How CNMI Tax Works: Rates, Rebate, and Filing Deadlines

Taxes in the CNMI run on a system that looks federal on the surface and behaves very differently underneath. Bona fide residents of the Commonwealth of the Northern Mariana Islands file income tax returns locally with the Division of Revenue and Taxation rather than the IRS, and a territorial rebate returns 50 to 90 percent of the income tax owed. On top of that income tax sit a separate wage and salary tax withheld from paychecks, a gross revenue tax on businesses, and excise taxes on almost everything imported into the islands.

Who Files With the CNMI and Who Files With the IRS

Your residency status settles the filing question. If you are a bona fide CNMI resident for the entire tax year, you file one return with the CNMI Division of Revenue and Taxation, report your worldwide income on it, and owe nothing to the IRS for income tax purposes. Any withholding paid to either the CNMI or the United States counts toward your total.¹

If you are a U.S. citizen or resident alien who is not a bona fide CNMI resident, the direction reverses: you file federally, report worldwide income to the IRS, and have no CNMI filing obligation. When your adjusted gross income is $50,000 or more and at least $5,000 of it comes from CNMI sources, you must also file Form 5074 to allocate income between the two jurisdictions.²

One trap worth knowing about: if you move into or out of CNMI residency during a year, the IRS may require Form 8898 to report the change. Failing to file it carries a $1,000 penalty per occurrence absent reasonable cause.²

Territorial Income Tax and the Rebate

CNMI residents report income on Form 1040CM, the local counterpart to Form 1040.³ Because CNMI law adopts the Internal Revenue Code as the Northern Mariana Islands Territorial Income Tax (NMTIT), federal brackets, standard deductions, and most credits carry over.⁴ A key limit: bona fide CNMI residents cannot claim the earned income credit, additional child tax credit, other dependent credit, or American opportunity tax credit on a U.S. return. Those credits are handled locally through the CNMI Division of Revenue and Taxation.⁵

The rebate is what separates CNMI income taxation from the mainland experience. Under 4 CMC § 1708, every person subject to the NMTIT receives a rebate on a sliding scale tied to their rebate base, which is essentially the tax liability on CNMI-source income:⁶

Rebate base up to $20,000: 90 percent rebate
$20,001 to $100,000: $18,000 plus 70 percent of the amount over $20,000
Over $100,000: $74,000 plus 50 percent of the amount over $100,000

A taxpayer whose territorial income tax liability comes to $15,000 would receive $13,500 back, leaving an effective bill of $1,500. The rebate can also offset other unpaid taxes, penalties, or interest on the return. Economic Incentive District licensees and gaming licensees fall under different rules.⁶

Wage and Salary Tax

The wage and salary tax sits alongside the income tax, not inside it. Under 4 CMC § 1201 it applies to every employee earning wages for services performed in the Commonwealth, including cost-of-living allowances, and it is withheld directly from paychecks.⁷ The rate is progressive by total yearly wages:

$0 to $1,000: no tax
$1,001 to $5,000: 2 percent
$5,001 to $7,000: 3 percent
$7,001 to $15,000: 4 percent
$15,001 to $22,000: 5 percent
$22,001 to $30,000: 6 percent
$30,001 to $40,000: 7 percent
$40,001 to $50,000: 8 percent
Over $50,000: 9 percent

⁸

Watch the bracket mechanics. The rate applies to the full amount of wages, not just the slice above each threshold. An employee earning $25,000 pays 6 percent on all $25,000, not a blended rate across the lower brackets. The withheld amount shows up in Box 17 of Form W-2CM.⁹

Business Gross Revenue Tax

Every person or entity doing business in the CNMI owes an annual tax on total gross revenue under 4 CMC § 1301. It hits total receipts before any deduction for expenses, so it behaves nothing like a corporate income tax on net profit. The rate is graduated, starting at 1.5 percent for businesses with annual gross revenue between $5,001 and $50,000 and climbing to 5 percent for those exceeding $750,000.¹⁰

Several categories of revenue are exempt under 4 CMC § 1305. The most commonly relevant exemptions cover gross receipts from exporting CNMI-produced goods, fish, food, and agricultural products; revenue earned by qualifying nonprofits exempt under NMTIT sections 501(c)(3), (4), (5), (6), (8), or (10), when the revenue relates to the organization’s exempt purpose; revenue earned by offshore banking corporations; revenue earned under an Economic Incentive Authority exemption, though construction operations and in-district retail sales remain taxable; and employee reimbursements for food and housing to the extent allowed by law.¹¹ The nonprofit exemption has a catch: revenue from an activity not substantially related to the organization’s charitable or educational purpose is still taxable.

Excise Taxes on Imported Goods

The CNMI sits outside the U.S. customs territory, so goods entering the islands face excise taxes under 4 CMC § 1402. The tax applies on the first sale, use, or lease of goods in the Commonwealth, and rates vary sharply by product:¹²

Foodstuffs: 1 percent of value
Construction materials and equipment: 3 percent of value
Passenger vehicles under $30,000: 5 percent of value
Passenger vehicles over $30,000: 5.75 percent of value
Cigarettes: $3.75 per pack of 20
Other tobacco products: 60 percent of invoice price
Beer and malt beverages: 2 cents per fluid ounce
Distilled spirits: 18 cents per fluid ounce
Wine and sake: 5 cents per fluid ounce
Cannabis products: 15 percent of value
Cosmetics: 17.25 percent of value
Perfumery: 23 percent of value

Goods manufactured or grown entirely within the CNMI face a lower rate of 1 percent of retail price, and renewable energy equipment such as solar panels and wind turbines is exempt whether imported or locally assembled.¹² Customs officers inspect shipments at entry and collect what is owed.

Self-Employment Tax

The territorial income tax and the rebate do not cover Social Security and Medicare. Anyone with net self-employment income of $400 or more must file Form 1040-SS with the IRS to report self-employment tax, even though bona fide CNMI residents otherwise have no federal income tax filing requirement.¹

Self-employed filers who expect to owe $1,000 or more generally need to make quarterly estimated payments. The CNMI mirrors the IRS schedule: mid-April, mid-June, mid-September, and mid-January of the following year. When a deadline lands on a weekend or holiday, it shifts to the next business day.

Deadlines, Penalties, and How to File

Individual CNMI returns are due April 15, the same as federal returns. The penalty structure tracks the federal system because of the mirror code. Late filing runs 5 percent of the unpaid tax per month, capped at 25 percent. For returns filed more than 60 days late, the minimum penalty is $525 (for returns due after December 31, 2025) or 100 percent of the unpaid tax, whichever is less.¹³

A failure-to-pay penalty of 0.5 percent per month also accrues on unpaid tax. When both penalties run in the same month, the filing penalty is reduced by the payment penalty amount, so you are not charged twice for the same period. After five months the filing penalty maxes out, but the payment penalty keeps running until the balance is cleared.¹³

Individuals file Form 1040CM, with wage information coming from Form W-2CM. Nonresident aliens with CNMI-source income use Form 1040NR-CM. The Division of Revenue and Taxation is based at the Dandan Commercial Center on Saipan, with local offices on Tinian and Rota. Filers outside the Commonwealth mail returns to:

Commonwealth of Northern Mariana Islands
Division of Revenue and Taxation
P.O. Box 5234 CHRB
Saipan, MP 96950⁵

There is no online portal for individual filing. The CNMI’s “electronic filing” option covers employer reconciliation forms like the W-2CM and OS-3710 submitted on physical media such as a USB drive or DVD, not individual returns.¹⁴ For individuals, filing means paper, in person or by mail.

1
Internal Revenue Service. Publication 570 – Tax Guide for Individuals With Income From U.S. Possessions
2
Reginfo.gov. Allocation of Individual Income Tax to Guam or the Commonwealth of the Northern Mariana Islands
3
Division of Revenue and Taxation. Form 1040CM – Northern Marianas Territorial Income Tax Return
4
Commonwealth of the Northern Mariana Islands Law Revision Commission. 4 CMC 1701 – Application of the Internal Revenue Code, In General
5
Internal Revenue Service. Bona Fide Residents of the Commonwealth of the Northern Mariana Islands – Tax Credits
6
Commonwealth Law Revision Commission. 4 CMC 1708 – Tax Relief
7
Commonwealth of the Northern Mariana Islands Legislature. House Bill 15-327 – Fair Taxation Act of 2007
8
Commonwealth of the Northern Mariana Islands Law Revision Commission. Public Law 09-22
9
Division of Revenue and Taxation. Form W-2CM – Wage and Tax Statement
10
Commonwealth Law Revision Commission. 4 CMC 1301 – Tax on Gross Revenue
11
Commonwealth Law Revision Commission. 4 CMC 1305 – Exemptions
12
Commonwealth Law Revision Commission. 4 CMC 1402 – Excise Tax
13
Internal Revenue Service. Failure to File Penalty
14
Commonwealth of the Northern Mariana Islands Department of Finance. Electronic Filing Specifications