Bill to cut taxes on interest received
pending governor's signature
House Bill 955, which would reduce the import of taxes to be paid on certain interest received, has been approved by both the Senate and the House of representatives, and is pending the governor's signature at press time.
If it becomes law, the bill, which amends Section 1013A of the Puerto Rico Internal Revenue Code, would:
lower to 10% the tax to be paid on interest income generated from investments in bonds, promissory notes and other obligations issued by certain corporations and partnerships;
lower to 17% the tax to be paid on interest income generated by residential mortgages, if the mortgaged property is located in Puerto Rico.
In order for interest income to qualify for the 10% tax, it must be paid by:
a Puerto Rico corporation or partnership, or
other corporations or partnerships, if not less than 80% or their gross income during the previous three tax years was effectively related to the operation of an industry or business in Puerto Rico.
The proceeds of the bond or note (or other obligation) must have been used exclusively in Puerto Rico operations, within 24 months of their issue.
Both the 10% and the 17% tax must be withheld at the source.
The taxpayer is not to include the interest as gross income in the tax return for the year in question.
Corporations and partnerships paying such interest would not be able to deduct the amount when computing their net income for income tax purposes. n
The new tax rates would be available to natural persons, decedent estates, corporations, partnerships and trusts.
© 2003 Goldman Antonetti