Property Taxes in Puerto Rico
Tax Rate on Rental Income |
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| Monthly Income | US$1,500 | US$6,000 | US$12,000 |
| Tax Rate | 29% | 29% | 29% |
Nonresident foreigners are taxed only on their income from sources in Puerto Rico. Nonresident foreign married couples are taxed separately.
Income Tax
Income earned by nonresident foreigners may be assessed and taxed in two ways: (1) not effectively connected with trade or business and (2) effectively connected with trade or business.
Income Tax Not Effectively Connected with Trade or Business
A nonresident alien not engaged in a trade or business in Puerto Rico is generally taxed at a flat rate of 29% (withheld) on Puerto Rican-sourced profits and income including investment income, rental income, and capital gains.
Income Tax Effectively Connected with Trade or Business
Nonresidents may choose to operate as a trade or business. Rental income and capital gains are then directly connected with the conduct of a trade or business, thereby allowing the deduction of related expenses, interest payment, and depreciation. Note that nonresidents are required to file an income tax return if their gross income is larger than US$3,300.
Income Tax Rates
| Taxable Income (US$) | Tax Rate |
| Up to US$9,000 | 0% |
| US$9,000 - US$25,000 | 7% on band over US$9,000 |
| US$25,000 - US$41,500 | US$1,120 plus 14% on band over US$25,000 |
| US$41,500 - US$61,500 | US$3,430 plus 25% on band over US$41,500 |
| Over US$61,500 | US$8,430 plus 33% on all income over US$61,500 |
Municipal License Tax (Patentes Municipales)
Puerto Rican municipalities are authorized to impose a municipal license tax on businesses within their jurisdiction. The annual tax is based on a business' gross receipts or sales. The applicable range is from 0.27% to 0.05%.
Capital Gains
Earnings of nonresident individuals from the sale of a property are subject to a withholding tax of 25% (if the nonresident is a US citizen, the rate is 15%). These rates apply if the property is held for more than 1 year.
Corporate Taxation
Income earned by nonresident companies may be assessed and taxed in two ways: (1) not effectively connected with trade or business and (2) effectively connected with trade or business.
Income Tax Not Effectively Connected with Trade or Business
A nonresident company not engaged in a trade or business in Puerto Rico is generally taxed at a flat rate of 29% (withheld) on Puerto Rican-sourced profits and income including investment income, rental income, and capital gains.
Income Tax Effectively Connected with Trade or Business
A nonresident company engaged in a trade or business in Puerto Rico is taxed as a local company.
Income Tax Rates
Income earned by companies is taxed on a graduated tax rate structure. A flat tax of 20% is levied on the "normal-tax net income." A surtax on "normal-tax net income" less credit is levied at progressive rates, from 25% on the first US$750,000 and up to 30% on surtax income over US$2,500,000.
Capital Gains Tax
Capital gains earned by companies are taxed at a flat rate of 15%. Capital losses may be carried forward for five years.
Property Buying and Selling Costs
| Cost Item | Rate or Amount |
| Property Transfer Tax | 0.00% |
| Agent Fee Buyer | - |
| Agent Fee Seller | 4.00% - 6.00% |
| Legal | 0.50% - 1.00% |
| Notary | 0.50% - 1.00% |
| Roundtrip Cost | 5.00% - 8.00% |
| Source: Global Property Guide, Deloitte | |
Property Taxation
Property Tax
Real property in Puerto Rico is subject to an annual property tax based on its assessed value. The property tax rate typically ranges from 8.03 to 11.83 mills (not percent), which translates to 0.803% to 1.183% of the property's assessed value. The assessed value is determined by the municipal government and usually represents a fraction of the market value of the property. These rates can vary depending on the municipality.