Changes in the Withholding Tax at Source for Services Rendered

The PRTD issued Internal Revenue Informative Bulletin Number 18-24 to clarify certain tax amendments incorporated to the PR Code by Act No. 257-2018.  As a general rule, every person, natural or juridical, that in the conduct of a trade or business or for the production of income in Puerto Rico, makes a payment to another person for services rendered, shall deduct and withhold income tax on such payments. The amendment by Act No. 257-2018 introduced the following tax changes for 2019:

 

  • Increase in the withholding tax rate from 7% to 10%;
  • Increase in partial waiver withholding rate from 3% to 6%;
  • A decrease in withholding exemption from the first $1,500 paid during the year to the first $500 paid.

 

Therefore, for the tax year 2019, withholding agents must withhold the amount of 6%, regardless of whether the Waiver Certificate provides a withholding tax rate of 3%, and the withholding exemption will only apply to the first $500 paid during the year.

 

Moreover, it was informed the PRTD will be issuing new waiver certificates to conform them with the amendments above.  

 

 

This post is part of FPVG Pulse | Issue 1.

 

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