In the Commonwealth of the Northern Mariana Islands (CNMI), employers have several tax responsibilities. These include the Wage and Salary Tax (WST), Northern Mariana Territorial Income Tax (NMTIT), Social Security and Medicare Taxes, and the Business Gross Revenue Tax (BGRT).

Wage and Salary Tax (WST)

The WST is a graduated tax imposed on all wages and salaries earned within the CNMI. Employers are responsible for withholding and remitting WST on behalf of their employees. They must follow the detailed tables and instructions provided by the CNMI Division of Revenue and Taxation. Employers must file and make WST payments on a scheduled basis (monthly or quarterly) depending on the amount of tax liability.

Northern Mariana Territorial Income Tax (NMTIT)

The NMTIT is an income tax system mirroring the U.S. federal income tax. Employers are responsible for withholding and remitting NMTIT on behalf of their employees. Employers should utilize the withholding tables found in IRS Publication 15-T. Employees receive a non-refundable credit for WST paid against their NMTIT liability. Employers typically file and make payments along with the WST.

Social Security and Medicare Taxes

CNMI government employees became subject to Social Security and Medicare taxes beginning in the fourth quarter of 2012. Employers are responsible for withholding and remitting the correct amounts, along with paying the employer's matching share.

Business Gross Revenue Tax (BGRT)

The BGRT is a tax levied on businesses based on their gross receipts. In some situations, employers may need to withhold BGRT from payments to independent contractors.

The Wage and Salary Tax (WST) is a graduated income tax on wages and salaries earned in the CNMI. The tax rates range from 2% to 20%, with various brackets based on income level.

The Northern Mariana Territorial Income Tax (NMTIT) is CNMI's income tax system, which closely resembles the U.S. federal income tax system. NMTIT uses the same graduated tax rates as the federal income tax system.

The Social Security and Medicare Taxes (FICA) apply to CNMI government employees starting in the fourth quarter of 2012. The employee deductions for Social Security are 6.2% of wages up to the annual Social Security wage base, and for Medicare, it's 1.45% of all wages.

There are also additional potential deductions. Employees might opt for voluntary deductions which could include retirement plan contributions (e.g., 401(k)), health insurance premiums, union dues, and charitable donations.

Service businesses in the CNMI currently need to be attentive to their BGRT obligations, including understanding applicable rates and filing requirements. While no immediate action is needed, it's prudent for businesses to remain aware of discussions regarding a potential VAT. Understanding how VAT fundamentally operates could be beneficial should a future implementation occur.

The CNMI's flagship incentive program, the Qualifying Certificate Program, offers substantial tax breaks for eligible businesses. Qualifying businesses can gain benefits such as up to 100% reduction in corporate income taxes for up to 25 years, exemption from paying excise taxes on imports of equipment, raw materials, and other business-related goods, rebates on wage taxes up to a certain percentage based on the size of the business and wages paid, and rebates on gross revenue taxes, based on the business type and revenue. To qualify, most businesses must be engaged in preferred industries like manufacturing, tourism, agriculture, or commercial fishing. Requirements include employment of a certain number of local residents and minimum capital investments.

NMTIT Tax Rebates

The Northern Marianas Territorial Income Tax (NMTIT) system offers rebates to taxpayers to offset their NMTIT tax liability. Rebates are available at varying percentages (50% to 90%) based on the amount of tax paid. Taxpayers subject to the NMTIT are eligible for these rebates.

Free Trade Zone (FTZ) Benefits

The CNMI has designated a Free Trade Zone on Saipan, offering businesses specific tax advantages. No duties are applied on goods imported into the FTZ for further processing or for re-export. Companies may also receive potential reductions on other local taxes.

Additional Considerations

The CNMI is a U.S. territory, however, businesses generally don't pay federal corporate income tax. Local taxes include wage taxes, gross revenue taxes, and excise taxes. However, tax incentives can minimize or eliminate the impact of these taxes on qualifying businesses.