Generally, those responsible for withholding are called “withholding agents.” This means any person that is bound to deduct and withhold any tax on income payments pursuant to the provision of the Puerto Rico Internal Revenue Code.
A person includes but is not limited to a U.S. citizen, a resident alien, a partnership, a Puerto Rico corporation, the government of Puerto Rico and a resident foreign corporation.
Every employer who pays wages to an employee must withhold an amount determined under withholding schedules established by regulations, regardless of the number of employees and length of time employed.
The employer may delegate the responsibility of the withholding to an agent, although ultimately, the responsibility rests with the employer.
Any person who in the conduct of a trade or business or an income producing activity in Puerto Rico pays for services rendered in Puerto Rico must withhold 7 percent thereof. A service provider may, nevertheless, have their payor withhold 10 percent, or 15 percent of service payments made after Dec. 31, 2010.
If at the time of filing the income tax return for the year, the employer or the person making payments for services rendered in Puerto Rico has not remitted to the Puerto Rico Treasury Department the full amount of tax deducted and withheld for the taxable year covered by that return, they may not claim the salaries or services paid as operating expenses.
In addition to wages and payment for services rendered in Puerto Rico, withholding may be required on a fixed or determinable periodical income. This includes dividends, interests, rents, royalties, premiums, annuities, remuneration, emoluments and other income of this type. Withholding may also be required in the event of a sale or exchange of a capital asset by a non-resident person.
If a withholding agent fails to withhold the corresponding tax, Treasury is allowed by law to collect the tax from the withholding agent. However, the withholding agent can file a civil claim against the taxpayer receiving the payment for the tax it paid to Treasury on the taxpayer’s behalf.
Please contact the Certified Public Accountant (CPA) of your choice for any additional information regarding the Responsibilities of the Withholding Agent or any other tax issue. Also, please go to the following link to access the 2016 Taxpayer’s Manual.