Puerto Rico (PR)
Puerto Rico is a self-governing US Commonwealth (Estado Libre Asociado) in the northeastern Caribbean, offering a unique blend of vibrant Latin culture, US legal framework, and tropical island living.
Tax & Payslip Guide
Understanding your taxes in Puerto Rico — tax year January 1 – December 31.
📊 Income Tax Brackets
| Income from | Income to | Rate | Notes |
|---|---|---|---|
| 0 | 9,000 | 0% | No tax on the first $9,000 of net taxable income |
| 9,001 | 25,000 | 7% | 7% on net income $9,001–$25,000 |
| 25,001 | 41,500 | 14% | 14% on net income $25,001–$41,500 |
| 41,501 | 61,500 | 25% | 25% on net income $41,501–$61,500 |
| 61,501 | ∞ | 33% | 33% on net income above $61,500 |
🏛️ Social Contributions
Same as US mainland. Self-employed pay 12.4% total as part of the 15.3% self-employment tax. Credits accumulate toward US Social Security retirement and disability benefits.
Same as US mainland. Self-employed pay 2.9% as part of the 15.3% SE tax. Qualifies the worker for Medicare at age 65.
Puerto Rico State Unemployment Insurance. Employer-only contribution. Workers qualify for Puerto Rico unemployment benefits (up to 26 weeks at 30–40% of wages, maximum ~$190/week).
Federal Unemployment Tax Act — employer only. Filed on IRS Form 940.
Puerto Rico Disability Insurance. Provides wage replacement for non-work-related disabilities lasting more than 7 days — $55–113/week from the PR Disability Insurance Fund. Deducted from employee wages.
Puerto Rico-specific social insurance for public transportation drivers. Provides disability and retirement benefits under the PR Transportation Worker Social Security programme.
🛒 VAT Rates
IVU (Impuesto sobre Ventas y Uso) — 10.5% to the PR government + 1% to the municipality. Exemptions: fresh/unprocessed groceries, prescription drugs, medical equipment, most services, export sales. Highest effective sales tax rate in any US jurisdiction.
🧾 Sample Payslip Decoder
🌍 Special Expat Tax Rules
Puerto Rico offers two major Act 60 (Incentives Code) tax programmes for qualifying bona fide residents: (1) Individual Investors Act (Chapter 2): 0% Puerto Rico tax on capital gains, dividends, and interest accrued after establishing PR residency. Annual report to DDEC required. Application fee ~$5,000. (2) Export Services Act (Chapter 3): 4% fixed Puerto Rico corporate/individual income tax rate on income from export services (services rendered to non-PR clients/markets). Annual report required; compliance costs $5,000–15,000/year. Bona fide PR residency requires: 183+ days/year in PR, closer connection test, PR tax home. US citizens exempt from US federal income tax on PR-sourced income under IRC Section 933 — but must still file Form 1040 and report worldwide income. Self-employment income remains subject to US self-employment tax (FICA) regardless of Act 60 status.
📋 Double Tax Treaties
Puerto Rico is a US territory, not a separate treaty partner. US tax treaties do not generally apply to Puerto Rico residents on their PR-sourced income (exempt from US tax under IRC §933). US citizens moving to PR should consult a CPA familiar with both IRS and Hacienda requirements. Act 60 decrees are quasi-contractual and typically lock in rates for 20 years — subsequent legislative changes do not void existing decrees. FATCA applies fully: US persons with foreign financial accounts above $10,000 must file FBAR. Puerto Rico bank accounts are domestic US accounts and do NOT trigger FBAR.
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