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 1004 - Tax Rates (§§ 30061 — 30090) › Subchapter C - Preferred Rate Taxes (§§ 30081 — 30090) › § 30084 - Tax on individuals, estates, and trusts with regard to the interest paid or credited on deposits in interest bearing accounts

(a) Tax rate. —
(1) Special tax rate. — Any individual, estate or trust may avail itself of the option to pay, in lieu of any other taxes imposed by this part, a tax equal to ten percent (10%) or to seventeen percent (17%) in the case of an individual retirement account, on the total amount of nonexempt interest paid to it, or credited on deposits to the interest-bearing accounts in credit unions, savings associations authorized by the federal government or the Government of Puerto Rico, commercial and mutual banks, or any other banking institution located in Puerto Rico, provided that said taxpayer meets the requirements of subsection (b).
(2) Normal tax rate. — Any individual, estate or trust may opt to pay a tax determined according to the normal tax rates.
(3) Excess of withheld tax. — In the event that the tax withheld in accordance with this section is greater that the tax resulting from the application of the applicable preferred tax rate provided in subsection (a)(1), the net income subject to such preferred tax rate, may be applied to such excess as a credit against the regular tax.
(4) Special rules. —
(A) Brokerage house as nominee. — This section applies to the interest paid or credited on deposits in interest-bearing accounts belonging to one (1) or more individuals, estates and trusts and are registered in the name of a brokerage house as nominee.
(B) Individual retirement account. — The seventeen percent (17%) tax shall apply to the portion of any amount paid or distributed from an individual retirement account consisting of interest described in this section.
(C) In the cases described in paragraphs (A) and (B), said provisions shall apply only to interest paid or credited with respect to shares in said account owned by individuals, estates and trusts.
(b) Requirements to avail oneself of the provisions of this section. —
(1) Option. —
(A) The option to pay only the ten percent (10%) tax referred to in subsection (a)(1) is available to those recipients of interest that not later than April 15 of each taxable year or on the opening date of an interest-bearing account authorize the payer thereof to withhold the tax imposed by subsection (a).
(B) The interest paid or credited to the taxpayer on accounts in effect between January 1 of each year and the date on which the option is exercised, provided that the latter is exercised within the term prescribed, may be taxed at the rate of ten percent (10%) when filing the income tax return.
(C) In the case of an individual retirement account (IRA), the option to pay the seventeen percent (17%) tax may be exercised at the time of making the payment or the distribution of the account.
(D) When an individual, estate, or trust has one or more interest-bearing accounts in one or more financial institutions, the same shall be bound to select the financial institution or account where the exemption on paid or credited interest shall be applied as established in § 30102(a)(3)(K) of this title and to notify the latter, and each of the other institutions in which said accounts are held, of the selection. In these cases, the institution thus selected shall be required to deduct and withhold the ten percent (10%) tax or the seventeen percent (17%) tax, as applicable, on the amount paid or credited for interest in excess of the first five hundred dollars ($500) accrued in each quarter. The other financial institutions shall withhold said ten percent (10%) or seventeen percent (17%), as applicable, taking as the base the total amount of interest paid or credited.
(E) Every individual, estate or trust that does not exercise the option provided herein shall be required to pay the income tax based on the normal rates.
(F) The withholding agent shall proceed to withhold, with regard to interest paid or credited from the date the option is exercised according to the procedure established in § 30279 of this title and shall be subject to the provisions thereof.
(G) Once exercised, this option shall continue in effect until the recipient of the interest chooses otherwise.
(2) Manner of exercising the option. — For purposes of claiming the benefits of the option provided in clause (1) of this subsection, the recipient of interest shall deliver to each payor of the same a written authorization in which it is stated under his/her signature that he/she opts for the withholding of the tax imposed by subsection (a).
(3) Special procedure in the case of accounts in brokerage houses. —
(A) For the purpose of applying clauses (1) and (2) of this subsection, in the case of an account belonging partially or wholly to one (1) or more individuals, estates or trusts, which has been acquired through a brokerage house and is registered in the name of a brokerage house as nominee, or of interest attributable to the distributive share in a partnership, special partnership or corporation of individuals, all references in said clauses to the phrases “payor of interest”, “financial institution that shall apply the exemption on interest”, “selected institution”, and “withholding agent” include the brokerage house in whose name the account is registered, the partnership, special partnership, or the corporation of individuals, as the case may be.
(B) With regard to the portion of an account that belongs to one (1) or more individuals, estates or trusts, said brokerage house can act as the withholding agent and may receive the authorization of each individual, estate or trust to withhold the ten percent (10%) or the seventeen percent (17%), as applicable, on interest paid or credited by the financial institution to the brokerage house, and in turn, paid or credited to the taxpayer by the brokerage house, and can be the institution selected to deduct and withhold the ten percent (10%) tax or the seventeen percent (17%) tax, as applicable, on the amount paid or credited on account of interest in excess of the first five hundred dollars ($500) accrued in each quarter.
History —Jan. 31, 2011, No. 1, § 1023.04, retroactive to Jan. 1, 2011.