Puerto Rico is an unincorporated US territory operating its own local Internal Revenue Code (Act 1-2011, as amended) alongside, not instead of, the US federal tax code; individuals qualifying as bona fide residents under IRC Section 937 generally exclude Puerto Rico-source income from US federal gross income under IRC Section 933, while a Puerto Rico corporation is resident for local PR tax purposes if organized under Puerto Rico law and pays PR corporate tax at the standard rate described elsewhere on this page.
The tax year generally follows the calendar year for individuals; corporations may adopt a fiscal year, with Puerto Rico's own Departamento de Hacienda administering filing and payment deadlines under the local Internal Revenue Code.
Puerto Rico's headline corporate income tax (CIT) rate is 37.5% (18.5% + 19% surtax over USD 275,000).
The headline personal income tax (PIT) rate is 33% plus 5% gradual adjustment tax.
The standard VAT/GST (or equivalent consumption tax) rate is 11.5% tangible property/services; 4% B2B/designated services.
Puerto Rico is an unincorporated US territory with its own local Internal Revenue Code (Act 1-2011, as amended) that operates alongside, not instead of, the US federal tax code - this dual-layer structure is the single most important thing to understand before applying any other section on this page. Individual residency for federal tax purposes turns on the IRC Section 937 "bona fide resident" test, applied by the IRS in three parts: (1) physical presence of at least 183 days in Puerto Rico during the tax year; (2) a closer connection to Puerto Rico than to any US state or foreign country; and (3) Puerto Rico as the individual's tax home. Under IRC Section 933, a bona fide resident of Puerto Rico for an entire tax year excludes Puerto Rico-source income from US federal gross income entirely - this is the statutory foundation underneath Puerto Rico's well-known tax incentive programs. A Puerto Rico corporation is resident for local PR tax purposes if organized under Puerto Rico law.
A non-Puerto-Rico corporation operating through a fixed place of business or dependent agent in Puerto Rico is brought within Puerto Rico's local corporate tax net on income attributable to that presence, taxed at the standard 37.5% combined rate (18.5% base plus 19% surtax over USD 275,000) described elsewhere on this page; because Puerto Rico sits within the US federal system, a mainland US corporation's Puerto Rico branch also carries US federal tax consequences layered on top of the local PR liability.
Puerto Rico's own local tax code does not operate a CFC-style attribution regime of the kind sovereign countries use, because it isn't taxing worldwide income against a foreign-subsidiary backdrop - PR sources and taxes income under its own code, layered under the federal system. The relevant CFC exposure is entirely a matter of US federal law: a Puerto Rico corporation counts as a Controlled Foreign Corporation under IRC Subpart F/GILTI if more than 50% owned (by vote or value) by "United States shareholders," which would ordinarily expose a mainland US owner to GILTI inclusion (a minimum federal rate of 10.5%, up to 21%) on top of Puerto Rico's own corporate rate. Critically, an individual who is a genuine bona fide resident of Puerto Rico and owns a Puerto Rico corporation qualifies for a specific federal exemption from CFC and PFIC treatment with respect to that PR corporation. If a mainland US resident co-owns more than 50% of the same entity, the full CFC/GILTI exposure reattaches for that mainland owner's share.
Puerto Rico's local Internal Revenue Code does not impose a general debt-to-equity ratio cap on interest deductibility. It does contain a targeted anti-abuse sourcing rule for interest paid to certain related foreign corporations: interest received from a foreign corporation, or from a domestic (Puerto Rico) corporation that is not a commercial bank, is only treated as non-Puerto-Rico-source (and thus outside the payee's PR tax net) if the payer can demonstrate that less than 20% of its gross income over the prior three years was Puerto Rico-source - a base-protection mechanism aimed at cross-border interest income sourcing rather than a debt/equity ratio limitation on the borrower's deduction.
Puerto Rico classifies entities under its own local Internal Revenue Code rather than offering an elective check-the-box system distinct from the US federal one, though a Puerto Rico entity can itself be the subject of a US federal check-the-box election made by its US owners under federal entity classification rules; no ATAD2-style anti-hybrid mismatch regime addressing double-deduction or deduction-without-inclusion outcomes exists under Puerto Rico's own local code, and the relevant anti-avoidance exposure (Subpart F, GILTI, and the bona fide resident CFC/PFIC exemption) is entirely a matter of US federal law, as described in the CFC section of this page.
Puerto Rico does not have a separate FBAR-equivalent regime distinct from the US federal system, since Puerto Rico is a US territory whose financial institutions are treated as US financial institutions for FATCA purposes rather than as a foreign jurisdiction exchanging information with the United States. A bona fide resident of Puerto Rico who is a US citizen or resident remains subject to the same FinCEN Form 114 (FBAR) and Form 8938 filing obligations as any other US person with respect to their own non-US, non-Puerto-Rico foreign financial accounts; Puerto Rico itself is not a foreign country for these purposes, so accounts held in Puerto Rico are not FBAR-reportable foreign accounts for a US person.
Puerto Rico's local Internal Revenue Code does not operate a general participation exemption regime for dividends or capital gains from a foreign subsidiary comparable to those found in many sovereign countries; relief from double taxation on cross-border corporate income for a Puerto Rico entity depends primarily on the interaction between the local PR code and the US federal system (including the bona fide resident CFC/PFIC exemption described elsewhere on this page) rather than a standalone PR participation exemption.
Puerto Rico's local Internal Revenue Code allows a credit for foreign tax paid on income also subject to Puerto Rico tax, subject to local documentation and limitation rules; because Puerto Rico residents and corporations sit within the broader US federal tax system, US federal foreign tax credit rules may also apply in parallel depending on the taxpayer's federal filing position, particularly for income not excluded under IRC Section 933.
Puerto Rico is not itself a party to any bilateral US income tax treaty - Puerto Rico residents generally cannot claim benefits under US tax treaties with foreign countries, since Puerto Rico is treated as US territory for treaty purposes but PR-source income is typically outside the federal tax base entirely for bona fide residents under Section 933 rather than being addressed through treaty relief. Confirm the specific treatment of any foreign-source income with a US international tax advisor, since the interaction between Section 933, GILTI, Subpart F, and any relevant US tax treaty is highly fact-specific and was significantly reshaped by 2017 US federal tax reform (introduction of GILTI) and by Puerto Rico's own 2026 Incentives Code reform (Act 38-2026).