Puerto Rico legal and accounting and tax considerations in 2023
Since 2003, Healy Consultants assists our multinational Clients with timely completion of their annual legal, accounting and tax obligations in Puerto Rico.
Puerto Rico Tax considerations
Corporate Income Tax
- Ordinary corporate income tax consists of i) normal income tax and ii) surcharge tax.
- The normal tax rate is 18.5%, and is calculated on the net taxable income of the corporation.
- The surcharge tax is calculated by subtracting US$25,000 (surcharge deduction) from the net taxable income. The registered surcharge tax rates are as follows:
Surcharge Tax Net Income Graduated Surcharge Tax Rates Up to US$75,000 5% US$75,001 to US$125,000 US$3,750 + 15% US$125,001 to US$175,000 US$11,250 + 16% US$175,001 to US$225,000 US$19,250 + 17% US$225,001 to US$275,000 US$27,750 + 18% US$275,001 and above US$36,750 + 19%
- A branch incorporated in Puerto Rico will be subject to an estimated distribution tax of 10% on profits that are repatriated to their overseas parent company.
- A subsidiary incorporated in Puerto Rico will be subject to withholding tax of 10% on dividends remitted to their overseas parent company. Additional tax may apply and based on any Double Taxation Agreement between Puerto Rico and the country of dividends distribution.
- National Puerto Rico corporations will be taxed on the company’s worldwide earnings.
- A Puerto Rico partnership’s earnings are allocated to its various partners, who will then individually pay income tax on earnings of more than US$9,000. The individual tax rates are as follows:
Individual Earnings Individual Tax Rates Up to US$9,000 0% US$9,001 to US$25,000 7% of amount in excess of US$9,000 US$25,001 to US$41,500 US$1,120 + 14% of amount in excess of US$25,000 US$41,501 to US$61,500 US$3,430 + 25% of amount in excess of US$41,500 US$61,501 and above US$8,430 + 33% of amount in excess of US$61,500
Sales and Use Tax (SUT)
- Sales and Use Tax (SUT) is the Puerto Rico equivalent of the Goods and Services Taxes (GST).
- All transactions on taxable items in Puerto Rico are subject to SUT at a rate of 11.5%. Out of this, 10.5% is to be remitted to the Puerto Rico government, and the remaining 1% is to be remitted to the corresponding municipality. Taxable items include tangible personal property, taxable services, admissions, and bundled transactions.
- Business-to-business services are taxed at 4% SUT rate, and the whole amount is to be remitted to the Puerto Rico government.
- These taxes can be filed directly by the company as well as via a registered tax agent.
Filing due dates
- Corporate tax filing is due by the 15th of the fourth month after the end of the tax year. The tax year is determined according to the annual accounting period of the company.
- SUT filings are to be done on a monthly basis, by the 20th day of the following month. The filings are to be done electronically to the Puerto Rico Treasury Department (PRTD).
Consequences of late tax payments
- Tax payments are to be made in instalments on the 15th day of the fourth, sixth, ninth and twelfth month of the taxable year. Failure to pay taxes by the deadline will result in a penalty amounting to 10% of the instalment due.
Accounting, and audit considerations
- All corporate structures in Puerto Rico are required to i) file a corporate tax return and pay taxes on an annual basis and ii) undergo audit if the annual revenue earned from Puerto Rico operations exceeds US$10 million.
- Annual reports for all Puerto Rico companies must be filed to the Registry of Corporations, together with the company’s balance sheet as of the financial year end, by 15 April of the following year. The annual fee is US$150. Filings can be done via the Departamento De Estado website.
- The balance sheet must be certified by a Certified Public Accountant if the business volume is more than US$3 million. Otherwise, the balance sheet only has to be prepared using the principles of the US Generally Accepted Accounting Principles (GAAP).
- Failure to timely and accurately file the annual report will result in a penalty amount of between US$75 and US$2,000.
Healy Consultants Group fees for accounting and tax support
Puerto Rico accounting and tax task US$ Puerto Rico active company unaudited annual tax and accounting 2,300 Puerto Rico dormant company unaudited annual tax and accounting 950 Puerto Rico active company audited annual tax and accounting * 5,950 Average monthly bookkeeping services 550 Monthly SUT reporting services (active entity) 2,850 Monthly SUT reporting services (dormant entity) 1,350
Note: * For an active trading company, these accounting, audit, and tax fees are an estimate of Healy Consultants Group fees to discharge your annual company accounting and tax obligations efficiently and effectively. Following receipt of a set of draft accounting numbers from your company, Healy Consultants Group will more accurately advise accounting and tax fees.
Legal and compliance
- All Puerto Rico entities are required to have a i) registered office and ii) resident agent. The resident agent can be either an individual resident, a domestic corporation, or an authorized foreign corporation.
- A foreign entity based in Puerto Rico is not allowed to commence or conduct any business in Puerto Rico without obtaining approval from the Secretary of State.