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) › § 30273 - Withholding at source on payments for services rendered

(a) General rule.— The Government of Puerto Rico and every natural or juridical person who, in the exercise of a trade or business activity or for the generation of income in Puerto Rico, makes payments to another person by reason of services rendered, and every payer who makes payments to a health service provider for health services rendered by said provider to any person, shall deduct and withhold seven percent (7%) of said payments. However, at the election of the service provider, the payer may deduct and withhold in lieu of seven percent (7%), an amount equivalent to ten percent (10%) or fifteen percent (15%) of said payments. The term “Government of Puerto Rico” includes the Government of the Commonwealth of Puerto Rico, its agencies, instrumentalities, public corporations and political subdivisions. The term “payer” means insurers, nonprofit associations, health insurance cooperatives, health service organizations, and any other person who makes payments in the name of the persons mentioned herein. The term services does not include the contracting of insurance, the lease or sale of tangible real or personal property, printing services, sale of newspapers, magazines, and other publications (including the placement of advertisements) and contracting of radio or television time.
(b) Special rules.— The requirement to deduct and withhold provided in subsection (a) of this section shall not apply to:
(1) The first one thousand five hundred dollars ($1,500) paid during the calendar year to the person who rendered the services. In the case of corporations or partnerships that operate in Puerto Rico through branches, the limit of one thousand five hundred dollars ($1,500) provided herein shall apply to each branch individually, at the option of the withholding agent.
(2) Payments made to hospitals, clinics, hospices for terminally ill patients, homes for the elderly, and institutions for persons with disabilities. The term “hospital or clinic” does not include the rendering of laboratory services, except in the case that said services are rendered by laboratories that form an integral part of a hospital or clinic.
(3) Payments made to exempt organizations, as provided in Section 110101 [sic].
(4) Payments for commissions made to direct salesperson for the sale of consumer products. The term “direct salesperson” means an individual who:
(A) Is engaged in the sale (or solicitation of sale) of consumer goods to any buyer on the basis of a purchase-sale agreement, commission for deposit, or any similar arrangements as the Secretary may determine by regulation, for resale (by the buyer or any other person) in the home or other site that is not a retail sales establishment, or
(B) is engaged in the sale (or solicitation of sale) of consumer products in the home or other site that is not a retail sales establishment.
(5) Payments made to contractors or subcontractors for construction works. The term “construction works” does not include architectural, engineering, design, or consulting services and other services of a similar nature.
(6) Payments for services rendered by nonresident individuals or foreign corporations or partnerships not engaged in trade or business in Puerto Rico that are subject to withholding under §§ 30278 and 30281 of this title.
(7) Payments of wages subject to withholding under § 30271 of this title.
(8) Payments for services to individuals, corporations, and partnerships during the first three (3) years as of the beginning of a service rendering activity. This exemption may be enjoyed only once by the taxpayer.
(9) Payments to the Government of Puerto Rico, their agencies, public corporations, and political subdivisions.
(10) Payments for services to a bona fide farmer who complies with the requirements for deduction provided in § 30132 of this title or in any other equivalent provision of special law.
(11) Payments made directly, or through agents, representatives, or other intermediaries, to an eligible carrier. The term “eligible carrier” means a person whose principal trade or business is air transportation, maritime cargo, or passenger transportation, or telephone communications service between Puerto Rico and any point outside of Puerto Rico.
(12) Payments made by an eligible carrier (as said term is defined in clause (11)) to nonprofit entities, for the purpose of carrying out accounting, registration, reporting, and collection of air or maritime transportation fare sales and other related services in the name or for the benefit of said eligible carrier.
(13) Payments for ecclesiastical services rendered by priests or other duly authorized or ordained ministers, including Jewish rabbis.
(14) Payments for services rendered outside of Puerto Rico.
(c) Responsibility of the payer.— Except as otherwise provided, any person required to deduct and withhold any taxes under the provisions of this section, shall be responsible to the Secretary for the payment of such taxes and shall not be responsible to any other person for the amount of any of such payments. Any person who, at the time of filing the income tax return has failed to remit to the Department of the Treasury the total amount deducted and withheld on payments described in subsection (a) of this section, shall not claim such payments as operating expenses.
(d) Income tax return and payment of withheld income.— Every payer required to deduct and withhold the tax provided in subsection (a) shall file a return and pay or deposit the same no later than the tenth (10th) day of the month following the close of the calendar month in which the tax was deducted and withheld. Said return shall be filed with the Secretary and shall contain such information and be made in the manner established through regulations by the Secretary.
(e) Failure to withhold.— If the withholding agent fails to withhold the amount referred to in subsection (a), unless the taxpayer pays the income tax directly to the Secretary, the amount that should have been deducted and withheld shall be collected directly from the government instrumentality or from the person in which the responsibility to deduct and withhold was delegated.
(f) Any person who fails to meet his/her responsibility to deduct and withhold the income tax described in subsection (a) of this section shall be subject to the penalties set forth in §§ 33082 and 33111 of this title.
(g) Waivers.—
(1) In the case of corporations and partnerships that are up to date with their tax liabilities, in lieu of the withholding provided in subsection (a), three percent (3%) shall be deducted and withheld.
(2) In the case of corporations with a volume of business of one million dollars ($1,000,000) or more that are up to date with their tax liabilities and submit financial statements enclosed with an auditor’s report subject to the provisions of § 30255 of this title, in lieu of the withholding provided in subsection (a), no withholding shall be made on account of payments for services rendered by these corporations.
(3) In the case of individuals and entities not included in clause (2) of this subsection with a volume of business of one million dollars ($1,000,000) or more, and that are up to date in their tax liabilities and file financial statements together with an auditor’s report, subject to the provisions of § 30255 of this title, the applicable withholding percentage shall be three percent (3%), in lieu of the withholding provided for in subsection (a).
(4) In the case of other sectors or categories of enterprises or businesses where it is shown to the satisfaction of the Secretary, or that the Secretary determines that the obligation of this section shall result in undue hardship to said sectors or categories of enterprises or businesses, without serving any practical purpose, since the amounts thus withheld would be refunded to the taxpayers, or because said withholding would be excessive, the Secretary may, under such rules and regulations as he may promulgate, release the withholding agent from making such withholding wholly or partially, from all enterprises or businesses included in the sector or category. The Secretary may use the aforementioned criteria to release the withholding agent, wholly or partially, from performing the withholding provided in subsection (a) or in this subsection, in the cases of the corporations and partnerships that carry over a substantial amount of net operating loss with regard to the annual business volume of said corporation.
(h) Annual reconciliation statement.— Any payer who is required to make the deduction and withholding set forth in subsection (a) and to file a return for the amounts deducted and withheld as established in subsection (d) must submit, on or before February 28 of the following year, an annual reconciliation statement stating the total of the amounts withheld under this section with respect to payments made during the year for services rendered.
(i) Information statements.— The Secretary shall establish, through regulations, the method of reporting the payments described in this section and the amounts withheld pursuant to the provisions of subsection (a).
History —Jan. 31, 2011, No. 1, § 1062.03, retroactive to Jan. 1, 2011; Dec. 10, 2011, No. 232, § 67.