The tax year in Puerto Rico is the calendar year.
In most cases, taxpayers must file an individual income tax return on a calendar-year basis by 15 April of the following year. Filing of returns, availability of deductions, and applicability of tax rates depends on residency and US citizenship. Also, filing of a tax return for a non-resident depends on whether the tax has been withheld at source.
An automatic extension of time to file is granted (upon request) if submitted by 15 April. This extension is for three months, through 15 July, for Puerto Rican residents. For taxpayers that have left the country, there is a six-month extension granted upon authorisation of the Secretary, through 15 October. This six-month extension should also be submitted, and evidence will be required to support that the taxpayer was out of the country.
The following three categories of filing status are available for taxpayers:
- Individual: includes (i) unmarried individuals; (ii) married individuals who are separated for a continuous period of 12 months, including the last day of the tax year, and that have been living in separate households for an uninterrupted period of 183 days (within the continuous 12-month period); and (iii) married taxpayers with pre-nuptial agreements expressly stating that the marriage would follow total asset separation.
- Married taxpayers living together and filing jointly.
- Married taxpayers living together and filing separately.
Non-residents of Puerto Rico have a statutory Puerto Rican income tax filing requirement if the PR-source gross income or the PR-effectively connected gross income exceeds USD 1 for foreign nationals and USD 5,000 for US citizens, provided the PR income tax has not been paid totally at source.
Payment of tax
Puerto Rico follows a 'pay as you go' withholding mechanism to fund income taxes on compensation throughout the year. For Puerto Rican residents, the employer will compute the income tax withholding for each employee based on the information provided by the employee on a specific form and with tables or percentage methods provided by the PR Treasury Department. Puerto Rican employees who are non-residents are subject to a flat 29% withholding in the case of foreign nationals and to a 20% withholding in the case of US citizens. In the case of a Puerto Rican resident who provides services (rather than as an employee) to another resident person, the income earned while providing such services will be subject to a withholding flat rate of 7%. Such withholding tax (WHT) rate does not apply to the first USD 1,500 of income earned by the individual who provides the services.
Puerto Rican resident taxpayers with income not subject to withholding (e.g. self-employment income, capital gains, rent) must generally make quarterly payments of estimated tax due 15 April, 15 June, 15 September, and 15 January. If the taxpayer's balance due will be at least USD 1,000, the taxpayer will be subject to the payment of quarterly payments of estimated tax. Any balance of tax owed is due 15 April of the following year.