As of November 1, 2023, the Trust Company of the Marshall Islands has implemented a penalty fee of USD 500 for entities failing to adhere to Economic Substance Reporting (ESR). This move comes as part of the country’s commitment to upholding international standards and remaining in the European Union’s whitelist.
Reporting obligation
Since 2020 the companies incorporated under laws of the Marshall Islands have the reporting obligation. All entities (“non-resident domestic entities”) submit the economic substance declaration to the Registrar of Corporations on an annual basis. Along with the obligatory reporting every company is granted a special certificate (“certificate of compliance”). The certificate is issued after 72h of filing the report – and sent to the email address mentioned during the reporting.
Non-compliance consequences
The introduction of this penalty fee marks a significant change in the landscape of regulatory compliance for companies registered in the Marshall Islands. Entities that are 90 days away from being annulled due to non-compliance with ESR will now face this financial penalty if they fail to submit the required information through the ESR.
One of the key changes includes the revision of the ESR Suspension of Services letter. This letter will now explicitly state the imposition of the USD 500 penalty fee if an ES report is not submitted by the specified date, which is 90 days before the potential annulment of the company. This provides affected entities with a six-month window from the time services are suspended to rectify their compliance status.
Furthermore, in the event that an ESR is not submitted by the specified date, an ESR Reminder of Suspension of Services letter will be issued, confirming the imposition of the penalty fee on the account.
EU’s Approval
The introduction of the penalty fee for non-compliance with ESRs represents a proactive step towards reinforcing regulatory compliance within the Marshall Islands.
By aligning with international standards, particularly those set by the European Union, the country aims to safeguard its reputation and remain on the EU’s whitelist. Let’s remind that in October 2023, the Council of the EU issued a press release removing the Republic of the Marshall Islands from the list of non-cooperative jurisdictions “as it has made significant progress in enforcement of economic substance requirements”.
It serves as a reminder to companies registered within its jurisdiction of the importance of adhering to economic substance regulations, not only for their own compliance but also to uphold the country’s standing on the international stage.
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