Taxation in Puerto Rico

Taxation in Puerto Rico consists of taxes paid to the United States federal government and taxes paid to the Government of the Commonwealth of Puerto Rico. Payment of taxes to the federal government, both personal and corporate, is done through the federal Internal Revenue Service (IRS), while payment of taxes to the Commonwealth government is done through the Puerto Rico Department of Treasury (Departamento de Hacienda).

Puerto Rico is an unincorporated territory of the United States and Puerto Ricans are U.S. citizens; however, Puerto Rico is not a U.S. state, but a U.S. insular area. Consequently, while all Puerto Rico residents pay federal taxes, many residents are not required to pay federal income taxes. Aside from income tax, U.S. federal taxes include customs taxes,^[1] federal commodity taxes, and federal payroll taxes (Social Security, Medicare, and Unemployment taxes).

Not all Puerto Rican employees and corporations pay federal income taxes. Federal law requires payment of federal income tax from the following residents and corporations only: federal government employees in Puerto Rico,^[a][b][4] residents who are members of the United States military, those with income sources outside of Puerto Rico, those individuals or corporations who do business with the federal government, and those Puerto Rico-based corporations that intend to send funds to the United States.

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