Summer 2006-05 Special tax imposed on dividends
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Summer 2006-05 Special tax imposed on dividends

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Number 64
Summer 2006

Special tax imposed on dividends

Act No. 117 of July 4, 2006, added subparagraph (j) to Section 1012 of the Puerto Rico Internal Revenue Code of 1994, to impose a 5% special tax on dividends and profits.

The tax applies to dividends available and profits made from July 1 through October 31, 2006, by all domestic corporations and partnerships, as well as by foreign corporations and partnerships if 80% or more of their income is generated from the conduct of a trade or business in Puerto Rico.


No distribution needed


Under new subparagraph (j) of § 1012, dividends are not required to be distributed to the shareholders or partners in order for the tax to apply.




Finally, Act 117 added subparagraph (d) to § 1221 of the Code, regarding the taxing of nonresident foreign individuals. New subparagraph (d) provides a special tax of 5% on dividend and profits of corporations and partnerships made from July 1 to December 31, 2006. In this case, as in that of § 1012(j), distribution is not required to be made to the shareholders or partners.

© 2006 Goldman Antonetti & Cordóva, LLC