How income tax works in Marshall Islands
Marshall Islands income tax is primarily a tax on wages and salaries rather than a broad personal income tax. The 2025 amendment removed the former 16% top rate and applies from October 1, 2025.
The general rates are 8% on the first $10,400 of annual wages and 12% on the amount over $10,400. The Ministry of Finance states that wages of $8,320 or less are exempt, but a worker earning more than $8,320 is not eligible for that exemption.
Employers withhold wage tax as wages are paid and generally remit it every four weeks or 13 times a year. A worker paid by an employer without a local place of business, including certain US government payments, may have to file and pay directly if tax was not withheld.
Income tax brackets in Marshall Islands
| Bracket | Rate | Notes |
|---|---|---|
| Annual wages up to $8,320 | 0% | Ministry exemption; confirm payroll treatment |
| Above $8,320 to $10,400 | 8% | The exemption is lost once the threshold is exceeded |
| Annual wages above $10,400 | 12% | Applied above the first statutory band |
Tax rates at a glance
- Low-income exemption
- Up to $8,320Threshold
- First wage band
- 8%
- Wages over $10,400
- 12%
- US contractor personnel
- 5%
- Retirement contribution
- 8% employee + 8% employer
- Health Fund contribution
- 3.5% employee + 3.5% employer
Who benefits most
These profiles tend to benefit most when the rules match their real residence, payroll and business setup.
EmployeesLocal businessesUS contractorsMaritime workersEmployers with payroll
Watch out for
- The $8,320 exemption is not a normal graduated allowance. The Ministry of Finance says employees earning more than $8,320 are not eligible for it, creating a threshold effect that payroll systems must handle carefully.
- Wage tax is separate from social insurance. Retirement contributions are 8% for the employee and employer on covered wages up to $10,000 per quarter, while Health Fund contributions are 3.5% each on covered wages up to $5,000 per quarter.
- The Income Tax Act contains source and apportionment rules for services performed in and outside the Republic. A cross-border worker should not assume that payment from a foreign employer automatically removes Marshall Islands tax.
- The 5% US contractor rate is a special rule for qualifying contractor personnel. US citizens, nationals, or permanent resident aliens who do not qualify for that treatment can fall back into the general wage-tax rules.
Frequently asked questions
Is there personal income tax in Marshall Islands?
Yes. Marshall Islands has a wage and salary tax. The current general rates are 8% and 12%, with a low-income exemption threshold and a separate 5% rule for qualifying US contractor personnel.
Does Marshall Islands tax foreign income?
The system is focused on Marshall Islands-source wages and business activity, not a broad worldwide personal income base. Services performed in the Republic and local-source activity can still be taxable, so residence and source facts matter.
How is wage tax collected?
Employers generally withhold the tax from each payroll and remit it to the Secretary of Finance. Individuals paid by an employer without a local place of business may need to file and pay directly.