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.
An automatic extension of time to file is granted (upon request) if submitted by 15 April. This extension is for six months.
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.
For tax years after 31 December 2018, the obligation to file a Puerto Rico income tax return will be triggered when gross income minus the exemptions allowed under the Code is more than USD 0, unless the total income tax was withheld at source. Taxpayers are also required to file a tax return if the net income subject to ABT is USD 25,000 or more.
'Premium' tax return filing system
For those taxpayers who only report income from wages, the Puerto Rico Treasury Department will generate a 'pro-forma' tax return with the taxpayer’s information. The taxpayer will only need to review and approve the return in order to complete the filing.
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 10%. Such withholding tax (WHT) rate does not apply to the first USD 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.