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) › § 30271 - Income tax withholding at source in the case of wages

(a) Definitions.— As used in this section:
(1) Wages.— The term “wages” means any remuneration for services rendered by an employee for his/her employer, and every remuneration as pension for services rendered, including the cash value of all remuneration paid by any medium other than cash; except that said term shall not include remuneration paid:
(A) For such services in agricultural labor, as defined in clause (12) of this subsection, excluding services performed by executive, administrative, office, or supervisory employees and by the employees occupying permanent positions, or
(B) for domestic services in a private home, local college club, or local chapter of a college fraternity or sorority, or
(C) for services not in the course of the employer’s trade or business performed in any calendar quarter by an employee, unless the cash compensation paid for is more than eight hundred seventy-five dollars ($875) and such service is performed by an individual who is regularly employed by such employer. For purposes of this paragraph, an individual shall be deemed to be regularly employed by an employer during a calendar quarter only if:
(i) On each of any twenty-four (24) days during such quarter such individual performs for his/her employer for some portion of the day services not in the course of the employer’s trade or business, or
(ii) such individual was regularly employed, as determined under subparagraph (i), by such employer in the performance of services during the preceding calendar quarter, or
(D) services rendered by a citizen or resident of Puerto Rico for a foreign government or an international organization, or
(E) for services performed by a nonresident individual, other than compensation as pension for services rendered, or
(F) for services performed by a duly ordained, commissioned, or licensed minister of a church in the exercise of his/her ministry or by a member of a religious order in the exercise of duties required by such order, or
(G) by reason of indemnification in case of dismissals in which there was no just cause, as provided in §§ 185a et seq. of Title 29, or under a severance pay agreement between the employer and the employee, or
(H) for services rendered outside of Puerto Rico by an individual resident of Puerto Rico if, at the time the remuneration is paid the employer is required by the laws of the United States or of any possession of the United States or of any foreign country to withhold at the source the tax on all or any part of said remuneration, or
(I) for pensions subject to withholding under other provisions of this part, as well as such amount received from said pensions that is excludible from gross income under § 30102(a)(13) of this title.
(2) Payroll period.— The term “payroll period” means a period for which a payment of wages is ordinarily made to the employee by his/her employer, and the term “miscellaneous payroll period” means a payroll period other than a daily, weekly, bi-weekly, bi-monthly, monthly, quarterly, semiannual, or annual payroll period.
(3) Employee.— The term “employee” includes an officer, employee, or elected official of the Government of Puerto Rico or any political subdivision thereof, or of any agency or instrumentality of any of the foregoing. The term “employee” also includes an officer of a corporation.
(4) Employer.— The term “employer” means the person for whom an individual performs or has performed any service, of whatever nature, as the employee of such person, except that:
(A) If the person for whom the individual performs or has performed the services does not have control of the payment of the wages for such services, the term “employer”, except for purposes of clause (1), means the person having control of the payment of such wages, and
(B) in the case of a person paying wages on behalf of a nonresident individual, foreign partnership, or foreign corporation not engaged in trade or business within Puerto Rico, the term “employer”, except for purposes of clause (1) of this subsection, means such person.
(5) Single person.— The term “single person” means a person with respect to whom a withholding exemption certificate is in effect under subsection (f) stating that such person is an individual single taxpayer, as defined in § 30043(a)(1) of this title.
(6) Married person.— The term “married person” means a person with respect to whom a withholding exemption certificate is in effect under subsection (f) stating that said person is married, as defined in § 30043(a)(2) of this title.
(7) Dependent.— The term “dependent” means a person included in a withholding exemption certificate in effect under subsection (f) as a dependent of the employee according to the definition of “dependent” provided in § 30138(c)(1) of this title.
(8) Agricultural labor.— The term “agricultural labor” includes all service performed:
(A) On a farm, in the employ of any person, in connection with the cultivating of the soil, or in connection with the raising or harvesting of any agricultural or horticultural commodity, including the raising, shearing, caring for, training, and management of livestock, bees, poultry, and wildlife.
(B) In the employ of the owner or tenant or other operator of a farm, in connection with the operation, management, conservation, improvement, or maintenance of the farm and its tools and equipment, or in salvaging timber or clearing land of brush and other debris left by a hurricane, if the major part of such service is performed on a farm.
(C) In connection with the production or harvesting of any commodity defined as an agricultural commodity in Section 15(g) of the U.S. Congress Act known as the “Agricultural Marketing Act”, as amended, or in connection with the operation or maintenance of ditches, canals, reservoirs, or waterways, not owned or operated for profit, used exclusively for supplying and storing water for farming purposes.
(D)
(i) In the employ of the operator of a farm in the handling, planting, drying, packing, packaging, processing, freezing, grading, storing, or delivery to storage or to market or to a carrier for transportation to market in its unmanufactured state, of any agricultural or horticultural commodity; but only if such operator produced more than one-half of the commodity with respect to which such service is performed.
(ii) In the employ of a group of operators of farms (other than a cooperative organization) in the performance of service described in subparagraph (i), but only if such operators produced all of the commodity with respect to which such service is performed. For purposes of this subparagraph, any unincorporated group of operators shall be deemed to be a cooperative organization if the number of operators comprising such group is more than twenty (20) at any time during the calendar quarter in which such service is performed.
(iii) The provisions of subparagraphs (i) and (ii) of shall not be deemed to apply with respect to service performed in connection with commercial canning or commercial refrigeration or in connection with any agricultural or horticultural commodity after its delivery to an end market for distribution for consumption.
(E) On a farm operated for profit if such service is not in the conduct of the employer’s trade or business or is domestic service in a private home of the employer.
As used in this clause, the term “farm” includes cattle, dairy, poultry, fruit, and truck farms, plantations, ranches, nurseries, ranges, greenhouses or other similar structures used primarily for the raising of agricultural or horticultural commodities, and orchards.
(b) Requirement to withhold.— Every employer who makes payment of wages shall deduct and withhold a tax on the sum of all wages determined according to the withholding schedules that, in harmony with the tax rates fixed in this part, shall be approved by the Secretary of the Treasury and which shall be part of the regulations of this part. For purposes of applying said schedules, the term “amount of the wages” shall mean the amount by which the wages exceed the allowable exemption for withholding allowable under subsection (c)(1).
(6) In determining the amount to be deducted and withheld under this subsection, the wages may, at the election of the employer, be computed to the nearest dollar.
(c) Withholding exemption.—
(1) In computing the tax required to be deducted and withheld in accordance with the tables promulgated by the Secretary, as provided in subsection (b), there shall be allowed, as a withholding exemption with respect to the wages paid for each payroll period, an exemption determined according to the withholding exemption tables which, in harmony with the provisions of this part, the Secretary shall approve and that shall be part of the regulations of this part. Said tables shall take into consideration the amount of the personal exemption and credit for dependents allowable to the taxpayer according to § 30138 of this title, as well as the concession for withholding based on the deductions provided in clause (2) of this subsection.
(2) Concession for withholding based on deductions.—
(A) In determining the amount of the exemption for withholding under clause (1), concessions shall be allowed based on deductions in a number equal to the result of dividing:
(i) The amount of any payments, if any, made by an employee towards a government pension or retirement plan by five hundred dollars ($500).
(ii) At the option of the employee, the amount of the deductions which he/she deems he/she is entitled to deduct under § 30135 of this title, upon computing his/her net income for the corresponding taxable year, by five hundred dollars ($500).
For purposes of this clause, the system established under the Social Security Act shall not be considered as a government pension or retirement system and a fraction shall not be considered unless the same exceeds fifty percent (50%), in which case this fraction shall be considered as an additional concession.
(B) In the case of a husband and wife living together who, on determining the withholding concession, exercise the option under paragraph (A)(ii) of this clause, the number of concessions to which they are entitled under this clause shall be determined taking as a basis their combined wages and deductions. They may divide among themselves the total concessions as they wish, but on the basis of the complete concessions. However, any concession claimed by one of the spouses in a withholding exemption certificate shall not be claimed by the other spouse.
(3) If wages are paid with respect to a period other than a payroll period, the withholding exemption allowable with respect to each payment of such wages shall be the exemption allowed for a miscellaneous payroll period containing a number of days, including Sundays and holidays, equal to the number of days in the period with respect to which such wages are paid.
(4) In any case in which wages are paid by an employer without regard to any payroll period or other period, the withholding exemption allowable with respect to each payment of such wages shall be the exemption allowed for a miscellaneous payroll period containing a number of days equal to the number of days, including Sundays and holidays, which have elapsed since the date of the last payment of such wages by such employer during the calendar year, or since the date of commencement of employment with such employer during such year, or since January 1 of such year, whichever of these dates is the latest.
(5) In any case in which the period, or the time described in clause (4), in respect to any wages, were less than one week, the Secretary may, under regulations prescribed by him/her, authorize an employer to use, in computing the tax required to be deducted and withheld, the excess of the aggregate of the wages paid to the employee during the calendar week over the withholding exemption allowed by this subsection for a weekly payroll period.
(d) Alternative withholding.— The Secretary is hereby empowered to prescribe through regulations, under such conditions and to the extent he/she deems convenient, a withholding method which substitutes that method otherwise required under this section, when at his/her discretion he/she deems it necessary or convenient to provide for such alternative withholding method. Such alternative withholding shall be treated for all purposes as tax required to be deducted and withheld under this section.
(e) Additional withholding.— The Secretary is authorized to prescribe by regulations, under such conditions and to such extent as he/she deems proper for withholding in addition to that otherwise required under this section, in cases in which the employer and the employee agree (in such form as the Secretary may by regulations prescribe) to such withholding. Such additional withholding shall for all purposes be treated as tax required to be deducted and withheld under this section.
(f) Withholding exemption certificates.— Every employee receiving wages shall furnish his/her employer a signed withholding exemption certificate for the purpose of computing his/her withholding exemption. In case of a change that affects the withholding exemption, a new certificate shall be furnished not later than ten (10) days after such change occurs. The certificate shall be in such form and shall contain such information as the Secretary may by regulations prescribe.
(1) Such certificate:
(A) If furnished after the date of commencement of employment with the employer by reason of a change of status, shall take effect with respect to the first payment of wages made on or after the first status determination date which occurs at least thirty (30) days from the date on which such certificate is furnished to the employer, except that at the election of the employer such certificate may be made effective with respect to any previous payment of wages made on or after the date such certificate is furnished. For purposes of this paragraph, the term “status determination date” means January 1 and July 1 of each year.
(B) If furnished otherwise than by reason of a change of status, shall take effect as of the beginning of the first payroll period ending, or the first payment of wages made without regard to a payroll period, on or after the date on which such certificate is furnished to the employer, except that if the reason for filing the new certificate is one which will become effective from and after the following calendar year, said certificate shall not be taken into consideration with respect to any payment made in the calendar year in which it is filed.
(2) A certificate which takes effect under this subsection shall continue in effect with respect to the employer until another such certificate furnished by the employee takes effect under this subsection. If no certificate is in effect under this subsection with respect to an employee, such employee shall be treated, for purposes of the withholding exemption, as a married person claiming none of the personal exemptions for withholding and having no dependents nor any concession based on deductions.
(3) An employer who receives from any employee an exemption certificate in which the number of dependents claimed exceeds eight (8), must submit to the Secretary, under regulations prescribed by him/her, a copy of said certificate, as well as a copy of any written statement received from the employee in support of the information contained in the certificate.
(g) Included and excluded wages.— If the compensation paid by an employer to an employee for services performed during one-half or more of any payroll period of not more than thirty-one (31) consecutive days constitutes wages, all the compensation paid by such employer to such employee for such period shall be treated as wages; but if the compensation paid by an employer to an employee for services performed during more than one-half of any such payroll period does not constitute wages, then none of the compensation paid by such employer to such employee for such period shall be deemed to be wages.
(h) Overlapping pay periods.— If a payment of wages is made to an employee by an employer:
(1) With respect to a payroll period or other period, any part of which is included in a payroll period or other period with respect to which wages are also paid to such employee by such employer; or
(2) without regard to any payroll period or other period, but on or prior to the expiration of a payroll period or other period with respect to which wages are also paid to such employee by its employer; or
(3) with respect to a period beginning in one and ending in another calendar year, or
(4) through an agent, fiduciary, or other person who also pays or has the control, receipt, custody, or disposal of the wages payable by another employer to such employee; the manner of withholding and the amount to be deducted and withheld under this section shall be determined in accordance with regulations prescribed by the Secretary under which the withholding exemption allowed to the employee in any calendar year shall approximate the withholding exemption allowable with respect to an annual payroll period.
(i) Withholding on basis of average wages.— The Secretary may, under regulations prescribed by him/her, authorize employers: (1) to estimate the wages which will be paid to any employee in any quarter of the calendar year, (2) to determine the amount to be deducted and withheld upon each payment of wages to such employee during such quarter as if the appropriate average of the wages so estimated constituted the wages actually paid, and (3) to deduct and withhold upon any payment of wages to such employee during such quarter, such amount as may be necessary to adjust the amount actually deducted and withheld upon the wages of such employee during such quarter to the amount required to be deducted and withheld during such quarter without regard to this subsection.
(j) Return and payment.— A person required to deduct and withhold any tax under this section shall, on or before the last day of the month following the close of each of the quarters ending on March thirty-first (31st), June thirty (30), September thirty (30), and December thirty-first (31st) of each year, in lieu of on the date prescribed in §§ 30255 and 30256 of this title, file a return therefor and pay such part thereof which has not been paid or deposited in the form and manner prescribed in §§ 33001 et seq. of this title. Such return shall be filed with the Secretary and contain such information and be made in such manner as the Secretary may by regulation prescribe.
(k) Return and payment by government employer.— If the employer is the Government of Puerto Rico, or any political subdivision thereof, or any agency or instrumentality thereof, the return of the amount deducted and withheld upon any wages may be filed by any officer or employee of the Government of Puerto Rico, or of such political subdivision, or of such agency or instrumentality, as the case may be, having control of the payment of such wages, or duly designated for that purpose.
(l) Liability for tax.— The employer shall be liable to the Secretary for the payment of the tax required to be deducted and withheld under this section and shall not be liable to any person for the amount of any such payment. Any employer who, at the time of filing its income tax return, has failed to remit to the Department of the Treasury the total amount deducted and withheld from the wages paid to its employees corresponding to the taxable year it is filing, shall not claim the wages paid as operating expenses.
(m) Tax paid by recipient.— If the employer, in violation of the provisions of this part, fails to deduct and withhold the tax under this section, and thereafter the tax against which such tax may be credited is paid, the tax so required to be deducted and withheld shall not be collected from the employer, but this subsection shall in no way relieve the employer from liability for any penalties or additions to the tax otherwise applicable in respect of such failure to deduct and withhold.
(n) Statements.—
(1) Annual reconciliation statement.— An employer required to deduct and withhold any tax with respect to the wages of his/her employees and to file a monthly return for such tax so deducted and withheld shall submit, on or before January thirty-first (31st) of the following year, in addition to any other documents, an annual reconciliation statement showing the amount of the tax deducted and withheld monthly, under this section, with respect to said wages.
(2) Evidence of withholding.— An employer required to deduct and withhold a tax with respect to the wages of an employee, or who has been required to do so if the employee had claimed only the personal exemption allowed to a individual who is single, shall furnish to each such employee with respect to his/her employment during the calendar year, on or before January thirty-first (31st) of the following year, or, if his/her employment is terminated before the close of such calendar year, then on the day the last payment of wages is made, a written statement showing the following information:
(A) Name, address, and employer’s identification number (social security);
(B) name, address, and employee’s account number (social security);
(C) total amount of wages paid, as said term is defined in subsection (a)(1);
(D) amount of the tax deducted and withheld under this section with respect to such wages;
(E) amount of expenses reimbursed to the employee, and
(F) cash or deferred contributions to qualified plans under § 30391(e) of this title.
(3) Statements to constitute information returns.— The statements required to be furnished by this subsection with respect to any wages shall be furnished at other times, shall contain such other information, and shall be in such form as the Secretary may by regulation prescribe. A duplicate of such statement, if made and filed in accordance with regulations prescribed by the Secretary, shall constitute the return required to be made with respect to such wages under this part.
(4) Extension.— The Secretary may, under such regulations as he/she may prescribe, grant to any employer a reasonable extension, not in excess of thirty (30) days, with respect to the statements required to be furnished under this subsection.
(o) Nondeductibility of tax in computing net income.— The tax deducted and withheld under this section shall not be allowed as a deduction either to the employer or to the recipient of the income in computing net income for purposes of any income tax imposed by a law of the Legislative Assembly.
(p) Refunds or credits.—
(1) Employers.— Where there has been an overpayment of tax under this section, refund or credit shall be made to the employer only to the extent that the amount of such overpayment was not deducted and withheld under this section by the employer.
(2) Employees.— The refund or credit in cases of excessive withholding shall be governed by §§ 33001 et seq. of this title.
(q) Penalties.— For penalties applicable to fraudulent statements or failure to furnish statements and/or information required under subsection (e) or under subsection (n) of this section see §§ 33001 et seq. of this title.
(r) In cases regarding wages for services rendered in occasional, temporary or seasonal work in which the payroll period with respect to the employee is daily and the amount thereof is based on an hourly wage, if the employer shows to the satisfaction of the Secretary that by determining the amount of the tax to be deducted and withheld from said wages under the provisions of subsection (b) it would cause him serious hardship, such employer may, upon authorization of the Secretary, deduct and withhold the income tax at source on said wages applying two percent (2%) to the total amount thereof, without considering any withholding exemption. For purposes of determining whether the application of the provisions of subsection (b) would cause serious hardship to the employer, the following factors, among others, shall be taken into consideration:
(1) Number of employees that the employer has and who receive wages under such circumstances.
(2) Regularity of employment of each of the employees.
(3) Rotation of employees in the business of the employer.
(4) Amount of compensation per employee.
(5) Available time for preparing and transacting the payrolls corresponding to said wages.
(6) Difficulties in determining the amount of the wage of the employee because of being unable to foresee the duration of the job.
History —Jan. 31, 2011, No. 1, § 1062.01, retroactive to Jan. 1, 2011; Dec. 10, 2011, No. 232, § 65.