CORPORATE TAXES
SIGNIFICANT DEVELOPMENTS
The Uniform Commercial Code was made effective as of January 1,998. It is basically a Spanish translation of the Uniform Commercial force throughout the United States.
The electronic filing tax payment system (EFTPS) was made effective January 1,1999. Businesses with more than US$ 50,000 in U.S. payroll tax deposits (a tax commonly known as FICA) during a calendar year must use this system to avoid the imposition of significant penalties. To harmonize the local system with EFTPS, similar provisions were made effective for
local payroll tax withholdings. New due dates for remitting withheld taxes to the appropriate fiscal authorities were also established.
The number of legal holidays was significantly reduced as of April 1998. There are now eight days (previously ten) on which retail stores and combined retail and wholesale operations are required to be closed for the entire day. Half-day holidays were eliminated (there were previously eight half days). These changes do not apply to government agencies.
With the privatization of the telecommunications industry in Puerto Rico, a new basis for computing property and municipal license taxes has been imposed on business involved in the industry. For property taxes the changes were effective for property held at January 1,1999. For municipal license taxes the changes apply to the business volume reported on the return due April 23,1999.
Certain income tax exemptions apply to employers who provide goods or property or grant loans or gifts to employees to cover damages suffered as a result of Hurricane Georges.
Employers are now able to deduct, with certain limitations, contributions to qualified employee stock ownership plans for taxable years commencing after June 30,1998.
TAXES ON CORPORATE INCOME
Corporation tax/Surtax is imposed at a rate of 20%
surtax/surtax is imposed on normal tax net income after a deduction of $ 25,000. The rates are as follows.
SURTAX NET INCOME TAX ON PERCENTAGE
OVER NOT OVER COLUMAN 1 ON EXCESS
(COLUMN 1)
0 $ 75,000…………………- 5
$ 75,000 125,000………………………$3,750 15
125,000 175,000…………………… 11,250 16
175,000 225,000…………………… 19,250 17
225,000 275,000…………………… 27,750 18
275,000……………………………………36,750 19
Recover of tax by differences in tax rates/Where a corporations net income subject to tax exceeds $550,000 for any taxable year, for the purposes of recovering the tax not imposed by the difference in tax rates, a tax of 5% on net income subject to tax in excess of $ 500,000 is to be imposed, collected andpaid. This computation should be performed to the extent that the total tax determined on net income subject to tax does not exceed 39%.
Alternative minimum tax/The law also imposes an alternative minimum tax (AMT) at a rate of 22% toensurethatmostcorporations pay a minimum amount of tax. The AMT is an entirely separate tax computation that the corporate taxpayer must address each year in addition to the regular tax computation.Thiscomputation does not takeintoconsiderationcertaintaxpreference items (i.e., flexible and/or accelerated depreciation) and includes other book income adjustments that are not considered in the regular tax computation. In addition, the AMT may be reduced by certain foreign tax credits and maybecarriedforwardindefinitely as a credit against regular income tax, with certainlimitations.
CORPORATE RESIDENCE
A corporation is considered to be resident in Puerto Rico if it is incorporated under the
laws of Puerto Rico or, in the case of foreign corporation, if it is engaged in trade or business in Puerto Rico.
OTHER TAXES
Property and municipal taxes/Property taxes are imposed (unless expressly exempted by law, as in the caseoftaxexemptindustries) on real and personal property owned on each January 1. The tax depends on the location (muni
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