Puerto Rico is known for its low real-estate taxes, making it a great choice for vacation properties or investment properties. What is more, the country is an unincorporated territory of the United States, making it easier for U.S. residents to purchase property. But remember that Puerto Rico is still a unique nation, separate from the United States, so it has its own laws that residents and nonresidents must follow when purchasing property. Buying or selling real estate in Puerto Rico requires an understanding of the tax laws that apply to all property in the nation.
Jurisdiction
Property taxes in Puerto Rico fall under the jurisdiction of CRIM: Centro de Recaudacion de Ingresos Municipales. This organization is a nine-member board that manages taxation in the municipal areas throughout Puerto Rico, with offices in each region.
Property owners or those who have recently purchased property must contact the local or regional office to find their tax rate and the amount of their property taxes. CRIM has made a number of changes in recent years that apply to property taxes, so new property owners should contact the office to ensure they understand their tax responsibilities.
Rates
Puerto Rico levies property taxes based on a flat rate of 1.03 percent for real estate. There is a further tax rate of 1 percent for the personal property contained within the real estate, falling under the furniture tax law of Puerto Rico, and an additional rate of 3 percent for the land containing the real estate. Property owners must consider not only the residence, but also the property attached to it and contained within it.
Law 83 and Law 71
Application of real estate tax laws has created some confusion in recent years, requiring a revised law that clarifies owner tax obligations. According to Law 83, enacted in 1991, property owners could be exonerated for unpaid property taxes up to $15,000, as long as the property represented the owner’s primary residence. Owners of multiple properties do not have this luxury. Due to this exoneration, many property owners were confused about whether or not they owed taxes, in part because property value reassessments were not always annual. CRIM could reassess at a later time and require back payment of taxes.
Many property owners did not realize the amount due, because they were unaware of the property value increase until they were beyond the $15,000 exoneration. As a result, the exoneration amount was raised to $150,000 in 2009 under Law 71, giving property owners more time to find the amount of their tax payments. No matter the laws, all property owners should be sure to contact CRIM to make sure they understand what taxes they owe in real estate.
FAQs
If there is a will, the forced heirs are entitled, in equal proportions, to one-half of the Puerto Rico Estate (the "legitimate portion"). The testator is free to bequeath the other half of the Puerto Rico Estate (the "free disposition portion") as he/she desires.
Can US citizens own property in Puerto Rico? ›
Because Puerto Rico is a commonwealth of the United States, there are no restrictions on Americans acquiring property on the island. However, there are also financial risks and potential drawbacks to buying a property in Puerto Rico.
Do I need a real estate license in Puerto Rico? ›
After passing the exam, you must submit an application for a real estate salesperson license to the Puerto Rico Real Estate Commission. You will need to provide proof of completion of the pre-licensing course and passing the exam, as well as a background check and fingerprinting.
Do you pay taxes when you buy a house in Puerto Rico? ›
Puerto Rico real property is subject to an annual real property tax. This tax is computed based on property values that date back to the fiscal year 1957–1958 (which was the last time that a general appraisal was conducted by the government).
Who inherits when there is no will in Puerto Rico? ›
In the absence of a will (intestate estate), estate is distributed equally among forced heirs. The portion reserved for forced heirs in a will is reduced to 50%. In the absence of a will, estate is still distributed equally among forced heirs.
Does Puerto Rico have forced heirship? ›
In Puerto Rico, the testator cannot freely dispose of part of the estate because he or she must respect the forced heirship except in extreme cases, such as indignity (incapacity to inherit)or disinheritance.
What is the US estate tax for Puerto Rico residents? ›
They also have the same estate tax exclusion as other U.S. citizens and residents, $11.58 million in 2020. However, if they are living in Puerto Rico and if they only have U.S. citizenship due to their birth in Puerto Rico, then they are taxed as non-resident aliens.
How do you transfer property in Puerto Rico? ›
Notary Law is very important because unlike many places in the U.S., Puerto Rico uses notary attorneys to execute all deeds that transfer property. All public documents, affidavit, and sworn statements must be drafted by and signed by a notary attorney.
Is Puerto Rico a good place to invest in real estate? ›
Puerto Rico offers many advantages to homeowners, including a lower cost of living, tax benefits, beautiful weather and beaches, and a rich culture.
Are US licenses valid in Puerto Rico? ›
Visitors from the United States can use their driver's license to drive in Puerto Rico since the island is a territory of the United States. International visitors will need an International Driving Permit along with their country's license.
Puerto Rico's laws allow for several legal structures, so you can select the one that is most convenient to you. Register with the Treasury Department. You will need to get with the agency a Merchant Registration (“Registro de Comerciante”) to operate your business and get all required permits.
Can I be my own registered agent in Puerto Rico? ›
Yes, you can be your own registered agent in Puerto Rico. However, after considering the registered agent requirements most business owners elect to hire a registered agent service instead.
What is the law 60 in Puerto Rico? ›
The Tax Incentive Code, known as “Act 60”, provides tax exemptions to businesses and investors that relocate to, or are established in, Puerto Rico.
What is the 20 and 22 law in Puerto Rico? ›
Puerto Rico's Act 20 / 22
The tax benefits include a tax rate of 4 percent for eligible export services, a 100 percent tax exemption on dividends from earnings and profits, and a 60 percent tax exemption on local municipal taxes, all with a 20-year decree guaranteeing these rates.
What is the law 22 in Puerto Rico? ›
Puerto Rico Act 22 – The Individual Investors Act
As long as an individual is a bona fide resident and their source of income is in Puerto Rico, they will not have to pay the federal income tax rate which ranges from 10% to as high as 37%.
What is the basis of inherited property to the beneficiary? ›
The basis of property inherited from a decedent is generally one of the following: The fair market value (FMV) of the property on the date of the decedent's death (whether or not the executor of the estate files an estate tax return (Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return)).
What are forced heirs in Puerto Rico? ›
This system is based on a "forced heir" policy, that states that all children need to receive from the decedent (the person that died). If they are not included in the will or they are left out, the whole distribution of an estate can be set aside and invalidated.
How do you transfer on death deed in Puerto Rico? ›
This means that if someone dies owning property in Puerto Rico, in order to transfer that property to another person, you must go to court to get the permission to transfer and register the property to the new person. This is what is commonly known in the U.S. as probating an estate.
What is the inheritance of private property? ›
There are three ways you might inherit a property or part of one: if the property was held under 'joint tenancy', the surviving owner inherits automatically. if the property was owned outright by the deceased, or jointly by owners who have died, the terms of their will(s) sets out who inherits.
