Editor’s note: Section 2 of PL 13-71 added a new chapter 3 entitled Income Tax Regime for FSM Corporations.
This chapter has been subdivided into subchapters to improve its organization. Also, the numbering of the sections in PL 13-71 indicated an intent to subdivide this chapter into subchapters.
Every major corporation shall prepare and file with the Secretary an annual income tax return on a form approved by the Secretary, which annual income tax return shall be signed by the major corporation’s authorized representative. This form shall be filed with the Secretary, together with a copy of the major corporation’s financial statements and any other required information or documents as prescribed by the Secretary in regulations, in a form acceptable to the Secretary, by the last day of the sixth month period following the last day of the major corporation’s taxable year.
Cross-reference: The statutory provisions on Corporations and Business Associations are found in title 36 of this code. The statutory provisions on Commercial Law are found in title 33 of this code.
(1) A major corporation shall, pay 50 percent (50%) of the tax it paid for the income of previous fiscal year, if any, hereinafter referred to as “Tax Deposit”, to the FSM by the end of the eighth (8th) month of the current fiscal year.
(2) A major corporation which pays an amount less than the Tax Deposit shall pay interest on the delinquent tax balance of one-half of one percent (0.5%) for each full month until the full amount is paid.
(3) A major corporation that does not have a previous fiscal year to determine its Tax Deposit either because it is newly formed or is redomesticating into the FSM, be exempt from the payment of Tax Deposit and any filing requirements pertaining to the Tax Deposit.
(4) A major corporation shall complete and submit to the Department of Finance and Administration an annual statement declaring the taxable income with permitted deductions and exemptions, hereinafter referred to as “Tax Return”, by the last business day of the sixth month period following the last day of the major corporation’s fiscal year. The annual statement shall be accompanied by one of the following:
(a) Any additional tax payment, after the subtraction of the Tax Deposit, due as shown on the Tax Return of the major corporation shall be paid by the last business day of the sixth month period following the last day of the major corporation’s fiscal year.
(b) If the major corporation pays, including the Tax Deposit by the end of the eighth (8th) month during the fiscal year, as per paragraph (a) of this subsection, an amount less than the tax due as shown on the annual tax return by the last business day of the six month period following the last day of the corporation’s fiscal year, it shall pay interest on the delinquent tax balance of one half of one percent (0.5%) for each full month until the full amount is paid.
(5) Should the Tax Deposit paid by the major corporation exceed the total annual income tax amount shown on the Tax Return resulting in overpayment of tax, then the major corporation shall be entitled to their rights conferred under section 332, chapter 3 of this title. The major corporation shall apply to the Department of Finance and Administration for either of the following tax treatment options provided under section 332 of this chapter by indicating their choice in the Tax Return form:
(a) To have the overpaid tax amount refunded in full, in which case, the Department of Finance and Administration shall credit the major corporation’s bank account within a two (2) month period from the last business day of the sixth month period following the last day of the major corporation’s fiscal year;
(b) To have the overpaid tax amount credited to any tax payments by the major corporation to the Federated States of Micronesia.
A corporation incorporated in the Federated States of Micronesia that only holds, buys, sells, transfers or otherwise transacts with assets or property located outside of the FSM, including but not limited to, businesses, shares, stocks, bonds, annuities, treasury bills, partnership units or trust units, is not engaging in business in the Federated States of Micronesia or a business operating in the Federated States of Micronesia for the purposes of section 323 of this chapter or title 32, chapter 2: the Foreign-Investment Act of this code.
Source: PL 13-71 § 16.
Cross-reference: Title 32 of this code is on Business Regulation. The statutory provisions on Corporations and Business Associations are found in title 36 of this code. The statutory provisions on Commercial Law are found in title 33 of this code.
Editor’s note: This section was originally numbered 360, but has been renumbered here as 353 to be consistent with standard code formatting.
The words “Federated States of Micronesia” in the section heading is shortened to “FSM”.
The words “the Code of the Federated States of Micronesia” is replaced with “this code” to comport with standard code formatting.