Property Taxes

A corporation engaged in trade or business in Puerto  Rico is subject to the imposition of personal property tax, which is generally determined based on a rate ranging from 4.23% to 6.33% of the statutory net book value of taxable property. The rates depend on the municipality in which the  taxable property is located.  Taxable property normally includes cash on hand, inventories, materials and supplies, furniture and fixtures, and machinery and equipment used in the trade or business. A minimum residual value is  assigned to items which are substantially depreciated.  The assessment date is January 1st, although the value of the inventory should be determined on an annual average basis.

A personal property tax return  must be filed on or before May 15 of each year in the corresponding regional office of the Municipal Revenue Collector Center or with:

Municipal Revenue Collector Center
PO Box 195387
San Juan, Puerto Rico 00917-5387

The personal property tax must be paid on or before May 15 of each  year.  If payment is made in full by that time, a 5% discount is allowed.

The law provides for a 90 days extension of time to file the return.  The extension is applicable upon payment of the tax by the  original due date of filing the return.

If the volume of business (defined as gross receipts) of the corporation exceeds $l,000,000, the property tax return must be reviewed by a Puerto Rico licensed CPA and  accompanied by financial statements certified by CPA licensed in Puerto Rico.  The financial statements of foreign corporations engaged in business in Puerto Rico should reflect solely its operations in Puerto Rico.

In Circular Letter 843 the Puerto Rico Secretary of the Treasury ruled that the audited financial statements and the corresponding opinion of the Certified Public Accountant on such statements are exclusively the  financial statements of the corporation filing the return and not consolidated or combined statements with other affiliates, even when the information of the individual corporation subject to the personal property tax in Puerto  Rico is included as supplementary information.

Returns filed with financial statements, which do not comply with the previously mentioned requirements, shall be considered incomplete and not acceptable.

A trial balance of the corporation's business activities in Puerto Rico as of the preceding January 1, is required when the corporation does not have a calendar year closing.  The trial balance must be traced to  the corporation's accounting records and shall be accompanied by a report of an accountant affirming that the trial balance is in agreement with the books of account of the business.

A surcharge for late payment of the tax is imposed as follows:

• 5% of the unpaid amount for a delay in payment in excess of 30 days, but not more than 60 days
   
• 10% of the unpaid amount for a delay in payment in excess of 60 days, but not more than 90 days.
   
• 15% of the unpaid amount for a delay in payment in excess of 90 days.
   

A penalty of 5% per month up to a maximum of 25% is imposed for late filing of the return, unless it is shown to the satisfaction of the Municipal Revenue Collector Center that the failure to file is due to reasonable cause out  of the control of the taxpayer and not due to willful neglect.

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