A person or corporation  (nonresident of Puerto Rico) that sells a property in PR could avoid the deposit in the PR Treasury Department of the income tax withholding at source made by the bank or purchaser

General Background

The PR Internal Revenue Code of 1994, as amended, provides that the withholding agent or the purchaser should make a withholding to nonresidents of Puerto Rico who sale property in PR as follows:

         10% (US citizens),  

         25% (Aliens)

The withholding tax rate is applied to the difference of the amount received in the sales less the original cost of the property (if the property was acquired by purchase), the commision paid to a real state broker and the legal expenses paid by the seller in the closing date. If the property was acquired by inheritance or construction, the withholding rate will be applied to the difference of the selling price less the above-mentioned expenses.

The bank or the purchaser should deposit the withholdings with the PR Treasury Department (Hacienda) on or before the fifteen date following the month that the sale of property took place.

Recommendation

You or your client can get an authorization letter from Hacienda that will allow the bank to return the amounts withheld to the seller before the deposit in Hacienda

To obtain the above mentioned letter, it is necessary to submit in Hacienda an application letter, other information that will be requested based on the circumstances of the case, copy of the PR Income Tax Return reporting the sale of the property, evidence of payment, if any, with the tax return and a filing fee of $100.  This process should be made before the fifteen date following the month that the sale of property took place.