Sections 1062.08 and 11062.11 of the Puerto Rico Internal Revenue Code of 2011 (Act No. 1 of January 31, 2011), as amended (Code), establishes the special rule in the case of property sales by non-residents of Puerto Rico.
1. Obligation to withhold. - Notwithstanding any other provisions of this Subtitle, a person who acquires real property or shares from any non-resident person (if the benefit derived from the transactions constitutes income from Puerto Rico sources) shall deduct and withhold 25% of the payments made to the nonresident person during the current taxable year or in subsequent taxable years as part of the purchase price of such property. Said withholding will have the same nature and will be declared and paid to the Secretary in the same way and subject to the same conditions that will be fulfilled in the other sections of this section. When the receiver is an individual citizen of the United States, the withholding provided herein will be 15%.
The term "purchase price", when referring to real property, means the totality of the payments that the buyer is obligated to make reduced by:
A. the acquisition price of the property, as stated in the public deed or original private document of acquisition of the seller.
2. The notary fees, the internal revenue stamps of the deeds and the Land Registry fees corresponding to the cancellation of mortgages paid by the seller.
3. the commission paid by the seller to a real estate broker in connection with the sale of real property; Y
4. The increase in the value of the property on which the seller has paid in advance the special tax in accordance with Section 1014A of the Puerto Rico Internal Revenue Code of 1994, as amended.
5. No other reduction in the purchase price will be allowed for the purposes of this paragraph. If the seller acquired the real property by order, legacy, inheritance or donation, the sale price will only be reduced by the expenses described in subsections (B), (C) and (D).
The above provisions can be illustrated with the following examples:
Example 1:
On February 2, 2014, “C”, who is an American citizen not a resident of Puerto Rico, sold a property located in Puerto Rico for $200,000. “C” bought said property 5 years ago for $125,000 and made permanent improvements to it for $20,000. In addition, he incurred the payment of $850 for notary fees, $385 in Internal Revenue stamps, $375 in property fees that corresponded to the cancellation of the mortgage, and $11,000 in commission to the real estate broker. What is the amount to withhold?
Sale price……………………….……………………………………………............. $200,000.00
Original Cost…………………..………………………….………….............… $125,000.00
Selling Expenses:
Notary fees…………………………………………………………...........…… $850.00
Internal Revenue Stamps………………………………….........................… $385.00
Tariffs………………………………………………………………..…...........… $375.00
Broker Commission………………………………………….......................… $11,000.00 (137,610)
Adjusted sale price…………….....……………………….....................… $62,390.00
Percent to withhold……………… X 15%
Amount to withhold………………………...…………........................… $9,358.50
Date to make the deposit of the tax withheld:
Section 6183 of the Code provides, in part, that the tax withheld for this concept must be deposited no later than the 15th day of the month following the one in which the withholding was made. To deposit this tax, you must use the Deposit Coupon – Tax Withheld at Source-Non-Residents (Form 480.31).
Example 2:
Based on the example above, the deposit date is due on March 15, ____.