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 1005 - Computation of Taxable Income (§§ 30101 — 30157) › Subchapter C - Deductions (§§ 30121 — 30140) › § 30139 - Deductions applicable to corporations for dividends received from their subsidiaries

(a) Dividends received. — Eighty-five percent (85%) of the amount received as dividends from a domestic corporation that is subject to taxation under this part, or from industrial development income subject to taxation under this part, but the deduction shall not exceed eighty-five percent (85%) of the net income of the taxpayer. Said deduction shall be extensive to the notice of credit for capital distributed to a corporation by a special employee-owned corporation, during the time said entities keep a parent-subsidiary relationship, as provided in Section 1509 of Act No. 3 of January 9, 1956, as amended, which may not exceed ten (10) years. However, in the case of a distribution of dividends from industrial development income derived from operations covered under the provisions of §§ 10012 et seq. of this title, known as the “Puerto Rico Industrial Incentives Act of 1963”, the deduction shall not exceed seventy-seven point five percent (77.5%) of the amount received as dividend from industrial development income subject to taxation under this subtitle, but such deduction shall not exceed seventy-seven point five percent (77.5%) of the net income of the taxpayer. Provided, That, the deduction established in this subsection shall not apply in the case of a distribution of dividends of income derived from operations covered by the provisions of §§ 6001 et seq. of Title 23, known as the “Puerto Rico Tourism Development Act”.
(1) Exceptions. —
(A) In the case of a small business investment company operating in Puerto Rico under the Act of the U.S. Congress known as the “Small Business Investment Act of 1958”, there shall be allowed as a deduction from the net income, an amount equal to one hundred percent (100%) of the amount received as dividends from a domestic corporation subject to taxation under this part.
(B) There shall be allowed as a deduction from the net income, one hundred percent (100%) of the amount received as dividends by corporations organized under the laws of any state of the United States or the Government of Puerto Rico, whose principal is derived from industrial development income accumulated during taxable years beginning before January 1, 1993, and invested in obligations of the Government of Puerto Rico or any of its agencies or political subdivisions or invested in mortgages secured by the Puerto Rico Housing Bank and Finance Agency or in home-equity loans or other securities granted by any general pension or retirement system established by the Legislative Assembly of Puerto Rico, the municipalities and the agencies, instrumentalities and public corporations of the Government of Puerto Rico, upon compliance with the following requirements:
(i) That they are owned by March 31, 1977, and retained by the investing corporation for a period of more than eight (8) years as of said date, and/or
(ii) that they are acquired after March 31, 1977, and owned by the investing corporation for a period of more than eight (8) years from the date of acquisition.
For purposes of this paragraph, if the corporation has owned the note or mortgage for more than five (5) years, the aforesaid period of ownership shall not be deemed as interrupted because of the fact that the corporation owning said note or mortgage sells, transfers or exchanges the same, provided it reinvests the principal in other notes or mortgages specified in this paragraph within a period of not more than thirty (30) days. Only one transfer shall be permitted in the case of any note or mortgage during said period of eight (8) years. When the investment is made in obligations of the Government of Puerto Rico or any of its instrumentalities or political subdivisions with a maturity date of more than eight (8) years as of the date of acquisition of such obligation, and such obligation is redeemed, retired, or prepaid by the issuing government entity before eight (8) years as of the date of acquisition, the investing corporation may distribute the proceeds as a dividend with a credit against the net income equivalent to one hundred percent (100%) of the amount of said dividend, as provided in this paragraph.
(C) There shall be allowed as a deduction from the net income, one hundred percent (100%) of the amount received as dividends from corporations organized under the laws of any state of the United States or the Government of Puerto Rico, whose principal is derived from industrial development income accumulated during taxable years beginning before January 1, 1993, and invested in obligations of the Government Development Bank for Puerto Rico or any of its subsidiary corporations, for the financing through the purchase of mortgages, construction, acquisition, improvement of housing in Puerto Rico, begun after December 31, 1984, and/or the refinancing of mortgage obligations whose interests are subsidized according to the provisions of §§ 651 et seq. of Title 17; §§ 851 et seq. of Title 17; and §§ 661 et seq. of Title 17, under the terms and conditions to be established by the Bank through regulation, at the rate of a fraction whose numerator shall be number one (1) and whose denominator shall be the total number of time periods established for the payment of interest on said liabilities. In no case shall said fraction be less than one eighth (⅛) annually or one sixteenth (1/16) semiannually, based on the dates established for the payment of interests on said liabilities, provided that the investment company has owned the liability for the whole year or semester immediately preceding said dates. At the option of the investment corporation, the amounts eligible for annual or semiannual distributions under this paragraph can be accumulated for distribution in any subsequent dates. In the case of the investments described in clause (1)(B) of this subsection:
(i) A sum equal to the total of the distributions authorized under this paragraph shall be excluded from the principal invested in liabilities as described herein; Provided, That a sum equal to said principal (excluding from it a sum equal to the total of the distributions authorized under this paragraph) may be distributed under said paragraph (B) at the end of the eight (8)-year period provided in such paragraph. Provided, That the investment shall continue to be eligible for distribution under this clause for the term in excess of said eight (8)-year period during which it is owned by the investing corporation.
(ii) Those sold, transferred or exchanged at any time and the principal is reinvested within thirty (30) days following said sale, transfer or exchange, in liabilities described in this paragraph, shall be deemed as complying with said paragraph (B), but a sum equal to the total of the distributions authorized by this clause shall be excluded; provided, that the period of ownership of the investing corporation in the two (2) types of investments adds up to eight (8) years or more, including the thirty (30)-day period mentioned in this paragraph. A sum equal to said principal (excluding from it a sum equal to the total of the authorized distributions under this paragraph) may be distributed under said paragraph (B) at the end of said eight (8)-year period. The investment shall continue to be eligible for distribution under this clause for the term in excess of said eight (8)-year period that it is owned by the investing corporation. In the case of the investments described in this clause that are sold, transferred, or exchanged at any time, the principal reinvested within thirty (30) days after the sale, transfer or exchange, in liabilities described in clause (1)(B) of this subsection shall be deemed as complying with said paragraph (B), but a sum equal to the total of the distributions authorized by this clause shall be excluded therefrom; provided, that the period of ownership of the investing corporation in the two (2) types of investments adds up to eight (8) years or more, including the thirty (30)-day period mentioned in this subparagraph. A sum equal to that principal (excluding from it a sum equal to the total of the distributions authorized by this paragraph) may be distributed under said paragraph (B) at the end of said eight (8)-year period. The distributions authorized under this paragraph shall reduce, during the year that they are made, the industrial development net income for purposes of determining the investment requirements of §§ 10024 et seq. of this title, and/or any other similar act that supersedes them.
(D) Dividends received from a domestic controlled corporation. — In the case of a domestic corporation, there shall be allowed as a deduction from the net income, one hundred percent (100%) of the amount received as dividends from domestic-controlled corporations (as defined in § 30044(a)(1) of this title) that is subject to taxation under this part.
History —Jan. 31, 2011, No. 1, § 1033.19, retroactive to Jan. 1, 2011.