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#WORKING REMOTELY FROM HOME IN USA FOR PUERTO RICO CODE#

In many cases, the facts and circumstances allow for an allocation on the time basis that is, including as income an amount which allows the same relation to the total compensation as the number of days of performance of labor or services within Puerto Rico, as to the total number of days of performance of labor or services for which the payment is made. Meanwhile, if a specific amount is paid, said amount (if deemed from sources within Puerto Rico and does not comply with “de minimis rule”), is included as Puerto Rico income. the place in which the contract for service was made orįor purposes of applying this rule, the Foreign Taxpayer is not necessarily engaged in an active trade or business in Puerto Rico by reason of the performance of personal services by an employee in the island.Furthermore, the compensation is from sources within Puerto Rico no matter: If both conditions are met, known as “de minimis rule”, the compensation received by the employee for services performed in Puerto Rico for the Foreign Taxpayer, is not deemed income from sources within Puerto Rico.Īs already established, income from sources within Puerto Rico includes compensation for labor or personal services performed within Puerto Rico. the compensation does not exceed $3,000 in the aggregate, during the year.the services are performed by a nonresident individual temporarily present in Puerto Rico (90 days or less during the year) and.

#WORKING REMOTELY FROM HOME IN USA FOR PUERTO RICO CODE#

The Puerto Rico Code states that compensation for labor or personal services performed in Puerto Rico, is considered from sources within Puerto Rico, and therefore, subject to Puerto Rico tax, unless two conditions are met: they must have gross income treated as being effectively connected with the conduct of an active trade or business in Puerto Rico.they must have gross income from sources within Puerto Rico or.the entity was organized under the laws of another jurisdiction.įoreign taxpayers are required to register and pay taxes when doing business in Puerto Rico and deriving income from operations in the island.īut what happens when a taxpayer that has never done business in Puerto Rico (“Foreign Taxpayer”), employs residents of the island to “work remotely”? According to the Puerto Rico Internal Revenue Code of 2011 (“PR Code”), there are two ways for a Foreign Taxpayer to be considered engaged in a trade or business in Puerto Rico:.

the individual is a bona fide resident of a jurisdiction other than Puerto Rico or.

In the case of a foreign or nonresident taxpayers, the classification of “foreign” is determine when:

the limited liability company, corporation, or partnership (collectively “entity” or “entities”), is organized under the laws of Puerto Rico.Īs such, domestic entities are required to register with the necessary governmental agencies to do business and all domestic taxpayers are required to pay Puerto Rico taxes.

the individual is a bona fide resident of Puerto Rico or.

Generally, individuals, limited liability companies, corporations, or partnerships (collectively “taxpayers”), are classified as domestic when: Puerto Rico income tax framework to be considered for employers hiring Puerto Rico employees While this reality, has open a new window of opportunities for employers to search for talent outside their jurisdiction, special consideration must be given to the income tax implications associated with new and former employees telecommuting or working remotely. Most employers were force by their government to close non-essential businesses physical facilities, resulting in millions of employees working from home or other remote locations.

Various businesses closed indefinitely, while others made significant modifications to their business model to continue operating. Since March 2020, the way businesses conduct operations locally and internationally changed for the foreseeable future the World Health Organization or WHO for its English acronym, declared a global health crisis due to a pandemic outbreak of the novel coronavirus disease 2019, or COVID-19.