10 practical steps to starting business in the FSM
Step 1. Action:Determine the legal form of the businesss
Main Responsibility: Inventor
Businesses may operate in the FSM regardless of their legal form (sole proprietorships, partnerships, corporations, etc) and the laws do not require local citizens to share ownership in a foreign business. However, National and State Governments encourage partnerships and joint ventures with local partners. In some jurisdictions (Pohnpei and Yap), certain sectors that are reserved for local citizens are opened to a foreign investor who choose to form joint a venture or partnership with FSM citizens.
Step 2. Action:Establish the company name
Main Responsibility: Registrar of Corporations/investor
Step 3. Action: Register or incorporate your company
Main Responsibility: Registrar of Corporations/investor
- Incorporation: an investor who chooses to do business in the FSM under a company formed under the laws and regulations of the FSM, will be required to incorporate the new company. In this regard, the investor will be required to provide, among other things, the articles of incorporation and bylaws of the company to be established. Through this process, the investor will obtain a Certificate of Incorporation.
- Registration: an investor who chooses to do business in the FSM under a company already incorporated elsewhere, (as is the case for most foreign investments), will be required to register the existing company with the Registrar of Corporations. In this case, the investor will be required to provide the articles of incorporation, bylaws, and a certificate of good standing issued by authorities of the country where the company was incorporated. In the case of captive insurance companies, the investor will be issued a Certificate of Redomestication.
Additional information on establishing a company name and registering or incorporating a company in the FSM can be obtained by contacting the FSM Registrar of Corporations at telephone number: (691) 320-8089, e-mail: fsmroc@mail.fm or by visiting the following website: http://www.fsmroc.fm
Step 4. Action: Obtain a foreign investment permit
Main Responsibility: FSM Dpt of Resources and Development/State competent agency/investor
- Who is interested? Any company wholly owned by a non-FSM citizen or a company in which a foreign investor owns more than 30% of substantial ownership of interest in the company. Thus, this step does not apply if a foreign investor owns less than 30% of substantial ownership of interest, or if the business is wholly owned by an FSM citizen. Major corporations as defined by the FSM laws are exempted from the requirement to obtain a foreign investment permit.
- Basic conditions for obtaining a foreign investment permit
Conditions applicable to all applicants (character criteria)Specific conditions attached to certain economic activities
1. Not have been convicted of a felony or crime of moral turpitude in the FSM, any State of the FSM, or any foreign jurisdiction during the prior 10 years;
2. Not ever have a foreign investment permit cancelled by the FSM or any of its States; and
3. Not be indebted to any government, citizen or resident of the FSM more than 30 days after adjudication of the debt by final and unapplealable decision of a FSM state or national court or administrative body, except to the extent that the delay in paying the debt is required by bankruptcy or other laws, or because payment over time is expressly permitted under the terms of the applicable decision.
- Activities regulated by the FSM National Government
- Insurance:a $100,000 deposit in cash, negotiable securities, or bond from a corporate surely, or a combination totaling $100,000; and a verified statement of all commercial activity transacted in the FSM during the previous financial year.
- Banking other than commercial banking: not yet determined
- Activities regulated by the State Governments
- Specific conditions attached to activites regulated by State Governments are specified in their respective foreign investment acts and regulations.
- Current applicable Foreign Investment Permit (FIP)FeesThe table below provides the current applicable fees in relation to the application and processing of FIP in each of the five jurisdictions.
| Nature of the Fee |
|
Yap |
Chuuk |
Pohnpei |
Kosrae |
| FIB Application |
None |
US$250.00 Non-refundable |
US$250.00 Non-refundable |
US$250.00 Non-refundable |
US$150.00 Non-refundable |
| Issuance of FIB |
US$50.00 |
none |
none |
none |
none |
| Annual Renewal of FIB |
US$50.00 |
US$100.00 |
US$150.00 |
US$250.00 |
none |
| Modification of FIB |
US$50.00 |
US$100.00 |
US$250.00 |
US$250.00 |
US$100.00 |
Step 5. Action: Obtain licenses/authorizations from relevant agencies
Main Responsibility:Relevant National and States agencies/investor
- import/export license for businesses importing and exporting goods
- insurance license for insurance companies
- banking license for banking
- fishing license for fishing in the FSM EEZ
- health certificate, food establishment permit, and beverage licenses for food and beverage businesses
- shipping license for sea transport
- air operator certificate and foreign air carrier permit
- telecommunication or communication license for telecommunication and communication.
Step 6. Action: Obtain licenses from relevant municipal governments
Main Responsibility:Relevant municipal governments/investor
Additional information on obtaining a foreign investment permit, licenses from other relevant agencies and municipal governments can be obtained by contacting the FSM Investment Promotion Unit at telephone number: (691) 320-2620/2646/5133; fax: (691) 320-5854, e-mail: fsmrd@fsmrd.fm, or by visiting the following website: http://www.fsmrd.fm.
Step 7. Action: Register for Social Security
Main Responsibility:FSM Social Security Administration/investor
After all permits, relevant licenses and authorizations are obtained, investors are required to obtain a social security number. A US$10.00 fee applies. If the company is a foreign company, the social security number of the Members of the Board of Directors is also required.
Additional information on the social Security can be obtained by contacting the FSM Social Security Administration at telephone number (691) 320-2706, e-mail: fsmssa@mail.fm, or by visiting the following website: http://www.fm.fsmss.
Step 8. Action: Recruit Workers
Main Responsibility: Division of Immigration and Labor, FSM Dpt of Justice/investor
Additional information on hiring workers in the FSM can be obtained by contacting the FSM Immigration and Labor at telephone number: (691) 320-2605, e-mail: ImHQ@mail.fm
Step 9. Action: Open a domestic bank account
Main Responsibility: Banks/investor
Additional information on opening a bank account in the FSM can be obtained by contacting the relevant bank at the following telephone number: Bank of the FSM, telephone number: (691) 320-2724, e-mail: pni@bofsm.fm; Bank of Guam, telephone number: (691) 320-2550/2446.
Step 10. Action: Pay Taxes
Main Responsibility: Division of Revenue and Taxation, FSM Dpt of Finance and Administration
Additional information can be obtained by contacting the FSM Customs and Tax Administration and FSM Treasury (FSM Department of Finance and Administration) at telephone number: (691) 320 2826.
Numerous Investment Incentives available
National and State Governments in the FSM understand the challenges facing infant industries and the importance of providing those investment that qualify, with a wide range of support measures so as to enable them to mature and become competitive. Investors can take advantage of the following incentives for the entire duration of their investment:
Preferential access arrangements with major international markets
In addition to investment incentives, investors can also take advantage of the preferential treatment granted to products originating in the FSM in the US (Amended Compact of Free Association), EU (Cotonou Agreement), Australia and New Zealand (South Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA)).
Finally, the FSM is a signatory to the Pacific Island Trade Agreement on Trade in Goods and its Protocol on Trade in Services, which provide greater preferential market access to goods originating in the FSM and services supplied by FSM providers or companies.
Furthermore, the FSM, the Republic of the Marshall Islands and the Republic of Palau are negotiating the establishment a sub-regional trade and economic initiative, which will ultimately encompass all Micronesian Countries and Territories (Kiribati, Nauru, Guam and CNMI) to form a market of approximately 600,000 consumers.
