Other earnings
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Overtime pay is considered part of the employee’s basic salary, and therefore, subject to Retirement and Health Fund taxes.
All bonuses, including but not limited to Christmas, year-end/mid-year, productivity, profit sharing, performance and signing bonuses, are considered taxable wages and therefore, subject to Retirement and Health Fund taxes.
All tips are considered taxable wages and therefore, subject to Retirement and Health Fund taxes.
In general, stipend of less than $250 per quarter is tax exempt. Likewise, stipend paid to patients traveling off-island for medical treatment is tax exempt.
In order to be treated as tax exempt, the stipend of non-citizen volunteers must meet the following requirements:
- The employer must provide MISSA with a valid copy of the volunteer’s work permit issued by the RMI Division of Labor (if required) or an entry permit or visa issued by the RMI Immigration Office (if required);
- The work permit, entry permit or visa, if applicable, or any other supporting document must clearly indicate that the worker is, in fact, a volunteer; and
- The amount of stipend must not exceed $500 per month or the standard stipend given by embassies to their volunteers in the Marshall Islands, whichever is less.
In order to be treated as tax exempt, the per diem or travel allowance must:
- be part of the employment contract;
- not exceed two times (2X) the approved per-diem rates for government employees traveling off-island and in the outer-islands; and
- the trip is paid by the employer
All commissions are considered taxable wages and therefore, subject to Retirement and Health Fund taxes.
In order to be treated as tax exempt, the sitting fee must meet the following requirements:
- The recipient must be an employee, officer, board member or official representative of the entity who paid the sitting fee;
- The entity is an organization duly registered with MISSA; and
- The recipient must have attended a regular or special board meeting or any other meeting similar in nature to a board meeting.
In general, transportation allowance is considered taxable wages and therefore, subject to Retirement and Health Fund taxes.
However, transportation allowance may be considered tax-exempt if:
- The amount was paid as a reimbursement for car rental, fuel used, taxi fare, airfare and related travel expenses;
- The employee has really taken a trip or trips outside the place of business; and
- The nature of the employee’s functions requires him or her to travel outside the employer’s place of business.
In order to be treated as tax exempt, the fuel allowance must meet the following requirements:
- The employee must be driving an employer-owned or personally owned vehicle that is used in the ordinary course of the employer’s business;
- The employee is the one paying for the fuel of the said vehicle; and
- The amounts being claimed as fuel allowance are covered by official receipts or any proof of fuel purchases.
- Meals provided by employers to employees are not included in employee earnings and are not taxable by MISSA
- However, cash payments, payment by check, or meal allownces are included in employee earnings and are taxable by MISSA
Hazard allowance is considered taxable wages and therefore, subject to Retirement and Health Fund taxes.
Night differential is considered taxable wages and therefore, subject to Retirement and Health Fund taxes.
Definition and other conditions:
“Gross salary/compensation” includes the employee’s basic salary, overtime pay and other earnings received during the taxable period, except for housing allowance allowed by MISSA.
“Other earnings” include bonuses, tips, stipends, per diem, transportation and fuel allowances, commissions, sitting fees, food allowance, hazard allowance, night differential and other compensation in cash or in kind, but exclude housing allowance and basic salary/overtime pay.
The combined other earnings that may be allowed as non-taxable wages must not be more than 50% of the employee’s basic salary and overtime.
*the combined other earnings does not include housing allowance, sitting fees, allowable per diem, travel and fuel allowances.