CNMI Business Taxes
This is the most important tax in the CNMI. It is assessed on your CNMI sourced revenues, not on profits.
The rates are as follows:
Annual Revenue – Tax Rebate
From zero to $5,000 ? No BGRT
From $5,000.01 to $50,000 ? 1.5%
From $50,000.01 to $100,000 ? 2%
From $100,000.01 to $250,000 ? 2.5%
From $250,000.01 to $500,000 ? 3%
From $500,000.01 to $750,000 ? 4%
Above $750,000 ? 5%
It is important to note that BGRT is assessed on the total revenue. For example, if your revenues were $50,000 for the first two quarters, you would be paying in at 2%. If your revenues in the third and fourth quarter were another $60,000 then the entire $110,000 for the year would be taxed at 2.5%.
BGRT is not deducted in arriving at taxable income. It is instead treated as a dollar-for-dollar credit against calculated income tax.
The CNMI requires BGRT returns to be filed on a quarterly basis. The deadline is the end of the month following the end of each quarter.
The BGRT form is available online at www.dof.gov.mp . It is Form OS-3105.
In my discussions with the Division of Revenue and Taxation, their opinion is that you have CNMI sourced income from professional services if you are physically in the CNMI when you provide the services. If you sitting at a desk somewhere other than the CNMI and you provide services to a CNMI entity, then that revenue is not CNMI sourced. Likewise, if you are sitting at a desk in the CNMI and you are providing services to an entity that is not in the CNMI, you do have CNMI sourced revenues.
For items imported into the CNMI for business purposes, an excise or import tax is imposed. There is a long list of rates, depending on the type of item imported. If an item is not specified in the list, the default rate is 5.0% of the cost of the item.
The tax is assessed at point of entry. The CNMI Customs office will prepare an assessment sheet, and a business usually has 30 days to pay the tax. There are Customs officers stationed at the post office and at the seaport and airport.
ANNUAL CORPORATION REPORT
Every corporation incorporated or registered in the CNMI must file an Annual Corporation Report, which is a one page document listing the resident agent, the shareholders, officers and directors of the corporation. The filing fee is $50 and the deadline for submission is March 1 of each year.
EMPLOYMENT RELATED MATTERS
A business with employees in the CNMI is obligated to withhold two types of taxes from a person?s wages or salaries ? Chapter 2 and Chapter 7 taxes. Chapter 7 taxes are similar to Federal withholdings. An employer can use the same Circular E as is used in the U.S. to calculate the Chapter 7 taxes.
Chapter 2 taxes are from zero to nine percent, as follows:
Employee Salary – Tax Rate
From zero to $1,000 – 0%
From $1,001 to $5,000 – 2%
From $5,001 to $7,000 – 3%
From $7,001 to $15,000 – 4%
From $15,001 to $22,000 – 5%
From $22,001 to $30,000 – 6%
From $30,001 to $40,000 – 7%
From $40,001 to $50,000 – 8%
Above $50,000 – 9%
Just like the BGRT mentioned previously, the rate is applied to the total wages for the year. For example, if an employee is scheduled to be paid $49,000 for the year, the withholding would be done at 8%. If the person received a $2,000 bonus at the end of the year, the entire $51,000 would be taxed at 9%.
The same general deadlines apply for remitting withheld taxes to the CNMI Treasury as they do for U.S. withholdings. The form used for remitting withheld taxes is Form 500-WH.
There are quarterly withholding tax returns to file with the CNMI. They are due at the end of the month following the end of the quarter. The form is OS-3705.
For social security taxes, the same rules apply in the CNMI as they do in the U.S., except that Filipinos and Koreans are not subject to FICA taxes. A quarterly return must be filed with the IRS. The form to use is Form 941-SS.
At the end of the year, employers must prepare Form W-2CM for each employee. Employers must also prepare an Annual Reconciliation of Taxes Withheld form. The totals of the W-2CM forms are entered on the Annual Reconciliation form. Employers also must transmit copies of the Forms W2-CM to the Social Security Administration using Form W-3SS.
For more information or seeking tax assistance, please visit: