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Municipal License Tax A corporation engaged in
trade or business in Puerto Rico is normally subject to the payment of municipal license taxes. If other than a financial business, the tax may be as high as .5% of the volume of business (defined as gross receipts) the
company realizes during the year. The maximum rate for a financial business is 1.5% on income from interest, rents, fees, profits, etc. The municipal volume of business declarations must be filed on or before April 15,
reflecting the volume of business realized by the corporation during the accounting year preceding the filing of the return. Financial statements certified by a Certified Public Accountant (CPA) licensed in Puerto Rico
must be attached to the declarations if the total volume of business is or exceeds $1,000,000. Otherwise a copy of the income tax return, stamped in all its pages as received by the Department of the Treasury, should
accompany the declaration. The municipal license tax is payable by July 15 and January 15, following the filing date. If total payment is made on or before April 15 a 5% discount is granted for prompt payment. If the taxpayer operates in more that one municipality, a breakdown of the volume of business by municipality must be prepared and attached to the declarations and a separate declaration must be filed with each
municipality in which business is conducted. A return filed without certified financial statements, or copy of the income tax return, may be considered unacceptable and considered as "not filed". The
law provides for a maximum six (6) months extension of time to file the declaration upon request. In order to obtain the extension, a request form must be completed and filed with the municipality on or before April 15.
No extension for the payment of the tax is available. When a new business is established, the semester in which the company commences operations is generally exempt, provided that the business informs the Municipal
Treasurer (within the first 30 days of operations) that it has established a business in the municipality. A declaration, however, must be filed for the following semester. The Municipal License Tax Act imposes
penalties for failure to file a complete return unless it is shown that such failure is due to reasonable causes and not to willful neglect. The penalty is 5% of the amount of the municipal license taxes due, if the failure
is not for more than 30 days, with an additional 5% for each additional 30 days or fraction thereof during which such failure continues, not to exceed 25% in the aggregate. |
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