Expatriate tax ebook - Puerto Rico

Facts and figures

Pre arrival procedures
Employment visas
Tax year
Tax returns and compliance
Income tax rates
Sample income tax calculation

Pre arrival procedures
US immigration rules apply in Puerto Rico. Expatriates taking up employment in Puerto Rico will be subject to income tax rules. Before visiting or working in Puerto Rico, foreign nationals must obtain visas from a US embassy or consulate. Kevane Grant Thornton's tax team can help expatriates and their employers to deal with Puerto Rico’s tax requirements.

In particular, Kevane Grant Thornton can help expatriates and their employers to identify Puerto Rico’s tax planning opportunities, review tax equalization policies, as well as providing compliance services regarding the tax filing requirements of Puerto Rico and the United States

Employment visas
Foreign nationals who wish to work in Puerto Rico on a temporary basis (that is, they will not obtain permanent residence) must be certified by the US Department of Labor. A petition from a local employer must generally be attached to the visa application. A person holding a temporary visitor's visa cannot be employed by a Puerto Rican employer.

Again, US immigration rules are fully applied in Puerto Rico.

Where the expatriate is a US citizen the above procedure is not required.

Tax returns and compliance
Personal tax returns should be filed by April 15 following the end of the tax year concerned. Various extensions to file are available. Even when the required amount is withheld by the employer and deposited with Puerto Rico's (PR) Treasury Department, the taxpayer has the right to file a PR individual income tax return to claim applicable exemptions, deductions and to pay tax according to the progressive tax tables applicable to resident individuals.

The following taxpayers are required to file a PR income tax return:

• every individual resident of PR, who during the taxable year has a gross income over $5,000;
• every resident of PR who is married living with a spouse, who during the taxable year has a gross income over $5,000;
• every individual non resident of PR, citizen of the United States, who during the taxable year has a gross income over $5,000 unless the taxes have been totally paid at source;
• every non resident of PR, citizen of the United States, who is married living with spouse, who during the taxable year has a gross income from PR over $5,000, unless the taxes have been totally paid at source; and
• every non-resident alien who has a gross income from sources within PR, unless the taxes have been totally paid at source.

Tax year
Puerto Rico’s tax year for individuals usually runs from January to December.

Income Tax Rates for 2011

Ordinary tax rates will be gradually adjusted during the next fives years as perscribed by the Internal Revenue Code for a New Purto Rico approved in January 21, 2011.

There is a gradual adjustment of the lower tax rates, the personal exemption and credit for dependents for taxpayers whose net taxable income is over $100,000. The law also provides for an Alternative Minimum Tax.

Sample income tax calculation for year ending 31 December 2011

• introduction
• facts and figures
• basis of taxation
• what taxes?
• tax planning opportunities