2023 Laws of Puerto Rico › TITLE THIRTEEN - Taxation and Finance (§§ 1 — 33423) › Subtitle 17 - Internal Revenue Code of 2011 (§§ 30001 — 33423) › PART II - Income Taxes (§§ 30041 — 30622) › Chapter 1011 - Foreign Corporations (§§ 30431 — 30451) › Subchapter A - Nonresident Alien Individuals (§§ 30431 — 30438) › § 30431 - Tax on nonresident alien individuals

(a) Income not related to trade or business in Puerto Rico.—
(1) General rule.—
(A) Imposition of tax.— There shall be imposed, collected, and paid for each taxable year, in lieu of the tax imposed by §§ 30061 and 30062 of this title, upon the amount received, or constructively received, by any nonresident alien individual who is not engaged in trade or business in Puerto Rico, the tax provided below:
(i) Interests received by a related person, rents, royalties, salaries, annuities, compensations, remunerations, emoluments, distributions from entities exempt by the provisions of subsections (a)(8)(F) or (a)(5)(A) of § 30471 of this title, incomes pertaining to the distributive share of a partner’s interest in a partnership, special partnership, limited liability company, net capital earnings, or other fixed or determinable annual or periodical gains, profits, and income (other than insurance premiums or interests), a tax of twenty-nine percent (29%).
(ii) Dividends, a tax of ten percent (10%).
(iii) Income pertaining to the distributive shares of a stockholder in a corporation of individuals, a tax of thirty-three percent (33%).
(B) The provisions of this subsection shall not apply to the interests (including the original issue discount, letters of credit, and other financial guarantees), dividends, partnership interest, or other income items similar to these that are received from international insurers or from international insurer holding companies that comply with § 4304 of Title 26 or to the amount of any benefits or interests received under a life insurance or annuity contract issued by an international insurer.
(2) Definition of “net capital gains”.— Means the amount by which gains derived from sources within Puerto Rico in sales or exchanges of capital assets exceed losses, allocable to sources within Puerto Rico, from such sales or exchanges.
For purposes of determining capital gains, the gains and losses shall be taken into account only if and to the extent that they would be recognized and taken into account if such individual was engaged in trade or business in Puerto Rico, except that such losses shall be determined without the benefits of capital loss carry-over provided in §§ 30061 and 30062 of this title.
(3) Definition of “related person”.— The term “related person” shall have the same meaning established in § 30045 of this title.
(b) Engaged in trade or business in Puerto Rico.— A nonresident alien individual engaged in trade or business in Puerto Rico during the taxable year shall pay tax on net income which is effectively connected with the conduct of trade or business within Puerto Rico, as provided in §§ 30061—30064 of this title. When determining net income for purposes of this subsection, gross income shall only consist of the gross income which is effectively connected with the conduct of trade or business within Puerto Rico.
(c) Option to treat real estate income as income related to business in Puerto Rico.—
(1) In general.— A nonresident alien individual that is not engaged in trade or business in Puerto Rico who, during the taxable year, derives any income from real property located in Puerto Rico and owned for the production of income, or from any interest in said property, including gains in the sale or exchange of such real property or any interest thereon and that, if it were not for this subsection, would not be treated as income which is effectively connected with the conduct of trade or business within Puerto Rico, may opt, for each taxable year, to consider all such income as income which is effectively connected with the conduct of trade or business within Puerto Rico. In such case, such income shall be taxed as provided in subsection (b). An option pursuant to this clause for any taxable year shall remain in effect for all the following taxable years, except that, with the consent of the Secretary, such option may be revoked with respect to any taxable year.
(2) If an option made pursuant to clause (1) has been revoked, a new option may not be made for the next four (4) taxable years following that for which the revocation is effective, unless the Secretary approves the same.
(3) Form and date of option and revocation.— An option under clause (1) or any revocation of said option shall be made only in the form and on the date that the Secretary may prescribe by regulations.
(4) Special rules.— For purposes of this part:
(A) With regard to other income from sources within or outside Puerto Rico derived by a nonresident alien individual, an option under clause (1) alone shall not have the effect of treating such individual as engaged in trade or business in Puerto Rico, and
(B) A nonresident alien individual who is a partner in a special partnership shall not be allowed to effect an option under clause (1) with respect to the distributive share of the net income of the special partnership, or with respect to any real estate owned by said special partnership.
(d) Transitory provisions.— Any distribution of dividends and partnership profit shares (except special partnership profit shares) made during the period from July 1, 2006 to December 31, 2006, shall be subject to a special tax rate of five percent (5%) of the total amount received by a nonresident alien individual in lieu of the special tax established under subsection (a)(1)(A)(ii). The distributions made by a public corporation to said individuals are excluded from the application of this provision.
Notwithstanding the foregoing, the distributions made and taxed pursuant to the provisions of this subsection do not have to be ordinarily distributed to stockholders or partners of the entities that make said distributions. Thus, said money may be kept in the books of the corporation or partnership in question for the purpose of complying with any type of contractual, commercial, or statutory commitment of said entities, to be taken into consideration at the time of making any type of distribution by the Board of Directors or managing partner or directors of said corporations or partnerships, and subject as such to their discretion in terms of the source or origin of the money to be distributed in the future by any of said entities.
History —Jan. 31, 2011, No. 1, § 1091.01, retroactive to Jan. 1, 2011; June 20, 2011, No. 98, § 9.