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 1007 - Credits Against Tax (§§ 30201 — 30230) › Subchapter A - Nonrefundable Credits (§§ 30201 — 30210d) › § 30201 - Taxes of the United States, possessions of the United States, and foreign countries

(a) Allowance of credit. — If the taxpayer elects to avail him/herself of the benefits provided in this section, the tax imposed by this part, except the tax imposed under § 30075 of this title, shall be credited to:
(1) Citizens and domestic corporations. — In the case of an individual who is a United States citizen resident of Puerto Rico and of a domestic corporation or partnership, the amount of any income tax and excess-profits taxes paid or accrued during the taxable year to the United States, any possession of the United States, or any foreign country; and
(2) Alien resident of Puerto Rico. — In the case of an alien resident of Puerto Rico, the amount of any such taxes paid or accrued during the taxable year to the United States, or any possession of the United States, and to any foreign country, if the foreign country of which such alien resident is a citizen or subject, in imposing such taxes, allows a similar credit to citizens of the United States residing in such country; and
(3) Estates and trusts. — In the case of any individual who is a beneficiary of an estate or trust, his/her ratable share of such taxes of the estate or trust paid or accrued during the taxable year to the United States, any possession of the United States, or any foreign country, as the case may be, and
(4) Nonresident aliens and foreign corporations and partnerships. — In the case of a nonresident alien individual or a foreign corporation or partnership engaged in trade or business within Puerto Rico during the taxable year, a credit shall be allowed for the amount of taxes paid or accrued during the taxable year to the United States, any possession of the United States or any foreign country with respect to income from sources outside Puerto Rico effectively connected with the conduct of a trade or business within Puerto Rico. For special rules for the application of this clause, see subsection (h).
Such election may be made or changed at any time prior to the expiration of the period prescribed for making a claim for credit or refund of the tax imposed by this part.
(b) Limits to credit. — The amount of the credit taken under this section shall be subject to each of the following limitations:
(1) The amount of the credit in respect of the tax paid or accrued to any country shall not exceed, in the case of a taxpayer other than a corporation the same proportion of the tax against which such credit is taken, which the taxpayer’s net income from sources within such country bears to his/her entire net income for the same taxable year, or in the case of a corporation, the same proportion of the tax against which such credit is taken, which the taxpayer’s normal-tax net income from sources within such country bears to its entire normal-tax net income for the same taxable year; and
(2) The total amount of the credit shall not exceed, in the case of a taxpayer other than a corporation, the same proportion of the tax against which such credit is taken, which the taxpayer’s net income from sources outside Puerto Rico bears to his/her entire net income for the same taxable year; or, in the case of a corporation, the same proportion of the tax against which such credit is taken, which the taxpayer’s normal-tax net income from sources outside Puerto Rico bears to its entire normal-tax net income for the same taxable year.
(3) For purposes of this subsection, income received by a resident of Puerto Rico from sources outside of Puerto Rico or the United States and which is taxable in the United States shall be further considered as income from sources within the United States.
(c) Adjustments on payments of accrued taxes. — If accrued taxes when paid differ from the amounts claimed as credits by the taxpayer, or if any tax paid is refunded in whole or in part, the taxpayer shall notify the Secretary, who shall redetermine the amount of the tax for the year or years affected, and the amount of tax due upon such redetermination, if any, shall be paid by the taxpayer upon notice and demand by the Secretary, or the amount of tax overpaid, if any, shall be credited or refunded to the taxpayer in accordance with the provisions of §§ 33001 et seq. of this title. In the case of a tax accrued but not paid, the Secretary as a condition precedent to the allowance of this credit may require the taxpayer to give bond with sureties satisfactory to and to be approved by the Secretary in such sum as the Secretary may require, conditioned upon the payment by the taxpayer of any amount of tax found due upon any such redetermination; and the bond herein prescribed shall contain such further conditions as the Secretary may require. In such redetermination by the Secretary of the amount of tax due by the taxpayer for the year or years affected by a refund, the amount of the taxes refunded for which credit has been allowed under this section shall be reduced by the amount of any tax described in subsection (a) imposed by the United States, possession of the United States or foreign country with respect to such refund; but no credit under this section, and no deduction under § 30124 of this title, shall be allowed for any taxable year with respect to such tax imposed on the refund. No interest shall be assessed or collected on any amount of tax due upon any redetermination by the Secretary, resulting from a refund to the taxpayer, for any period prior to the receipt of such refund, except to the extent interest was paid by the United States, possession of the United States or foreign country on such refund for such period.
(d) Year in which credit taken. — The credits provided in this section may, at the option of the taxpayer and irrespective of the method of accounting employed in keeping his/her books, be taken in the year in which the taxes of the United States, the foreign country, or the possession of the United States were accrued, subject, however, to the conditions prescribed in subsection (c). If the taxpayer elects to take such credits in the year in which the taxes of the United States, the foreign country, or the possession of the United States were accrued, the credits for all subsequent years shall be taken upon the same basis, and no portion of any such taxes shall be allowed as a deduction in the same or any succeeding year.
(e) Proof of credits. — The credits provided in this section shall be allowed only if the taxpayer establishes to the satisfaction of the Secretary:
(1) The total amount of income derived from sources outside Puerto Rico determined, as provided in § 30152 of this title;
(2) the amount of income derived from each country, the tax paid or accrued claimed as credit under this section to be determined under rules and regulations prescribed by the Secretary, and
(3) all other information necessary for the verification and computation of such credits.
(f) Taxes of foreign subsidiary. —
(1) For purposes of this section, a domestic corporation which owns a majority of the voting stock of a foreign corporation from which it receives dividends in any taxable year shall be deemed to have paid the same proportion of any income, or excess-profits taxes paid or treated as paid by such foreign corporation to the United States, any possession of the United States, or any foreign country upon or with respect to the accumulated profits of such foreign corporation from which such dividends were paid, which the amount of such dividends bears to the amount of such accumulated profits.
(2) The term “accumulated profits” when used in this subsection in reference to a foreign corporation means the amount of its gains, profits, or income in excess of the income, and excess-profits taxes imposed upon or with respect to such profits or income. The Secretary shall have full power to determine from the accumulated profits of what year or years such dividends were paid; treating dividends paid in the first sixty (60) days of any year as having been paid from the accumulated profits of the preceding year or years, unless to his/her satisfaction shown otherwise, and in other respects treating dividends as having been paid from the most recently accumulated gains, profits or earnings.
(3) In the case of a foreign corporation, the income, and excess-profits taxes of which are determined on the basis of an accounting period of less than one year, the word “year”, as used in this subsection, shall be construed to mean such accounting period.
(g) Credit for taxes equivalent to income, and excess-profits taxes. — For purposes of this section and § 30124 of this title, the term “income, and excess-profits taxes” shall include a tax paid equivalent to a tax upon income and excess-profits otherwise generally imposed by the United States, any possession of the United States or any foreign country.
(h) Special rules for application of subsection (a)(4). —
(1) For purposes of subsection (a)(4) and for purposes of determining the deductions allowable under §§ 30433 and 30443 of this title, in determining the amount of any tax paid or accrued to the United States, any possession of the United States or foreign country, there shall not be taken into account any amount of tax to the extent the tax so paid or accrued is imposed with respect to income from sources within Puerto Rico which would not be taxed by the United States, any possession of the United States or foreign country, except for the fact that:
(A) In the case of a nonresident alien, such individual is a citizen or resident of a foreign country or possession, or
(B) in the case of a foreign corporation or partnership, such corporation or partnership was created or organized under the law of the foreign country or is domiciled for tax purposes in such country or possession.
(2) For purposes of subsection (a)(4), in applying subsection (b) the taxpayer’s net income shall be treated as consisting only of the net income effectively connected with the taxpayer’s active conduct of a trade or business within Puerto Rico.
(3) The credit allowed pursuant to subsection (a)(4) shall not be allowed against any tax imposed by §§ 30431(a) and 30441(a) of this title.
(4) No credit whatsoever shall be allowed for the tax imposed by § 30442 of this title.
(i) Tax withheld at source. — For purposes of this subchapter the tax imposed by this part shall be the tax computed without regard to the credit provided in §§ 30221, 30222, 30224, 30225, 30227, 30228, and 30229, all of them of this title.
History —Jan. 31, 2011, No. 1, § 1051.01, retroactive to Jan. 1, 2011.