Northern Mariana IslandsTax Obligations Detailed

In the Northern Mariana Islands (CNMI), employers face specific tax obligations for 2025, encompassing federal taxes like FICA, Medicare, and FUTA, alongside CNMI-specific taxes like Chapter 2 (Wage and Salary Tax) and Chapter 7 (Territorial Income Tax).

Federal Taxes

• FICA (Social Security):
  • Employee/Employer Tax Rate: 6.20%
  • Maximum Taxable Earnings: $176,100
• FICA (Medicare):
  • Employee/Employer Tax Rate: 1.45%
  • Maximum Taxable Earnings: No limit
  • Additional Medicare Tax Withholding (Employee Only) on Wages > $200,000: 0.90%
• FUTA (Federal Unemployment Tax - Employer Only):
  • Taxable Wage Base: $7,000
  • Tax Rate: 6.00%
  • Maximum Credit: 5.40%
  • Net Tax Rate: 0.60%

CNMI Taxes

• Chapter 2 Tax (Wage and Salary Tax): This tax is calculated using a percentage based on the annual gross wages with specific withholding tables provided by the CNMI Division of Revenue and Taxation. All employees working in the CNMI are subject to this tax, irrespective of their federal tax exemptions.
• Chapter 7 Tax (Territorial Income Tax): This tax mirrors the U.S. income tax system with its own set of deductions and credits. Employers withhold this tax based on the employee's W-4 form and the federal withholding formula. A non-refundable credit for the Chapter 2 tax withheld is allowed against the Chapter 7 tax liability.

Other Considerations

• Federal employers in the CNMI withhold CNMI income taxes instead of federal income taxes for employees whose regular place of federal employment is in the CNMI. They are also required to file quarterly and annual reports with the CNMI Division of Revenue and Taxation.
• The CNMI has a separate income tax system from the U.S., influenced by both the U.S. Internal Revenue Code and local tax laws. CNMI residents generally file tax returns with the CNMI government, not the IRS, and this applies to all income sources for residents and CNMI-sourced income for non-residents.
• There are specific rebate provisions in the CNMI tax system, including for local taxes on wages and salaries exceeding $50,000 at a 9% rate and on business gross revenue exceeding $750,000 at a 5% rate. These can be claimed as non-refundable credits against CNMI territorial income tax liability.

Note: This information is current as of February 5, 2025, and may be subject to change. Consult with a tax professional or the CNMI Division of Revenue and Taxation for the latest updates and specific guidance.

In the Northern Mariana Islands, employers withhold taxes from employee wages for both federal and local taxes. These include Social Security, Medicare, and Northern Mariana Islands Territorial Income Tax.

Federal Taxes

• Social Security Tax: 6.2% of the employee's gross wages up to a limit of $176,100 for 2025.
• Medicare Tax: 1.45% of the employee's gross wages, with no wage base limit. An Additional Medicare Tax of 0.9% applies to wages above $200,000 for single filers, $250,000 for joint filers, and $125,000 for married filing separately.

Northern Mariana Islands Territorial Income Tax (NMTIT)

NMTIT uses the same tax rates and standard deduction amounts as the federal income tax system for the respective year. The standard deduction amounts for 2025 are:

• Single filers: $15,000
• Married filing jointly: $30,000
• Head of Household: $22,500

Form W-2CM

Employers must file Form W-2CM with the CNMI Division of Revenue and Taxation by February 28, 2025. Copies must also be provided to employees by January 31, 2025, and to the Social Security Administration by January 31, 2025.

Other Considerations

• Federal Income Tax Withholding: Employers also withhold federal income tax based on the employee's Form W-4.
• Household and Election Workers: Specific rules apply to the taxation of household employees (earning $2,800 or more in 2025) and election workers (earning $2,400 or more in 2025).

It is important to note that this information is current as of February 5, 2025, and may be subject to change. Consulting a qualified tax professional is always recommended for the most accurate and up-to-date guidance.

In the Northern Mariana Islands, the current tax system mirrors the U.S. federal tax laws, but returns are filed with the local Division of Revenue and Taxation. There is no Value Added Tax (VAT) or Goods and Services Tax (GST) in the Northern Mariana Islands.

Income Tax

• Residents of the Northern Mariana Islands generally file a local tax return, mirroring U.S. federal tax laws. This encompasses income earned within the Commonwealth.
• U.S. citizens residing in the Northern Mariana Islands do not file federal income tax returns if they qualify for rebates and other tax incentives offered within the Commonwealth.
• Non-resident aliens earning income in the Northern Mariana Islands must file both a Commonwealth tax return and a U.S. tax return (Form 1040NR).

Business Taxes

• The Business Gross Revenue Tax (BGRT) applies to businesses operating in the CNMI. Manufacturers exporting products overseas are exempt. The BGRT has a tiered tax rate structure:
  • $0 - $5,000: No tax
  • $5,001 - $50,000: 1.5%
  • $50,001 - $100,000: 2%
  • $100,001 - $250,000: 2.5%
  • $250,001 - $500,000: 3%
  • $500,001 - $750,000: 4%
  • Over $750,000: 5%
• A 3% surtax on gross revenues from non-residential construction projects costing $350,000 or more is planned to take effect from January 1, 2025. Sub-contractors are not required to pay this surtax.
• Excise Tax is levied on various goods and services, including:
  • Agricultural Commodities: 1%
  • Aviation Fuel: 3%
  • Beer and Malt Beverages: $0.02 per fluid ounce
  • Boats and Yachts over $500,000: 5.75%

Other Relevant Tax Information

• Individuals bringing goods for personal use are exempt from excise tax if the total value is $1,000 or less.
• U.S. immigration laws are being implemented in the CNMI with a transition period ending December 31, 2029.

Please note that this information is current as of February 5, 2025, and might be subject to change. Consulting with a tax professional is advised for the most up-to-date details.

The Commonwealth of the Northern Mariana Islands (CNMI) offers various tax incentives for businesses and individuals.

Rebates and Abatements

• Tax Rebates: The CNMI offers tax rebates on income tax, ranging from 50% to 90% depending on the income bracket. There's a 90% rebate on the first $20,000 of the "rebate base," 70% on the next $80,000, and 50% on any amount exceeding $100,000. The rebate base is generally calculated as the territorial income tax liability, minus specific deductions.
• Qualifying Certificate (QC) Program: This program provides substantial tax relief through rebates and/or abatements to investors in designated industries. Benefits can reach up to 100% on various CNMI taxes, including income tax, business gross revenue tax, excise tax, and more, for a period of up to 25 years. Factors like job creation, location, and impact on existing industries are considered when determining the benefits granted. Businesses located within designated Tax Free Trade Zones can also qualify for 100% rebates on all taxes.
• Other Rebates: A full 100% income tax rebate is available for Free Trade Zone licensees who employ resident workers and generate income from domestic sources.

Tax Credits

• Individuals with Disabilities Tax Credit: Employers who hire individuals with disabilities may be eligible for a nonrefundable tax credit.

Low-Income Housing Tax Credit (LIHTC)

The Low-Income Housing Tax Credit (LIHTC) program encourages the development of affordable rental housing. Project owners who allocate units for low-income families or individuals can receive federal tax credits. The Northern Marianas Housing Corporation (NMHC) administers this program within the CNMI.

Other Tax Incentives

• No Sales Tax: The CNMI does not impose sales tax.
• No Property Tax: The CNMI does not impose property tax.
• Generalized System of Preferences (GSP): Manufacturers in the CNMI may qualify for duty-free exports to the U.S. and international markets under the Headnote 3(a) provision, provided there is a minimum of 30% value-added processing within the CNMI.

General Tax Information

CNMI's tax system mirrors the U.S. Internal Revenue Code but with lower rates and unique local taxes like the Business Gross Revenue Tax. As of 2025, income tax constitutes a significant portion of the CNMI's revenue, around 66%. Recent economic developments, such as planned military investments, are expected to influence the economy and tax revenues in the coming years.