Business Volume Tax

Generally, any individual, trust, succession or entity who profits from the provision or sale of any service, sale of any property, any banking business or any industry or business operating in municipalities of the Commonwealth of Puerto Rico, is subject to Business Volume tax. Businesses with gross receipts below $5,000 are exempt.

The entity or individual will obtain a municipal license after full payment of the Business Volume tax. Further, this license must be visible to avoid the penalties per Section 7.209 of the Puerto Rico Municipal Code.

The basis subject to Business Volume tax equals the amounts reported as gross receipts in the preceding accounting year. The accounting year represents the calendar year, or fiscal year, used for income tax purposes.

The main or home office in Puerto Rico files a Volume of Business Declaration for the municipality where it is established. The declaration includes the results of operations for branches in the same municipality, if any. Taxpayers submit separate declarations for the business volume carried out in each municipality where the main or home office has a branch, subsidiary, office, warehouse, etc. All declarations are rendered to the Director of Finance of the municipality where the main office is located, and a copy of each statement is sent to corresponding municipalities. Upon filing, the Volume of Business Declaration is sworn to before any officer of the Municipal Revenues and Collection Office or authorized person to take oath under the Commonwealth of Puerto Rico.

The tax is payable to the municipality. A 5% discount applies to taxpayers given that the total amount is paid by the filing due date.

Any person or authorized agent subject to the payment of Volume of Business tax must file a Declaration of Business Volume by or before five (5) working days after April 15. Annual business volume tax payments are due on July 1 and January 1. Semesters run from July 1 through December 31 and from January 1 through June 30. The semester in which any individual or entity commences operations is exempt, provided that the business informs the Municipal Treasurer within the first 30 days of operations.

Currently, the law provides for a 6-month extension. The extension does not apply for the business volume tax payment.

The tax shall not exceed 0.5% (zero-point-five percent) of gross receipts received or accrued, as applicable, during the year. The tax rate for financial businesses is 1.5% (one-point-five percent) on income from interest, rents, fees, profits, etc. Taxpayers include a copy of certification of gallons of gasoline purchased with the Volume of Business Declaration to determine the tax due for the sale of gasoline.

The Puerto Rico Municipal Code imposes penalties for failure to file a complete return unless it is shown that such failure is due to reasonable causes and not to willful neglect. The penalty is 5% of the amount of the municipal license taxes due, if the failure is not for more than 30 days, with an additional 5% for each additional 30 days or fraction thereof during which such failure continues, not to exceed 25% in the aggregate.

If gross revenues exceed $10,000,000, the taxpayer or authorized agent certifies the declaration and accompanies the filing with audited financial statements by a Puerto Rico Certified Public Accountant.

Any person doing business in Puerto Rico must obtain a Merchant Registry Certificate, and the applicable permits and licenses, in addition to the municipal license.