Any person engaged in trade or business in Puerto Rico, who on January 1th of any given year owns personal property used in such trade or business is subject to the personal property tax in the municipality where it is located, unless otherwise exempt. The tax is computed on the net book value of taxable property, however, if the book value of the personal property does not reasonably reflect the fair market value then it must be appraised at fair market value. The maximum tax rate is 9.83% and varies depending 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.
Certain personal properties, including intangible properties, are exempt. The tax authority, however, takes the position that computer software is not exempt as an intangible property.
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 Collection Center or with:
Municipal Revenue Collection Center
PO Box 195387
San Juan, Puerto Rico 00917-5387
If the personal property tax liability is more than $1,000 it must be paid in four equal installments, which are due on August 15, November 15, February 15 and May 15. The estimated personal property tax shall be the lesser of:
- 90% of the current year’s tax or
- 100% of the prior year’s tax
If the total property tax liability is paid with the four estimated installment payments, a 5% discount is allowed.
The law provides corporations a 3-month extension of time to file the return. The extension must be filed not later than the due date of the return together with payment of the tax.
If the volume of business (defined as gross receipts) of the corporation exceeds $3,000,000, the property tax return must be reviewed by a Puerto Rico licensed CPA and accompanied by financial statements certified by a 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.
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 may be deemed not filed.
A trial balance of the corporation’s business activities in Puerto Rico as of the preceding January 1st, 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 sworn statement of an accountant or person in charge of the business 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 Collection Center that the failure to file is due to reasonable cause out of the control of the taxpayer and not due to willful neglect.