Modifications to the Puerto Rico Internal Revenue Code of 2011: Tax Alert on Act 52-2022 and its technical amendments

Puerto Rico Act 52, approved in June 2022, introduces a series of technical amendments to the Puerto Rico Internal Revenue Code of 2011. These amendments have significant implications for taxpayers and businesses operating on the island. 

One of the most notable amendments is the exclusion of activities performed by a remote worker from the term “engaged in trade or business in Puerto Rico” for taxable years beginning after December 31, 2021. This applies as long as certain requirements are met and wages paid to a remote worker will not be subject to income tax withholding. However, the remote worker will be required to pay estimated taxes. 

In addition, Law 52 extends indefinitely the 4% Selective Consumption Tax established by Law 154 of 2010. The new law also introduces a new optional flat rate for exempt manufacturing entities in lieu of the Selective Consumption Tax. 

Another of the most relevant amendments is the expansion and clarification of the compliance rules established by Law 60-2019. The concept of “Compliance Professional” has been established to issue the Certificate of Compliance, which will ensure that taxpayers’ tax obligations are properly met. 

Act 52 also establishes new disclosure requirements for payments to individuals and corporations in Puerto Rico. Beginning January 1, 2023, taxpayers that make payments to individuals or legal entities on the island will be required to file a Payment Report annually, containing detailed information on the beneficiary of the payment, the type of payment made, and the total amount paid during the taxable year. 

In addition, individuals and corporations receiving payments in Puerto Rico will be required to file a Report of Receipt of Payments with similar information for taxable years beginning on or after January 1, 2023. Failure to comply with these requirements could result in fines and penalties. 

In summary, Act 52 introduces a series of technical amendments to the Puerto Rico Internal Revenue Code of 2011 that will affect taxpayers and businesses operating on the island. Therefore, those affected are strongly advised to consult with a tax advisor to determine the specific impact of the amendments on their operations and to properly comply with the new legal provisions. 

At Gierbolini Consulting Group, we have a team of highly trained and experienced professionals who can assist you in relation to the Puerto Rico Internal Revenue Code. We offer a variety of tax advisory services, including tax planning and tax return preparation. Do not hesitate to call us to schedule an appointment and get more information on how we can help you with your Puerto Rico tax affairs.

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