Tax laws Northern Mariana Islands (US)
The Northern Mariana Islands (NMI) are a U.S. Commonwealth in the Pacific Ocean, and their taxation system is influenced by both federal and local laws.
1. Federal Income Tax:
Mirror Tax System: The NMI utilizes a "mirror" tax system, aligning its local income tax laws with the U.S. federal income tax code. This means that residents pay local taxes equivalent to federal taxes, with necessary modifications. However, certain conditions required to terminate this system, as outlined in the Tax Reform Act of 1986, have not been met, so the mirror system remains in effect.
Exemption from Federal Income Tax: Residents of the NMI are exempt from U.S. federal income tax but are subject to other federal taxes, such as Social Security and Medicare taxes. This exemption is part of the unique tax arrangement established under the Covenant between the U.S. and the NMI.
2. Local Taxes:
Income Tax: The NMI imposes a local income tax that mirrors the federal system. Tax rates and brackets are structured to reflect those of the U.S. federal tax code, adjusted as necessary to fit local governance.
Other Taxes: In addition to income tax, the NMI levies other taxes, including:
Gross Revenue Tax: Applied to businesses based on their gross receipts.
Hotel Occupancy Tax: Charged to guests of lodging establishments.
Business Privilege Tax: Imposed on businesses for the privilege of operating within the NMI.
3. Compliance and Administration:
Tax Administration: The NMI's Department of Finance oversees tax collection and enforcement, ensuring compliance with both federal and local tax laws.
Reporting Requirements: Residents and businesses must file tax returns in accordance with NMI regulations, which align closely with federal requirements due to the mirror system.
4. Recent Developments:
- Transition to Federal Immigration Laws: In 2009, the U.S. federal government extended its immigration laws to the NMI, superseding local immigration regulations. This change does not directly affect taxation but is part of the broader relationship between the NMI and the federal government.
Note: Tax laws are subject to change, and it's essential to consult with tax professionals or the NMI Department of Finance for the most current information.
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