Wherever you take your business, payroll will play a critical role in your company’s compliance and your employees’ compensation. When you expand to the Marshall Islands, you’ll need to ensure you follow all taxation laws in the country. Globalization Partners facilitates the process with payroll outsourcing.
If you manage an offshore company in the Marshall Islands, your employees, directors, and shareholders are exempt from any personal income tax. When you run a company within the republic, you must comply with the taxation laws detailed in the Income Tax Act of 1989.
Employers are responsible for deducting income tax from employee paychecks. For the first $10,400, employees who are residents must pay 8 percent income tax. Any annual earnings higher than that amount will be subject to a 12 percent tax. For nonresidents working within the republic, employers must deduct a 10 percent tax from their earnings.
As an employer, you’re also responsible for deducting social security contributions from employee paychecks. Employers should make these contributions quarterly, and the employer and worker both contribute 8 percent. The maximum quarterly taxable earnings are $10,000. This fund will support an employee’s retirement and health needs.
Marshall Islands Payroll Options
When you handle your international payroll, you’ll need to find an ideal management method. You have a few options, all of which include different levels of legal risk and use of company resources. Your choices include:
- Internal: If you have a subsidiary on the islands, you may choose to create an internal payroll department to handle employee paychecks. This structure is ideal for maintaining control, but it requires many company resources to establish. You’ll also be responsible for compliance.
- Payroll processing company: When you don’t have the resources for an internal unit, you can work with a processing company in the country. These professionals will have knowledge of payroll laws, but your business will still be liable for any legal mistakes they make.
- Remote: For the most cost-effective arrangement, managing your payroll remotely can be an option. This structure relies on your payroll team at home handing international paychecks, and they’ll need to stay organized to keep regulations separate and avoid noncompliance.
- Globalization Partners: As your global PEO, your employees will exist under our payroll. This setup allows us to handle all tax concerns, taking the legal risks off your shoulders. You’ll have peace of mind knowing you’re compliant, and your employees will receive the right payment on time every pay period.
How to Set Up Marshall Islands Payroll
Setting up payroll will look different depending on the structure you choose to work with. If you opt for an internal department, you’ll need to establish a subsidiary in the country first. This process relies on getting clearances from the Registrar of Corporations, and you’ll need to create a company charter. The entire setup process may take a few weeks.
Every payroll method requires the correct identification numbers. The Social Security Administration supplies social security numbers (SSNs) and employer identification numbers (EINs) for tax and contribution purposes.
An SSN is required to obtain any position of employment, whereas the EIN applies to both social security contributions and income tax. Make sure to file this information for every employee.
Entitlement and Termination
The country does not have any national regulations for entitlement upon termination, though they do have some guidelines for retirement. Employees who terminate employment for retirement purposes are entitled to the social security contributions they made over the course of their service.
Choose Globalization Partners for Payroll Outsourcing
With Globalization Partners, managing payroll is risk-free. We handle all the necessary processes, including tax and contributions, and we’ll include your employees’ payments in your monthly invoice for our services. Reach out to our team to learn more or get started.