Taxable Earnings
General Provisions
Contributions to the Retirement Fund are governed by the Social Security Act of 1990, as amended by the Social Security (Amendment) Act 2016, which imposes a tax on the quarterly *compensation of every employee working in the Marshall Islands, including off-island employees of employers doing business or operating in the Marshall Islands.
*means compensation of any kind, including without limitation any salary, wage, bonus, tip, allowance or fee, paid by the employer to or on behalf of the worker in cash or in any other form, but not including:
- Payments made by the employer as a result of an accident or sickness of the worker (other than sick leave);
- Reimbursement of medical or hospitalization expenses;
- Payments made to or on behalf of the worker or his beneficiary from a trust or annuity;
- Reasonable stipends paid to volunteers of religious organizations, NGOs; and schools;
- Reasonable sitting fees for board members and elected officials;
- Earnings exempted by virtue of any international agreement to which the Republic of the Marshall Islands is a party;
- Reasonable per diem and travel allowances to the extent that they do not exceed any comparable Government rates;
- Rental housing allowance paid to an employee, not exceeding Two Thousand Two Hundred and Fifty ($2,250) per quarter provided it does not exceed three times the wages;
- Any payment in the form of scholarship, fellowship or stipend made to any employee while he is a full-time, bona fide student at an educational institution;
- Earnings received by a minister of the gospel, or clergyman from a religious group or organization;
- Earnings received by an employee for services performed or rendered in the capacity if a domestic or household employee for a private individual or family;
- Reasonable session allowances for elected officials; and
- Payments made in cash, or any form other than cash, for casual labor not exceeding one week in any month of a quarter if the work is not performed in the course of the employer’s trade or business. For purposes of this Chapter, earnings shall be computed to the nearest cent;
- Any payment to account of sickness or accident disability, or any payment of medical or hospitalization expenses, made by the employer, provided however, that normal wages or salaries paid to an employee for a period of time during which he is excused from work because of sickness shall not be excluded from wages and salaries under this paragraph; and
- Any payment made to or in behalf of an employee or to his beneficiary from a trust or annuity including distributions from qualified pension or deferred compensation plan trusts and annuities that are funded in whole or part by taxable wages.
Employees are required to contribute an amount equal to 7% of wages prior to March 6, 2017 and 8% thereafter. Every employer is required to contribute an amount equal to that contributed by employees. The Maximum quarterly taxable wages are $5,000 prior to March 9, 2017 and $10,000 thereafter.
Tax Rates Prior to March 6, 2017
Retirement Fund:
3% for wages paid from Oct. 1, 1987 to June 30, 1990
4% for wages paid from July 1, 1990 to Sept. 30, 1990
5% for wages paid from Oct. 1, 1990 to June 30, 1995
6% for wages paid from July 1, 1995 to March 31, 1997
5% for wages paid from April 1, 1997 to Dec. 31, 2000
7% for wages paid from January 1, 2001 March 5, 2017
Although MISSA does not administer the Health Fund, it remains to collect Health Fund contributions as follows:
Health Fund:
2.5% for wages paid from Oct. 1, 1991 to March 31, 1997
3.5% for wages paid from April 1, 1997 to Dec. 31, 2000
2.5% for wages paid from Jan. 1, 2001 to Dec. 31, 2001
3.5% for wages paid from January 1, 2002 to present, but based on a maximum of $5,000 gross taxable wages
Refunds
If a worker contributes on earnings in excess of the covered earnings, whether from one or more employers, and his contributions are withheld and paid to the Administration, the excess of the worker’s contributions during the four quarters ending December 31st shall be refunded by the Administration to the worker within ninety (90) days after that date.
No refund shall be made to any worker of any amount less than US$5.00.
No refund shall be granted to the employers of workers or self-employed workers referred to in Subsection 1, in respect of contributions paid by such employers or self-employed workers on account of wages paid by them to the workers, other thanto correct an error.