Capital Gains Taxation in Puerto Rico
In Puerto Rico, capital gains are subject to taxation under the Puerto Rico Internal Revenue Code of 2011, as amended (PRIRC). The PRIRC defines capital gains as the profit realized from the sale or exchange of capital assets. Capital assets include real property, stocks, bonds, and other investment property.
Calculation of Taxable Capital Gains
Taxable capital gains are calculated as the difference between the selling price of the asset and its adjusted basis. The adjusted basis is the original cost of the asset plus any improvements or expenses incurred during the ownership period. Expenses that can be added to the basis include brokerage fees, legal fees, and the cost of any improvements made to the property.
Tax Rates
Capital gains are taxed at the following rates:
- Individuals: 15%
- Corporations: 20%
Exemptions and Deferrals
Certain types of capital gains are exempt from taxation, including:
- Gains from the sale of a personal residence
- Gains from the sale of property used in a trade or business
- Gains from the sale of certain types of investments, such as municipal bonds
In addition, capital gains may be deferred if the proceeds are reinvested in certain types of property, such as a new home or a business.
Legal Framework
The taxation of capital gains in Puerto Rico is governed by the following articles of the PRIRC:
- Article 1021: Definition of capital gains
- Article 1022: Calculation of taxable capital gains
- Article 1023: Tax rates
- Article 1024: Exemptions and deferrals
Policy Objectives
The taxation of capital gains in Puerto Rico is intended to generate revenue for the government and to encourage investment. The tax rates are designed to be competitive with other jurisdictions in order to attract foreign investment. The exemptions and deferrals are intended to provide relief for taxpayers who are selling their homes or investing in new businesses.
If you are considering selling a capital asset in Puerto Rico, it is important to understand the tax implications. You should consult with a tax advisor to determine your tax liability and to explore any available exemptions or deferrals.
