The Republic of the Marshall Islands (RMI) Economic Substance Regulations, 2018 (the “ESRs”) promulgated by the Registrar of Corporations responsible for non-resident domestic entities (the “Registrar”) entered into force on the 1^st of January, 2019 and were additionally amended on the 21^st of February, 2019 and on the 29^th of August, 2019. These regulations are applicable to all “relevant entities” engaged in a “relevant activity.” Compliance with the ESRs is required for financial periods commencing on or after the 1^st of January, 2019, with reporting requirements to begin in 2020.

According to the ESA ACT (2018) all non-resident domestic entities (NRDEs) and foreign maritime entities (FMEs) must submit the ESR report annually.

Which entities are required to have economic substance?

All non-resident domestic entities (NRDEs) and foreign maritime entities (FMEs) which fit the definition of “relevant entity” and which derive income from a “relevant activity” are within the scope of the economic substance requirements with respect to any relevant activity.

Relevant activities are limited to:

(a) Distribution and service center business;

(b) Financing and leasing business;

(c) Fund management business;

(d) Headquarters business;

(e) Holding company business;

(f) Intellectual property business;

(g) Shipping business;

(h) Banking business; and

(i) Insurance business.

Each relevant activity is further defined in Section 2 of the ESRs.

ESA REPORT DEADLINE:

Each entity will have a term of 12 months as from their following anniversary date after the 1^st of July, 2020 to complete the first ESR Report. Each subsequent year, the deadline will be 12 months as from the entity’s anniversary date. All entities will receive notice of their reporting period and deadline with each annual invoice.