A street in Puerto Rico for an article about Corporate Compliance in Puerto Rico

Everything you need to know about corporate compliance in Puerto Rico

If you wish to enter the local market, you must be aware of your corporate compliance in Puerto Rico. Understanding and complying with local legislation will help you expand in the territory as smoothly as possible. Just like every other part of the USA, this is of paramount importance.

However, if you will be seeking a broader range of support, including recruitment, visa processing, and ongoing administrative and operational assistance, you may find that a dedicated provider of back office services to help with corporate compliance in Puerto Rico is your most suitable partner.

Biz Latin Hub can help you with everything you need to know about corporate compliance in Puerto Rico. We can also support you to incorporate a business in Puerto Rico, or any of the other 17 markets in Latin America and the Caribbean where we have dedicated local offices providing specific advice for each area.

We recognize the challenges inherent in adapting to the new legislation, especially when it comes to complying with corporate obligations. In order to simplify this process, Biz Latin Hub has designed the following Annual Fiscal Compliance calendar. 2023
Tax is a key part of corporate compliance in Puerto Rico

Types of Companies

Foreign executives who want to enter the Puerto Rican market must decide what type of company incorporation will best suit their needs. Then, they must prepare all the documents and requirements necessary to register their company with the Department of State of Puerto Rico. The most common company types in Puerto Rico are:

  • Limited Liability Company (LLC): This is the most common type of company. Setting it up requires 1 or more people.
  • Corporation: In a corporation, the capital stock can be divided into shares that can be transferred. In this type of company, the partners are not personally liable for corporate debts. A minimum of 3 shareholders is required and there is no maximum limit. Corporations can be classified into domestic and foreign corporations, and for-profit or non-profit corporations.
  • Domestic corporations: Are those created under the General Corporations Act of Puerto Rico. That is, these are corporations of Puerto Rico.
  • Foreign corporations: Those entities which were created in another jurisdiction. In order for a foreign corporation to operate on the island territory, foreign corporations must obtain authorization from the Department of State of Puerto Rico by presenting the following documents:
    • A certificate of existence or its equivalent from your jurisdiction of origin, no more than 3 months old
    • The name and address of the representative of the corporation who resides in Puerto Rico
    • Documents showing the corporation’s assets and liabilities
    • Documents showing what kind of business the corporation plans to conduct in Puerto Rico
    • Names and business addresses of its current directors.
    • Any other documents or data that the company believes it should include in the registry report
  • For-profit corporations: Are domestic or foreign corporations where owners derive economic benefit from their operation based on their participation in the business.
  • Non-profit corporations: Are domestic or foreign corporations in which the proceeds of its operation, if any, are used to promote it.
  • Social benefit corporation: These are domestic or foreign corporations that have a social benefit aspect to their business, that is, their purpose is not to generate net profits, but if there is a net profit, it could be distributed to their owners.
  • Partnerships: Where the main company regulates the rules and assumes the responsibilities before third parties.

Once the company is registered, entrepreneurs must comply with the corporate compliance requirements established in Puerto Rico. Some of these requirements include: requesting the employer identification number, registering with the Department of the Treasury, requesting the Merchant’s Registry, and opening a corporate bank account.

What are the key requirements for corporate compliance in Puerto Rico?

Every corporation admitted to do business in the US territory must maintain a physical office and at least one resident agent on the island.

  • Resident agent: The resident agent can be an individual residing in Puerto Rico, or a legal person organized under the laws of the island, or authorized to do business there. The agent is responsible for representing the company. They will receive and process any official communication
  • Legal address: A company must register a legal address in Puerto Rico to operate, undergo inspections, and receive official notifications.

Requirements established by the State Department

All corporations must file an annual report with the Department of State on or before April 15 of each year, or the next business day if it is a weekend or holiday, containing the following information:

  • Name and registration number of incorporation
  • Physical and mailing address of the designated office
  • Name and physical address of the resident agent
  • Name and postal address of at least 2 officers of the corporation who are in an established office at the date of filing the report, including that of the officer who signs the report, and the expiration dates of their respective positions
  • The report must contain a status statement of the economic condition of the corporation at the close of operations during the previous calendar year
  • If the business volume of the corporation exceeds USD$3 million, this report must be audited by a certified public accountant licensed in Puerto Rico
  • The report must be signed by an authorized officer, a director or incorporator

LLCs will not have to file an annual report with the Department of State. They only pay annual fees in the amount of USD$150 on or before April 15 of each year, or the next business day if it is the end of the year or a holiday.

Tax obligations for companies in Puerto Rico

Companies operating in Puerto Rico must obtain a Merchant Registration Number with the Department of Treasury and declare all financial transactions to determine what taxes must be paid.

The four main taxes that any type of entity must declare and pay are:

TaxDeclaration to the tax office
Income Tax: A maximum tax of 39% is applied to the earnings obtained each year.It must be filed annually, no later than the 15th day of the fourth month following the close of the taxable year.
Personal property tax: The maximum tax rate is 9.83% and varies according to the municipality in which the entity is located.It must be filed annually, no later than May 15 following the taxable year.
Municipal Patent: A tax of 0.5% is applied to the operations of non-financial companies, and a maximum of 1.5% for financial companies.It must be declared each year, no later than the fifth day after April 15 following the taxable year, together with the income tax return.
IVU: An 11.5% tax is applied to company invoices, which must be withheld and paid to the Department of the Treasury.All withheld tax must be declared and paid no later than the 22nd of the following month.
In order to simplify processes, Biz Latin Hub has designed the following Annual Legal calendar as a concise representation of the fundamental responsibilities that every company must attend to in Puerto Rico
Key dates for corporate compliance in Puerto Rico

What labor regulations must be followed in Puerto Rico?

Foreign executives doing business in Puerto Rico must comply with labor regulations of the territory. These regulations include:

  • The national minimum wage is $10.50/hr (from July 2024)
  • Companies are required to pay a December Christmas bonus if the employee meets the established requirements
  • Standard working time is 8 hours per day
  • Employees are entitled to paid vacation and sick days, depending on their weekly working time

When a company hires a new employee, it must register with the Department of Labor and Human Resources, the Social Security Administration, the Department of the Treasury, and the State Insurance Fund Commission. In addition, the contributions established by the labor laws of Puerto Rico will be calculated based on the salary of each employee, as follows:

Employer Contributions Employer Contributions (%)
Social Security 6.2%
Medicare1.45%
State Unemployment

Federal Unemployment
Up to 4.4% +1%

0.6%
Disability

CFSE policy
0.3%

0.7%
TOTAL14.65% (calculated from an employee’s salary)

FAQs on corporate compliance in Puerto Rico

Based on our extensive experience these are the common questions and doubts of our clients on entity legal compliance in Puerto Rico:

1. What are the common statutory appointments for a company in Puerto Rico?

The following are the most common statutory appointments for Puerto Rican legal entities:

– An appointed legal representative who will be personally liable, both legally and financially for the good operation and standing of the company. This should be a local national or a foreigner with the right to live/work in the country.

2. Is a registered office address needed for a legal entity in Puerto Rico?

Yes, a registered office address or local fiscal address is required for all entities in Puerto Rico for the receipt of legal correspondence and government visits.

3. When must a tax auditor be appointed in Puerto Rico?

If you are among the obligated entities to appoint a tax auditor, you must submit this appointment before the 15th day of the fourth month after the closure of the fiscal year and by the deadline of April 15th in Puerto Rico.

4. When must a company hold a general shareholders meeting in Puerto Rico?

The ordinary general shareholders meeting must be held within five months following the closure of the fiscal year and by the deadline of April 15th in Puerto Rico.

5. What is the deadline for companies to submit their annual income tax declaration in Puerto Rico?

Companies in Puerto Rico have until the 15th day of the fourth month after closure of the fiscal year to submit their annual income tax declaration which will be by the deadline of April 15th.

Biz Latin Hub can help with corporate compliance in Puerto Rico.

At Biz Latin Hub, our team of legal and accounting specialists provides comprehensive company formation advice and guidance to support your expansion. With our full suite of bilingual market entry and back-office services, we are equipped to deliver excellence and ensure your business operations’ success in Puerto Rico.

Learn more about our team and expert authors.

A BLH infogrpahic showing key services offered by the company
Key services offered by BLH to help with corporate compliance in Puerto Rico.

The information provided here within should not be construed as formal guidance or advice. Please consult a professional for your specific situation. Information provided is for informative purposes only and may not capture all pertinent laws, standards, and best practices. The regulatory landscape is continually evolving; information mentioned may be outdated and/or could undergo changes. The interpretations presented are not official. Some sections are based on the interpretations or views of relevant authorities, but we cannot ensure that these perspectives will be supported in all professional settings.
David Wright
David Wright

David spent 22 years working for the British Diplomatic Service serving in various Latin American countries. He served twice in Colombia including acting as an advisor on regional security matters to the President of Colombia. Currently, he acts as a consultant for companies and governments on risk management, security and technology.

David is also involved in mining related companies, both in Executive and Non-Executive roles. Together with Craig Dempsey he set up Biz Latin Hub and now acts as its Non-Executive Chairman. David holds a Bachelors Degree in Astrophysics from Birmingham University and also studied at Brown University.

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