Contributions
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.
Taxable Earnings
Taxable earnings are compensation of any kind, including without limitation any salary, wage, bonus, tip, stipend, 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 6, 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
8% for wages paid from March 6, 2017 to present, based on a maximum of $10,000 quarterly taxable wages
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
Classification and reporting responsibilities of employers:
1. Corporation, national & local governments, and other entities not classified as self- employed workers
The employer shall deduct the SS & HF tax contributions of its workers through payroll deduction. This amount is remitted every quarter to MISSA, together with an equivalent amount representing the employer’s share.
2. Self -Employed Workers with one or more employees
Self-employed individuals who have one or more employees subject to SS & HF tax shall report based on their actual wages or at twice the wages of the highest paid worker in the quarter the employees whose earnings were reported. In the event that there are two self-employed individuals in the same business, the total taxable wages shall be divided by 2 and both employers must report by that amount.
3. Self-Employed Workers with no employees
Any self-employed individual who operates a business with no employees, shall report himself based on his gross revenue per quarter. To determine the amount to be reported by the self-employed worker without employees, the amount of gross revenue or sales, (GRT form from the Revenue and Taxations office), during the calendar quarter shall be multiplied by 75%. This amount will be the employer’s calculated wage to be used for the reporting quarter.
Example: If Gross revenues for the quarter is $1,000:
$1,000.00 x 75% = $750.00
Tax Compliance
Reporting Period
All employers are required to file and pay the Quarterly SS & HF tax returns and contributions within the ten-day period following the end of each quarter ending on:
March 31st;
June 30th;
September 30th;
and December 31st
Reporting Deadlines shall be:
1st Qtr. – April 10th;
2nd Qtr. – July 10th;
3rd Qtr. – October 10th;
and 4th Qtr. -January 10th.
Note: if the quarterly deadline falls on a weekend or holiday/non-working day, it will be extended to the next working day.
Contractor or Employee:
Any individual who has entered into a contract as an independent contractor with an employer, shall not be required to be reported by the contracting employer. However, the contractor shall be subject to SS & HF taxes in his own right, subject to the provisions of self-employment (with or without employees) reporting procedures.
To determine whether an individual is an employee or an independent contractor, the presence of the common law elements used to establish an employee/employer relationship must be examined. They include the following:
- the right to hire the individual
- the right to establish the method and amount of compensation
- the right to direct the individual activities in their employment capacity
- the right to discipline or promote the individual
- the right to terminate the individual.
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.