Planning to establish or expand your business operations in Puerto RicoPlanning to establish or expand your business operations in Puerto Rico Principal Tax Filing liabilities of any foreign corporation (a corporation organized outside of Puerto Rico) doing business in the Island:
Before any foreign corporation is authorized to do business in Puerto Rico, it must file with the Department of State of the Commonwealth a certificate of existence issued by the Secretary of State or other authorized officer of the jurisdiction of its incorporation, together with an application thereof. The foreign corporation is required to maintain in Puerto Rico (or have the readily available to be submitted at the request of the Puerto Rico's taxing authorities) those books of account and related underlying supporting records needed to reflect the items required to be informed in its Puerto Rico tax returns.
Any foreign corporation authorized to do business in Puerto Rico shall file by electronic means with the office of the Secretary of State a report showing the names of two corporate officers, no later than April 15 of each year. For corporations whose volume of business does not exceed $3,000,000 this report shall be accompanied by a balance sheet prepared under Generally Accepted Accounting Principles (GAAP) by a person with a general knowledge in accounting and by an Internal Revenue Voucher for $150. An audited balance sheet must be submitted if volume of sales in Puerto Rico equals $3,000,000 or more per year.
Any foreign corporation or partnership who commences any industry or business subject to the payment of a license tax, shall notify the Finance Director of the corresponding municipality no later than 30 days after commencing such activity. A volume of business declaration has to be filed annually in the Municipality or Municipalities where the corporation or partnership generates income from its operations, on or before five (5) working days after April 15 of each taxable year. This Volume of Business Declaration shall contain financial statements certified by a Certified Public Accountant holding a license issued by the Commonwealth of Puerto Rico. This statement must be submitted if volume of sales in Puerto Rico equals $3,000,000 or more per year.
Any foreign corporation or partnership must file annually a personal property tax return if it is engaged in trade or business in Puerto Rico and on the first day of January of any one year is the owner of personal property used in his trade or business or owned in a fiduciary capacity. This return should be filed no later than May 15 of each year. This Property Tax Return shall contain financial statements corresponding to the last fiscal year of the corporation, prepared in accordance with GAAP and duly audited by a CPA licensed in the Commonwealth of Puerto Rico, accompanied by the corresponding CPA's opinion thereon. As a general rule, this statement must be submitted if volume of business is $3,000,000 or more per year.
Any foreign corporation must file an income tax return not later than the 15th day of the 4th month following the last day of its taxable year, and attach to its income tax return a full set of financial statements. The due date for partnerships and limited liabilities companies is the 15th day of the 3rd month following the last day of its taxable year. Said financial statements must be accompanied by an "Auditor's Report" issued by a Certified Public Accountant with a license to practice public accounting in Puerto Rico reporting that the statements were prepared in accordance with GAAP. This requirement shall apply to foreign corporations and partnerships that have a business volume for the taxable year that is actually related to involvement in an industry or business in Puerto Rico of $3,000,000 or more per year. Four equal estimated tax installments must be filed by the fourth, sixth, ninth and twelfth month following the end of the taxable year.
Every merchant that have nexus and derives income from Puerto Rico sources is required to register at the Merchants’ Registry of the Puerto Rico Treasury Department. The registration needs to be filed with the Secretary of Treasury before the company commences to operate a business in Puerto Rico. In addition, the merchant is generally required to file a Sales & Use Tax Monthly Return by the 10th day of the following month.
Compensation paid to employees for services rendered in Puerto Rico is subject to withholding of income taxes by the employer under the rules and tax rates prescribed by the Puerto Rico Internal Revenue Code of 2011. The employer must also pay disability and unemployment insurance to the local government. FICA and FUTA taxes must be paid to the United States government following basically the same rules that are applicable in the states.
It is a compulsory insurance program covering employees who suffer injury, become disable or lose their lives due to a job related accident or function. A new employer should promptly seek WACA coverage and pay the corresponding premium.
The employees who receive compensation for services rendered in Puerto Rico must file an income tax return on or before April 15 with the Commonwealth of Puerto Rico, reporting the income received from Puerto Rico sources (income from all sources if he / she is a resident of Puerto Rico) and accompany the corresponding withholding statement provided by the employer.
The Puerto Rico Code requires that income taxes also be withheld on payments made to independent contractors, subject to some exceptions. The above paragraphs contain only general information and shall not be used to solve specific problems. You may contact us if you need any further help.
Landa Umpierre PSC
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