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 1008 - Tax Returns and Payment (§§ 30241 — 30303) › Subchapter B - Income Tax Withholding at the Source (§§ 30271 — 30282) › § 30278 - Tax withholding at the source in the case of nonresident individuals, due to the revocation of the authorization to do business in Puerto Rico, for the sale of certain assets, and in the case of certain exempt organizations

(a) Requirement to withhold.—
(1) In general.—
(A) All persons, in whatever capacity acting, including lessees or mortgagors of real or personal property, fiduciaries, employers, and all officers and employees of the Government of Puerto Rico, and its agencies, instrumentalities, and political subdivisions, having the control, receipt, custody, disposal, or payment of any interest, dividends, rents or royalties, salaries, wages, annuities, compensations, remunerations, emoluments, distributions made by exempt entities under the provisions of clauses (8)(F), (6), or (5) of subsection (a) of § 30471 of this title or other fixed or determinable annual or periodical gains, profits, and income (except for insurance premiums) of any nonresident individual (only to the extent that any of the above mentioned items constitutes taxable gross income from sources within Puerto Rico), shall deduct and withhold from such annual or periodical gains, profits, and income:
(i) An amount equal to twenty-nine percent (29%) thereof, if the receiver is an alien, or
(ii) an amount equal to twenty percent (20%) thereof if the receiver is a United States citizen.
(B) The Secretary may authorize such tax to be deducted and withheld from the interest on any of the securities, whose owners were unknown to the withholding agent.
(2) Withholding on dividends.— In the case of income on account of dividends (except as provided in §§ 30274 and 30280 of this title), a ten percent (10%) tax shall be deducted and withheld.
(3) Exceptions.— The provisions of this section shall not apply to:
(A) Dividends received from international banking entities organized under the provisions of §§ 232 et seq. of Title 7, known as the “International Banking Center Regulatory Act”,
(B) amounts from any benefits or interests received under a life insurance or annuity contract, interests (including the original issue discount, letters of credit, and other financial guarantees), dividends, partnership interest, distributions in a total or partial liquidation, or other income items similar to these received from an international insurer or by an international insurer holding company that complies with § 4304 of Title 26.
(4) Withholding exemption.— In those cases where the withholding agent shows to the satisfaction of the Secretary, or when the Secretary himself determines, that the withholding provided in this subsection will cause undue hardship without any practical result whatsoever because the amounts thus withheld would have to be reimbursed to the recipient of the income, or the withholding would be excessive, the Secretary may, under such rules and regulations as he/she may prescribe, relieve the withholding agent of the obligation of withholding, in whole or in part.
(5) Special rules.—
(A) The amounts received as distributions in complete or partial liquidation of a corporation or partnership shall be deemed as fixed or determinable annual or periodic income and shall be subject to withholding to the extent they constitute income from sources within Puerto Rico.
(B) No deduction or withholding shall be made pursuant to the provisions of this subsection, in the case of any item of income which is effectively connected to the exploitation of a trade or business within Puerto Rico and which is included in the gross income of the recipient for the taxable year, pursuant to § 30432 of this title, except if said item is by reason of compensation for personal services.
(C) Compensation for personal services rendered by a nonresident individual, other than remuneration on account of pension for services rendered, shall be subject to the withholding provided in this subsection.
(D) For special rules with regard to withholding at the source in the case of corporations of individuals, see §§ 30275 and 30280 of this title.
(E) In the case of interests received by a nonresident alien, the requirement to deduct and withhold an amount equal to twenty-nine percent (29%) of such interest imposed by this subsection shall apply only if such individual is a related person (as defined in § 30045 of this title) of the debtor of the liability.
(b) Return and payment.—
(1) General rule.— Every person required to deduct and withhold any tax under this section shall file a return thereof no later than April 15th of the following year and pay to the Secretary said tax or such portion thereof which has not been deposited in the form and manner prescribed in § 33338 of this title. Every such person shall be liable to the Secretary for the payment of such tax and shall not be liable to any other person for the amount of any such payments.
(2) Public shows.— Any person operating, in any form whatsoever, the business of public shows, functions, or exhibitions and who, in connection therewith, is required to deduct and withhold any tax under this section, shall file a return thereof and pay the tax to the Secretary on the day after each public show, function, or exhibition is held, rather than within the terms prescribed in clause (1) of this subsection and on the date prescribed in §§ 33001 et seq. of this title. Every such person shall be liable to the Secretary for the payment of such tax and shall not be liable to any other person for the amount of any such payments.
(c) Income of recipient.— Income upon which tax is required to be withheld at the source under this section shall be included in the return of the recipient of such income, but any amount of tax so withheld shall be credited against the total amount of income taxes as computed in such return.
(d) Tax paid by recipient.— If any tax required to be deducted and withheld under this Section is paid by the recipient of the income, it shall not be recollected from the withholding agent; nor any penalty be imposed upon or collected from the recipient of the income or withholding agent for failure to declare or pay the same in cases in which the tax is so paid, unless such failure was fraudulent and for the purpose of evading payment of the tax.
(e) Refunds and credits.— Where an overpayment of tax has occurred under this section, any refund or credit made under the provisions of §§ 33001 et seq. of this title shall be made to the withholding agent unless the amount of such tax was not actually withheld by the withholding agent.
(f) Withholding required of foreign corporations requesting withdrawal from Puerto Rico.—
(1) A foreign corporation that has filed with the Secretary of State of Puerto Rico a surrender of its authority to transact business in Puerto Rico, pursuant to the General Corporations Act of the Government of Puerto Rico, shall withhold from its shareholders and pay to the Secretary the corresponding tax in the same manner as if the undistributed amount of its earnings and profits from sources in Puerto Rico (including the earnings and profits attributable to the period comprised between the close of the last taxable year and the date on which the corporation gave notice to the Secretary of State of its withdrawal from Puerto Rico) had actually been distributed as dividends in the year in which such surrender of authority had been filed.
(2) For purposes of this part, the earnings and profits deemed to have been distributed under this subsection shall constitute taxable income for the shareholders in the taxable year in which the corporation filed the surrender of its authority to do business in Puerto Rico with the Secretary of State.
(3) The provisions of this subsection shall not be applicable to the above mentioned earnings and profits in the event of their distribution if, under the different tax and industrial incentive laws, no taxes may be levied thereon. The provisions of this subsection shall not apply to earnings and profits subject to the tax imposed by § 30442 of this title.
(g) Special rule in cases of sale of property by nonresident individuals.—
(1) Requirement to withhold.— Notwithstanding any other provisions of this part, a person who acquires real property or shares from any nonresident individual (if the profit made in the transaction constitutes income from sources in Puerto Rico) shall deduct and withhold twenty-five percent (25%) of the payments he/she makes to the nonresident individual during the current taxable year, or in subsequent taxable years, as part of the purchase price of said property. Such withholding shall be of the same nature, and be declared and paid to the Secretary in the same manner and subject to the same conditions provided in the other subsections of this section. When the recipient is an individual who is a United States citizen, the withholding provided herein shall be ten percent (10%).
(2) For purposes of this clause, the term “purchase price” when referring to real property means the total amount of payments that the purchaser is bound to make, reduced by:
(A) The acquisition price of the property, as it appears in the public deed or in the original private acquisition document of the seller;
(B) the notary fees, the internal revenue stamps of the deeds and the Property Registry fees corresponding to the cancellation of the mortgage paid by the seller;
(C) the commission paid by the seller to a real estate broker in connection with the purchase-sale of the real property, and
(D) the value increase of the property over which the seller has paid the special tax in advance, pursuant to Section 1014A of the Puerto Rico Internal Revenue Code of 1994, as amended.
(E) No other reduction shall be allowed to the purchase price for purposes of this paragraph. If the seller acquired the real property through bequest, legacy, inheritance or donation, the purchase price shall only be reduced by the expenses described in paragraphs (B), (C) and (D).
(3) Refund of the amounts withheld.— The amounts withheld under clause (1) may be refunded by the purchaser directly to the seller in cases where, prior to their being paid to the Secretary, the nonresident individual has paid the tax on the profit derived from the transaction and the Secretary so acknowledges in writing, or when the Secretary determines that no profit was derived from the transaction and therefore no tax is due.
(4) Failure to withhold.— If the purchaser, in violation of the provisions of this subsection, fails to withhold as provided in clause (1) the amount that should have been deducted and withheld (unless the seller pays to the Secretary the tax on the profit derived from the transaction) shall be collected from the purchaser following the same procedure as if the purchaser were liable for the tax.
(5) Request to relieve.— In the event that an individual resident alien qualifies under the provisions of § 30144(n) of this title, he/she may request a waiver from the Secretary to prevent the seller from making the withholding provided in clause (1). The Secretary shall determine the requirements to grant this waiver through regulation.
(h) Withholding on certain foreign tax-exempt organizations.— In the case of income of a foreign organization subject to the tax imposed by § 30481 of this title, the provisions of this section and § 30281 of this title shall apply to rents includible under § 30482 of this title when computing its unrelated business net income, but only to the extent and subject to such conditions as may be provided under regulations prescribed by the Secretary.
(i) Exception in the case of eligible distribution and distributions of corporations of individuals.— None of the provisions of this section shall apply to eligible distributions of dividends or shares of partnership benefits subject to the payment of the special tax provided in § 30086 of this title, or to the distribution, other than in total or partial liquidation, derived from income earned by a corporation of individuals.
(j) Information return.— Every person who is required to deduct and withhold any tax under this section, in addition to filing the return required by subsection (b), shall file an information return with the Secretary, as he/she establishes through regulations. Said return shall include the total amount paid, the tax deducted and withheld, and the name, address, and account number of the person to whom the payment was made. A copy thereof shall be handed to the person to whom payment was made no later than the fifteenth (15th) of April of the year following the calendar year for which the return was filed.
History —Jan. 31, 2011, No. 1, § 1062.08, retroactive to Jan. 1, 2011; June 20, 2011, No. 98, § 7; Dec. 10, 2011, No. 232, § 72; Sept. 19, 2014, No. 159, § 4.