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 1013 - Other Special Taxpayers (§§ 30501 — 30622) › Subchapter B - Registered Investment Companies (§§ 30521 — 30522) › § 30521 - Taxation on registered investment companies and their stockholders

(a) Registered investment companies.— Any registered investment company which, during its entire taxable year, fulfills all of the requirements and conditions provided in any law of the Commonwealth of Puerto Rico related to investment companies, shall be subject to taxation in accordance with the provisions applicable to domestic corporations, except that:
(1) In computing the net income of such company:
(A) There shall be included in its gross income the amount of dividend or profit distributions received from corporations exempt from taxation under Act No. 184 of May 13, 1948, as amended, under Act No. 6 of December 15, 1953, or under any other tax exemption law of Puerto Rico, and
(B) there shall be disregarded:
(i) Gains or losses from the sale or other disposition of capital assets;
(ii) the net operating loss deduction provided in § 30134 of this title, and
(iii) the provisions of § 30264(c) of this title.
(2) If such company distributes to its stockholders during the taxable year as taxable dividends or as dividends from industrial development income, as defined in subsection (c), an amount not less than ninety percent (90%) of its net income, computed as provided in this subsection, such company shall be exempt from taxation. For purposes of this subsection, taxable dividends or dividends from industrial development income declared by a registered investment company after the close of the taxable year and prior to the date prescribed by this part for filing its return for the taxable year (including any extension thereof) shall, if the company so elects in such return, be treated as paid during such taxable year but only if the distribution of such dividends is actually made to stockholders within the four (4) month period following the close of such taxable year and not later than the date of the first regular dividend distribution made after such declaration.
(b) Registered investment company stockholders.—
(1) Puerto Rico residents.— All Puerto Rico residents who are registered investment company stockholders shall:
(A) Exclude from their gross income:
(i) Tax-exempt dividends, as defined in subsection (c)(1), plus
(ii) dividends from industrial development income, as defined in subsection (c)(2), to the extent that the sums to which such dividends amount would be tax-exempt for them if received directly from a tax-exempt corporation under Act No. 184 of May 13, 1948, as amended, under Act No. 6 of December 15, 1953, or under any other tax exemption law of Puerto Rico, and
(iii) dividends of registered investment companies from current or accumulated earnings and profits attributable to their income derived from eligible activities described in subsections (d) and (e) of § 30522 of this title, excluding the eligible activities listed in subsections (e)(1) and (e)(2) of said section, up to a maximum of five percent (5%) of their total income, including the income excluded under the provisions of this section, arising from registered investment company dividends in the taxable year; and
(B) Include in their gross income:
(i) Capital gain dividends, as defined in subsection (c)(3), plus
(ii) dividends from industrial development income, as defined in subsection (c)(2), to the extent that the sums to which such dividends amount would be taxable for them if received directly from a tax-exempt corporation under Act No. 184 of May 13, 1948, as amended, under Act No. 6 of December 15, 1953, or under any other tax exemption law of Puerto Rico, plus
(iii) the actual and effective amount of taxable dividends, as defined in subsection (c)(4), or
(iv) in lieu of the amount includible under subparagraph (i), the amount of such dividends plus the stockholders’ pro rata portion corresponding to stockholders of any income tax, war profits, and excess profits paid to the United States, any possession of the United States or any other part of the United States other than a state, to the Government of Puerto Rico, or any foreign country, by the registered investment company or any subsidiary of which ninety percent (90%) of the stock is owned by the registered investment company, upon or with respect to the profits from which such dividends are deemed to have been paid. If a stockholder chooses to include in gross income such dividends plus such allocable taxes, such stockholder shall be entitled to credit the tax imposed by this part with the amount of such allocable taxes, subject to the limitations of § 30201 of this title, except that in applying said section, alien residents of Puerto Rico shall be treated in the same manner as residents of Puerto Rico who are United States citizens.
(2) Puerto Rico nonresidents.— Registered investment companies which pay dividends to nonresident stockholders shall, subject to the limitations of § 30201 of this title, credit the tax required to be deducted and withheld under §§ 30278 and 30281 of this title, with such stockholders’ pro rata portion of the income, war profit, and excess profit taxes paid to the United States, any possession of the United States, or any other part of the United States other than a state, to the Government of Puerto Rico, or any foreign country by such registered investment companies or any subsidiaries of which ninety percent (90%) of the stock is owned by such registered investment companies, upon or with respect to the profits from which such dividends are deemed to have been paid. For purposes of determining the gross tax required to be deducted and withheld prior to such credit, dividends paid during the taxable year by such registered investment companies to stockholders shall be regarded:
(A) As excluding the amount of tax-exempt dividends, as defined in subsection (c)(1), and
(B) as including the actual and effective amount of all other dividends, plus the amount of the stockholders’ pro rata portion of any income, war profit, and excess profit taxes paid to the United States, any possession of the United States or any part of the United States other than a state, the Government of Puerto Rico, or any foreign country by registered investment companies or any subsidiaries of which ninety percent (90%) of the stock is owned by such registered investment companies, upon or with respect to the profits from which such dividends are deemed to have been paid.
(c) Definitions.— For purposes of this section:
(1) Tax-Exempt dividends.— Tax-exempt dividend means any dividend or part of a dividend designated as such by a registered investment company in a written notice mailed to its stockholders at any date prior to the expiration of sixty (60) days after the close of its taxable year. If the aggregate amount so designated with respect to a taxable year of the company is greater than its current or accumulated earnings and profits attributable to tax exempt income: (A) under § 30102 of this title; (B) under Section 6(b)(1) of Act No. 184 of May 13, 1948; (C) under Section 3 of Act No. 6 of December 15, 1953; (D) under Section 3 of Act No. 57 of June 13, 1963; (E) under any other tax exemption law of Puerto Rico; or (F) under § 1258 of this title, the portion of each distribution which shall constitute tax-exempt dividends shall only be that ratio of the so designated amount that said current or accumulated earnings and profits bear to the accumulated amount so designated.
(2) Dividends from industrial development income.— Dividend from industrial development income means any dividend or part thereof designated as such by a registered investment company in a written notice mailed to its stockholders at any time prior to the expiration of sixty (60) days after the close of its taxable year. If the aggregate amount so designated with respect to a taxable year of the company is greater than its current or accumulated earnings and profits attributable to dividend or profit distributions of tax-exempt corporations or partnerships under Act No. 184 of May 13, 1948, as amended, under Act No. 6 of December 15, 1953, or under any other tax exemption law of Puerto Rico, made by such corporations or partnerships from income derived from the operations thereof covered by the exemption, the portion of each distribution which shall constitute dividends from industrial development income shall only be that ratio of the so designated amount that such current or accumulated earnings and profits bear to the aggregate amount so designated.
(3) Capital gain dividends.— Capital gain dividend means any dividend distribution or part thereof, made by a registered investment company out of its current or accumulated earnings and profits attributable to gains, sale or other disposition of property. Such term shall not include, however, any dividend distribution or part thereof made by a registered investment company out of its current or accrued earnings or profits attributable to tax-exempt profits under Section 6(b)(1) of Act No. 184 of May 13, 1948, under Section 3 of Act No. 6 of December 15, 1953, or under Section 3 of Act No. 57 of June 13, 1963, or under any other tax exemption law of Puerto Rico.
(4) Taxable dividends.— Taxable dividend means any dividend distribution or part thereof made by a registered investment company out of its current or accumulated earnings and profits attributable to sources other than those specified in clauses (1), (2), and (3).
(5) Registered investment company stockholders.— For purposes of subsection (b)(1), the term “registered investment companies” also includes, subject to the provisions of the regulations promulgated by the Secretary, any registered investment company or real estate investment trust created or organized under the laws of the United States of America or any state of the United States of America that, during the taxable year, meets the requirements of the Puerto Rico Investment Companies Act of 2013.
(d) Treatment of capital gain dividends.— Capital gain dividends shall be treated by stockholders as long-term capital gains.
(e) The provisions of subsection (a) notwithstanding, the separate accounts of an insurer established under the terms and conditions provided in the Insurance Code of Puerto Rico shall not be treated as a registered investment company for purposes of this Code.
(f) Treatment of interest over registered investment company notes.— The Secretary shall prescribe by regulations, circular letter, or any other general communication the tax treatment of the interests over notes issued by registered investment companies.
(g) Special tax rate for certain distributions.— The portion of dividend distributions made by a registered investment company from the income of such company that would not be eligible distributions under § 30086 of this title, if received directly by the taxpayer, shall not be deemed to be eligible distributions for purposes of the special tax rate provided in § 30086 of this title, and a special fifteen percent (15%) tax rate of the total amount received shall be imposed thereon; Provided, That if the income derived from these investments is less than twenty percent (20%) of the total income of the company for the year corresponding to the dividend, the tax rate of such dividend would be ten percent (10%).
(h) Special credit.— Taxpayers shall be allowed to claim an income tax credit of five dollars ($5) from registered investment companies distributions that must be otherwise included in their gross income, for every dollar received as distributions excluded under subsection (b)(1)(A)(iii) of this section. However, taxpayers shall not exclude, under the provisions of this subsection, more than twenty-five percent (25%) of their total income from such dividend distribution from registered investment companies during the taxable year, including distributions excluded from their gross income under the provisions of this section. The provisions of this subsection shall not affect the exempt-nature of a dividend excluded from gross income under the provisions of this section.
History —Jan. 31, 2011, No. 1, § 1112.01, retroactive to Jan. 1, 2011; July 30, 2013, No. 93, § 3; Nov. 27, 2013, No. 137, § 20.