I. INTRODUCTION
At the meeting of the EU Code of Conduct Group held on October 3, 2023, Member States positively assessed the Republic of the Marshall Islands’ implementation of tax procedure requirements. As a result, the Economic and Financial Affairs Council (ECOFIN) of the European Union removed the Republic of the Marshall Islands from the EU List of non-cooperative tax jurisdictions. The Republic of the Marshall Islands entered into an open and transparent dialogue with the European Union and emphasized its efforts to ensure full clarification, implementation, monitoring, and enforcement of its commitments made to the EU.
Casten Nemra, the Finance Minister of the Republic of the Marshall Islands, expressed his great satisfaction upon hearing that the improved measures taken by the Marshall Islands in implementation were positively received by the European Union. He reiterated that the Republic of the Marshall Islands is fully committed to cooperating with the European Union and ensuring full compliance with the EU standards regarding the nature of economic transactions.
The Republic of the Marshall Islands’ Flag not only confirmed its prestige and reliability by being listed on the white list through the Paris and Tokyo Memorandums of Understanding but also maintained its Qualship 21 status with the United States Coast Guard for 19 consecutive years, an unprecedented achievement. Moreover, with this recent development, the Republic of the Marshall Islands’ Companies Register has demonstrated its reputation in the eyes of European Union countries and has helped to prevent any concerns regarding transactions with EU countries.
The sensitivity of the Republic of the Marshall Islands on such matters and the success it has achieved by being placed on the white list highlight the international reliability and reputation of ships under its Flag Administration and companies in its Companies Register, making them trustworthy in the eyes of Port States.
As a result, stakeholders will be exempt from certain stringent inspections by Port States due to their affiliation with the Republic of the Marshall Islands’ registry and flag administration. We believe this development cannot be overlooked in the maritime sector, where every minute matters. Undoubtedly, this progress is based on the measures taken by the authorities of the Republic of the Marshall Islands and the new procedures they have implemented, and understanding these new procedures is crucial.
II. NEW REGULATIONS, CHANGES IN PRACTICE, AND AUDIT PROCEDURES
As is well known, the Republic of the Marshall Islands, in accordance with the views and decisions of the European Union’s Commission on Ensuring Equality and Business Ethics in Commercial Taxation, conducts annual audits on the compliance of non-resident domestic entities, foreign maritime entities, and their economic transactions with the regulations of the Marshall Islands through a system called “ESR” (“Economic Substance Reporting”).
We would like to point out that the Authorized Registration Officers have the authority to request supporting documents and information related to the transactions indicated in the ESR report. Although this authority existed prior to the current measures and new regulations, it has become more commonly encountered in practice due to the Republic of the Marshall Islands’ new regulations and cooperation with the European Union.
III. MOST FREQUENT INNOVATION: REQUEST FOR TAX IDENTIFICATION NUMBER
The most common and applied method among the “improved implementation measures” mentioned by the authorities of the Republic of the Marshall Islands and Mr. Casten Nemra is the request for tax identification numbers or documents identifying these numbers for companies whose tax residence is outside the Marshall Islands, along with certain documents proving the fulfillment of tax obligations.
It is important to note that this document request is a formality applied by Registration Officers when deemed necessary. Failure to provide the requested information and/or documents may result in financial penalties for the company, closure of the company, or both a financial penalty and closure of the company, similar to the consequences of failing to complete the ESR report.
However, we would like to emphasize that this situation does not undermine the Republic of the Marshall Islands’ commitment to confidentiality and privacy, nor does it affect its sensitivity regarding such matters. We confirm for all relevant parties that the submission of requested documents to the Marshall Islands Register will not incur any additional tax liability and will not violate the privacy principles of the Marshall Islands.
Should you require more detailed information on this matter, please feel free to contact us through the contact details below at any time.
