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) › § 30281 - Tax withholding at source on foreign corporations and partnerships not engaged in trade or business in Puerto Rico

(a) Requirement to withhold.—
(1) General rule.— In the case of foreign corporations and partnerships not engaged in trade or business in Puerto Rico, there shall be deducted and withheld at the source, in the same manner and on the same items of income that are provided for in §§ 30278 (including its subsection (g)) and 30280 of this title, a tax equal to twenty-nine percent (29%) of said income.
(2) Withholding on dividends.—
(A) Except as provided in paragraph (B), income from dividends shall be subject to a deduction and withholding of an amount equal to ten percent (10%) thereof.
(B) In the case of dividends referred to in § 30431(a)(2)(D) of this title, the withholding shall be of seven percent (7%).
(3) Exceptions.— The deduction and withholding provided in this subsection shall not apply with respect to:
(A) Dividends received from industrial development income that originate from interest on obligations of the Government of Puerto Rico or any of its instrumentalities or political subdivisions, on mortgages insured by the Puerto Rico Housing Finance Agency and Bank acquired after March 31, 1977, and on loans or other assets with mortgage security granted by any pension or retirement system of a general nature established by the Legislature of Puerto Rico, the municipalities, agencies, instrumentalities and public corporations of the Government of Puerto Rico and acquired after March 31, 1977,
(B) 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”, and
(C) the amount of any benefits or interests received under a life insurance or annuity contract, interest (including the original issue discount, letters of credit, and other financial guarantees), dividends, distributions in total or partial liquidation or other income items similar to those received from international insurers or from international insurer holding companies which are in compliance with § 4304 of Title 26.
(4) In the case of interest received by a foreign corporation or partnership not engaged in trade or business in Puerto Rico, the requirement to deduct an amount equal to twenty-nine percent (29%) of such interest imposed by this subsection shall apply only if such corporation or partnership is a person related (as defined in § 30045 of this title) to the debtor of the obligation. In the case of any item of income effectively connected to the exploitation of a trade or business within Puerto Rico and that, pursuant to § 30441(c)(2) of this title, may be included in the gross income of the recipient’s income for the taxable year, there will be no deduction or withholding.
(b) Limitation.— If a corporation or partnership organized under the laws of a foreign country receiving dividends from an entity which is or was exempt and is engaged in a trade in Puerto Rico or is the owner or operator of a hotel or hotels in Puerto Rico, or leases property, machinery, or equipment for use in a trade or hotel in Puerto Rico can establish to the satisfaction of the Secretary:
(1) that said corporation or partnership is not bound to pay, in any jurisdiction outside Puerto Rico or outside the United States, any tax on dividends derived from industrial development income, then no tax shall be deducted or withheld on such dividends; or
(2) that the tax withheld under subsection (a) may not be claimed as credit against the tax payable on the dividends to the country where the corporation was organized, or that said tax may only be taken partially as credit, because the tax withheld is greater than the tax imposed in said country, the tax so withheld, or the part thereof that could not be claimed as credit, shall be reimbursed to the taxpayer.
(c) Any corporation claiming a refund, either from the Secretary or from the withholding agent under the provisions of subsection (b), shall present to the Secretary:
(1) A certificate issued by the proper government authorities of the country where the corporation was organized, establishing the extent to which the income tax imposed in Puerto Rico on such dividends may be claimed as credit in such country; or
(2) a certified copy of the return filed in said country, showing the tax paid and the extent to which the Puerto Rico tax was allowed as credit, or
(3) any other satisfactory evidence.
Based on this evidence, the Secretary shall grant a refund or authorize the withholding agent refund the corresponding amount in case the funds have not been paid to the Department of the Treasury.
(d) The taxes withheld under the provisions of this section shall be declared and paid in the same manner and subject to the same conditions as provided in § 30278 of this title.
(e) Income tax withheld on nonresident alien of a partnership or special partnership.— In the case of a nonresident foreign corporation that is a partner in a partnership or special partnership, there shall be deducted and withheld an amount equal to twenty-nine percent (29%) of the amount of the distributive share of the corporation in the income of the partnership or special partnership. The income tax to be withheld under this subsection shall be subject to the provisions of § 30280 of this title.
(f) 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.
History —Jan. 31, 2011, No. 1, § 1062.11, retroactive to Jan. 1, 2011; June 20, 2011, No. 98, § 8; Dec. 10, 2011, No. 232, § 74.