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.
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.
Foreign bank account report
Act No. 52 of 2022, enacted 30 June 2022, introduced to PR tax laws the requirement for individual PR residents to report information regarding financial accounts maintained outside Puerto Rico or the United States in which they have a financial interest and whose maximum value during the tax year exceeded USD 10,000.
Foreign financial accounts can be bank accounts, broker accounts, future or options contract accounts, crypto asset accounts, cash value insurance accounts, investment accounts, or any other account where funds are held outside Puerto Rico or the United States. An individual is considered as having a financial interest in an account when: they are the owner, the owner is a third party acting on behalf of the individual, the owner is an entity in which the individual directly or indirectly owns at least 50% of all their value or voting power, the owner is a grantor trust for the individual’s benefit, or the individual has signature authority over the assets.
An individual that does not comply with foreign financial accounts reporting provisions will incur a penalty of USD 10,000 per report. The Secretary may publish regulations or communications to consider individuals in compliance with these provisions through the filing of the federal foreign financial accounts reports, Form 8938, and FinCEN Form 114.