\"7\">\n<li>The Registrar may issue guidance on how the economic substance test may be met.<\/li>\n<\/ol>\n<ol start=\"8\">\n<li>The Registrar may determine that a relevant entity has not met the economic substance test during any financial period of the entity starting on or after 1 January 2019.<\/li>\n<\/ol>\n<p><strong>Core Income-Generating Activities<\/strong><\/p>\n<p>For purposes of these Regulations, &#8220;core income-generating activities&#8221; means activities of central importance to a relevant entity in terms of generating income and that are being carried out in the Republic including:<\/p>\n<p>(a) in relation to distribution and service center business:<\/p>\n<ol>\n<li>transporting and storing goods, components, and materials;<\/li>\n<li>managing stocks;<\/li>\n<li>taking orders; or<\/li>\n<li>providing consulting or other administrative services;<\/li>\n<\/ol>\n<p>(b) in relation to finance and leasing business:<\/p>\n<ol>\n<li>agreeing funding terms;<\/li>\n<li>identifying and acquiring assets to be leased (in the case of leasing);<\/li>\n<li>setting the terms and duration of any financing or leasing;<\/li>\n<li>monitoring and revising any agreements; or<\/li>\n<li>managing any risks;<\/li>\n<\/ol>\n<p>(c)&nbsp; in relation to fund management business:<\/p>\n<ol>\n<li>taking decisions on the holding and selling of investments;<\/li>\n<li>calculating risk and reserves;<\/li>\n<li>taking decisions on currency or interest fluctuations and hedging positions; or<\/li>\n<li>preparing relevant regulatory or other reports for government authorities and investors;<\/li>\n<\/ol>\n<p>(d) in relation to headquarters business:<\/p>\n<ol>\n<li>taking relevant management decisions;<\/li>\n<li>incurring expenditures on behalf of Group entities; or<\/li>\n<li>coordinating Group activities;<\/li>\n<\/ol>\n<p>(e) in relation to holding company business, all activities related to that business;<\/p>\n<p>(f) in relation to IP business:<\/p>\n<ol>\n<li>where the intellectual property asset is a:<\/li>\n<\/ol>\n<ul>\n<li>patent or an asset similar to a patent, research and development; or<\/li>\n<li>non-trade intangible (including a trademark), branding, marketing and distribution<\/li>\n<\/ul>\n<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2. in exceptional cases, except if the relevant activity is a high risk intellectual property business, other core income-generating activities relevant to the business and the intellectual property assets, which may include:<\/p>\n<ul>\n<li>taking strategic decisions and managing (as well as bearing) the principal risks related to development and subsequent exploitation of the intangible asset generating income;<\/li>\n<li>taking the strategic decisions and managing (as well as bearing) the principal risks relating to acquisition by third parties and subsequent exploitation and protection of the intangible asset; or<\/li>\n<li>carrying on the underlying trading activities through which the intangible assets are exploited leading to the generation of income from third parties;<\/li>\n<\/ul>\n<p>(g) in relation to shipping business:<\/p>\n<ul>\n<li>managing crew (including hiring, paying and overseeing crew members);<\/li>\n<li>overhauling and maintaining ships;<\/li>\n<li>overseeing and tracking deliveries;<\/li>\n<li>determining what goods to order and when to deliver them; or<\/li>\n<li>organizing, and overseeing voyages;<\/li>\n<\/ul>\n<p>(h) in relation to banking business:<\/p>\n<ul>\n<li>raising funds;<\/li>\n<li>managing risk including credit, currency and interest risk;<\/li>\n<li>taking hedging positions;<\/li>\n<li>providing loans, credit or other financial services to customers;<\/li>\n<li>managing regulatory capital; or<\/li>\n<li>preparing regulatory reports and returns; and<\/li>\n<\/ul>\n<p>(i) in relation to insurance business:<\/p>\n<ul>\n<li>predicting and calculating risk;<\/li>\n<li>insuring or reinsuring against risk; or<\/li>\n<li>providing client services.<\/li>\n<\/ul>\n<p><strong>Failure to Satisfy the Economic Substance Test<\/strong><\/p>\n<p>(1) Notice. If the Registrar determines that a relevant entity has not met the economic substance test as required for a financial period, the Registrar shall issue a notice to the relevant entity stating the reasons for its determination, any applicable penalties, and such other information as may be determined by the Registrar.<\/p>\n<p>(2) Penalties.<\/p>\n<ul>\n<li>A relevant entity that has not met the economic substance test as required under Section 4 of these Regulations for a financial period shall be liable to a fine not exceeding $50,000 for each relevant such financial period, revocation of its formation documents and dissolution, or both.<\/li>\n<li>If, for the financial period following a financial period in which a penalty, other than revocation of its formation documents, was imposed under subsection (a), the Registrar determines that a relevant entity has not met the economic substance test, the relevant entity shall be liable for a fine not exceeding $100,000, revocation of its formation documents and dissolution, or both.<\/li>\n<\/ul>\n<p><a href=\"https:\/\/www.gstaxconsultants.com\/wp-content\/uploads\/2020\/07\/Annex_Economic_Substance_Regulations_MARSHAL_ISLANDS.pdf\" target=\"_blank\" title=\"MARSHAL ISLANDS SUBSTANCE_ANNEX\">Download Annex <\/a><\/p>\n<p style=\"text-align: center;\">&nbsp;******************<\/p>\n<p>Globalserve Consultants Ltd is a licensed providers and accounting firm in Cyprus specializing in company registration in Cyprus and other jurisdictions, banking and accounting services. <a href=\"https:\/\/www.gstaxconsultants.com\/ru\/changing-fiscal-and-banking-international-environment-2\/\">Find more information in our services<\/a> and register to receive our newsletters and tax alerts www.gstaxconsultants.com<\/p>","protected":false},"excerpt":{"rendered":"<p>Marshall Islands (RMI) have followed the other offshore jurisdictions with the introduction of economic substance regulations (the \u201cESRs\u201d) which were entered into force on 1 January 2019 and were further amended on 21 February 2019 and 29 August 2019. They are applicable to all \u201crelevant entities\u201d engaged in a \u201crelevant activity.\u201d Compliance with the ESRs [&hellip;]<\/p>\n","protected":false},"author":7,"featured_media":3012,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_seopress_robots_primary_cat":"","_seopress_titles_title":"","_seopress_titles_desc":"","_seopress_robots_index":"","footnotes":""},"categories":[61],"tags":[],"class_list":["post-3014","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news-articles"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.gstaxconsultants.com\/ru\/wp-json\/wp\/v2\/posts\/3014","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.gstaxconsultants.com\/ru\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.gstaxconsultants.com\/ru\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.gstaxconsultants.com\/ru\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/www.gstaxconsultants.com\/ru\/wp-json\/wp\/v2\/comments?post=3014"}],"version-history":[{"count":1,"href":"https:\/\/www.gstaxconsultants.com\/ru\/wp-json\/wp\/v2\/posts\/3014\/revisions"}],"predecessor-version":[{"id":3257,"href":"https:\/\/www.gstaxconsultants.com\/ru\/wp-json\/wp\/v2\/posts\/3014\/revisions\/3257"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.gstaxconsultants.com\/ru\/wp-json\/wp\/v2\/media\/3012"}],"wp:attachment":[{"href":"https:\/\/www.gstaxconsultants.com\/ru\/wp-json\/wp\/v2\/media?parent=3014"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.gstaxconsultants.com\/ru\/wp-json\/wp\/v2\/categories?post=3014"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.gstaxconsultants.com\/ru\/wp-json\/wp\/v2\/tags?post=3014"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}