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Puerto Rico Individual - Taxes on personal income

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Puerto Rican residents are taxed in Puerto Rico on their worldwide income, no matter where the income is sourced. Puerto Rican non-residents are only taxed in Puerto Rico on their PR-source income. Income for services performed is sourced to Puerto Rico based on where the services are performed. Such income is typically prorated to Puerto Rico based on workdays.

Puerto Rico has a de minimis rule to avoid sourcing to Puerto Rico very small amounts of income from personal services. Income from personal services performed within Puerto Rico will not be considered from Puerto Rican sources if it is USD 3,000 or less and the individual was present in Puerto Rico for 90 days or less during the calendar year.

Personal income tax rates

The following regular tax rates remain in effect for 2018 and future years:

Net taxable income (USD) Tax
Not over 9,000 0%
Over 9,000, but not over 25,000 7% of the excess over USD 9,000
Over 25,000, but not over 41,500 USD 1,120 plus 14% of the excess over USD 25,000
Over 41,500, but not over 61,500 USD 3,430 plus 25% of the excess over USD 41,500
Over 61,500 USD 8,430 plus 33% of the excess over USD 61,500

Gradual adjustment tax

If the individual's net taxable income exceeds USD 500,000, they will have to pay an additional tax (i.e. gradual adjustment tax). This tax is 5% of the excess of the total net taxable income over USD 500,000, limited to 33% of their personal and dependents' exemption plus USD 8,895.

Alternate basic tax (ABT)

In addition to the regular income tax, individuals are required to compute an ABT assessed in accordance to the below tax table. The ABT taxable income is computed by adding back certain income items exempt from regular income tax. 

Alternative Basic Income Tax (“ABT”) Rates:

Net income subject to ABT Tax
In excess of $25,000 but not more than $50,000 1%
In excess of $50,000 but not more than $75,000 3%
In excess of $75,000 but not more than $150,000 5%
In excess of $150,000 but not more than $250,000 10%
In excess of $250,000 24%

The credit for prior years’ ABT liability may not be sold, transferred, or refunded. When determining the net income subject to ABT, this credit will be reduced by the portion of the ABT attributable to non-deductible expenses.

The ABT will not be applicable to individuals whose only source of income is from salaries informed in a Withholding Statement.

For tax years after December 31, 2018, an individual's total tax will be 95% of his total tax determined (regular tax plus gradual adjustment).

New Optional Tax for Self-Employed Individuals Rendering Services:

Self-employed individuals whose income is derived substantially from the business of rendering services may elect to pay an optional tax on gross income instead of the income tax otherwise imposed by the Code on net income, as follows:

If gross income is: The tax will be:
Not greater than $100,000 6%
In excess of $100,000 but not more than $200,000 10%
In excess of $200,000 but not more than $300,000 13%
In excess of $300,000 but not more than $400,000 15%
In excess of $400,000 but not more than $500,000 17%
In excess of $500,000 20%

In order to use the optional computation of tax, the total gross self-employment income must be subject to withholding at source or estimated tax payments and must be reported in an Informative Return.

If the optional computation is used, no expenses nor deductions will be claimed against the self-employment income.

The new optional tax is applicable for taxable years that commence after December 31, 2018. However, the Secretary of Treasury may postpone its effective date for taxable years that commence after December 31, 2019.

Last Reviewed - 04 February 2019

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