Welcome to the CNMI!
For people who have just arrived in the CNMI from outside the US, the tax system can be confusing. This article is an introduction to the CNMI tax system which might be helpful on your filing decisions.
Does the CNMI have its own tax filing system?
Yes. The CNMI tax system is partially based on the same tax laws and tax rates as the United States. However, there are local rules which provide a substantial amount of tax benefits to CNMI residents. Individuals who have income from the CNMI may only need to file one income tax return, either with the CNMI or with the US federal government, depending on their residency status.
Who only needs to file the CNMI income tax return?
If the person is a “Bona Fide Resident” of the CNMI in that tax year, that person only needs to file their income tax return with the CNMI.
A person is a “Bona Fide Resident” of the CNMI during the tax year if you
(1) meet the “presence test”;
(2) do not have a tax home outside the CNMI; and
(3) do not have a closer connection to the United States or to a foreign country.
How can I meet the “presence test”?
It depends on your status:
(1) if you are a U.S. citizen or resident alien, you meet the “presence test” if you meet one of the following conditions:
- You were present in the CNMI for at least 183 days of the tax year;
- You were present in the CNMI for 549 days during the 3-year period that includes this tax year and the 2 immediately preceding tax years. Also, in each of these tax years, you were present in the CNMI for at least 60 days;
- You were present in the United States for no more than 90 days during the tax year;
- You had earned income in the United States of no more than $3,000 and were present for more days in the CNMI than the United States during the tax year.
- You had no significant connection to the United States as well during the tax year.
(2) If you are a non-resident alien, you meet the “presence test” if you:
- Were physically present in the CNMI for at least 31 days during the tax year; and
- Were physically present in the CNMI for 183 days during the 3-year period that includes this tax year and the 2 immediately preceding tax years, counting: (i) all the days you were present in the tax year; (2) 1/3 of the days you were present in the immediately preceding tax year; (3) 1/6 of the days you were present in the second preceding tax year.
How to determine if I will meet the tax home and closer connection test with the CNMI if I relocate within that year?
(1) For the year you move in, you will meet the standard if you fulfill all of the following requirements:
(i) You have not been a bona fide resident of the CNMI during any of the 3 years immediately before your move;
(ii) In the year you move, you do not have a tax home outside the CNMI or a closer connection to the United States or a foreign country than the CNMI during any of the last 183 days of the tax year;
(iii) You are a bona fide resident of the CNMI for each of the 3 years immediately following your move.
(2) For the year you move out, you will meet the standard if you fulfill all of the following requirements:
(i) You have been a bona fide resident of the CNMI for each of the 3 tax years immediately preceding your move;
(ii) In the year of the move, you do not have a tax home outside the CNMI or a closer connection to the United States or a foreign country than to the CNMI during any of the first 183 days of the tax year;
(iii) You are not a bona fide resident of the CNMI for any of the 3 tax years immediately following your move.
If I’m not a Bona Fide Resident, how should I file my return?
It also depends on your status:
(1) If you are a US citizen or resident alien:
You should file your tax return with the United States only.
(2) If you are a non-resident alien:
You should file one of your tax returns with the CNMI, reporting only your income from sources within the CNMI. You should also file another tax return with the United State to report your US source of income according with the rules for nonresident alien.
If my Bona Fide Resident status changes, should I report that?
You must file Form 8898 for the tax year if you meet both of the following status:
(1) Your worldwide gross income is more than $75,000;
(2) You meet one of the following requirements:
(i) You take a position for US tax purposes that you became a bona fide resident of the CNMI after a tax year for which you filed a U.S. income tax return as a citizen or resident alien of the United States but not as a bona fide resident of the CNMI;
(ii) You are a citizen or resident alien of the United States who takes the position for U.S. tax purposes that you ceased to be a bona fide resident of the CNMI after a tax year for which you filed an income tax return as a bona fide resident of the CNMI; or
(iii) You take the position for U.S. tax purposes that you became a bona fide resident of Puerto Rico or American Samoa after a tax year for which you were required to file an income tax return as a bona fide resident of the CNMI.
How could I file a joint tax return?
If you need to file a joint return, file with the jurisdiction where the spouse who has the greater adjusted gross income would have to file if you and your spouse will file separately. If the spouse who has the higher adjusted gross income is a Bona Fide Resident of the CNMI, file the joint return with the CNMI. If the spouse who has the higher adjusted gross income is a US citizen or resident alien, but not a Bona Fide Resident of the CNMI, file your tax return with the United States.
Where can I find the forms that I need to file?
You can find the forms and more helpful information from the CNMI Department of Finance’s website.