Running a business in Puerto Rico means dealing with three layers of government: Hacienda, the Puerto Rico Treasury Department, for income tax and sales tax; your municipality for the license tax and, through the CRIM, property tax; and the IRS for federal payroll taxes. This guide gives an owner's-eye view of the main obligations, with links to our more detailed guides.
Figures come from the Puerto Rico Internal Revenue Code of 2011 and the Municipal Code (Act 107-2020) as officially published, unless another source is named.
Step one: the Merchant Registry
Under Section 4060.01 of the Puerto Rico Internal Revenue Code, anyone who wants to do business in Puerto Rico as a merchant (comerciante) must apply to Hacienda for a Merchant Registration Certificate (Certificado de Registro de Comerciantes) before starting operations, for each business location. The application lists the owners, the main office and every place where sales happen.
The certificate cannot be sold or transferred to someone else without Hacienda's authorization. Registration is done in SURI, Hacienda's online system. Our guide to the Merchant Registry explains renewals, changes and closing.
Corporations and LLCs also register with Puerto Rico's Department of State, and most businesses need municipal and permit registrations as well.
Sales and use tax (IVU)
The impuesto sobre ventas y uso (IVU) is Puerto Rico's sales and use tax. Merchants collect it from customers and remit it to Hacienda.
Rates:
| What you sell | Rate | Where it comes from |
|---|---|---|
| Most taxable goods and services | 11.5% | 6% state tax (Section 4020.01) + 4.5% state surtax (Section 4210.01) + 1% municipal tax |
| Services to other merchants and designated professional services | 4% | Section 4210.01(c) |
A few points worth knowing:
- Restaurants. Prepared food, carbonated drinks, baked goods and candy sold by restaurants certified by Hacienda are exempt from the 4.5% surtax portion under Section 4210.01(a)(1). Food trucks count as restaurants for this rule.
- Exemptions. The Code exempts many items. In 2025, for example, Act 78-2025 fully exempted prescription drugs, according to Hacienda.
- Imports. If you bring taxable goods into Puerto Rico, you owe use tax and file import declarations and returns.
- Monthly return. Every merchant files a monthly IVU return no later than the 20th day of the month after the tax was collected (Section 4041.02(c)). Importers file a monthly import return by the same day.
Hypothetical example. A furniture store in Caguas sells a $1,000 table to a family.
- State IVU at 10.5%: $105
- Municipal IVU at 1%: $10
- Total IVU collected: $115
The same week, a graphic designer bills a local business $2,000 for a logo, a business-to-business service. IVU at 4%: $80.
Our guides cover the IVU and the monthly IVU return in more detail.
Municipal license tax (patente)
Every municipality where you do business can charge a municipal license tax, the patente, on your volume of business (gross receipts) attributable to that town. Under Article 7.202 of the Municipal Code:
- Financial businesses: up to 1.5% of volume of business.
- Everyone else: up to 0.5% of volume of business.
- Minimum: $25.
- Each municipality sets its own rates within those caps and may set lower rates or exemptions by ordinance to attract certain activity.
Dates. You file a volume of business declaration no later than 5 business days after April 15 each year; decree holders filing on the special June schedule get 5 business days after June 15 (Article 7.207). The tax is paid in advance in two installments, due July 1 and January 2, and payable in the first 15 days of each semester. If you pay the full year when you file the declaration, you get a 5% discount (Article 7.208).
Hypothetical example. A bakery in a municipality that charges the 0.5% maximum had $400,000 of volume of business last year.
- License tax for the year: $400,000 × 0.5% = $2,000, or $1,000 per semester.
- Paid in full with the declaration, with the 5% discount: $1,900.
Rates vary by town, so check your municipality's ordinance.
See our guide to the municipal license tax, including audited financial statement requirements.
Income tax on the business
How the business is taxed depends on its structure.
Regular corporations pay two layers under Sections 1022.01 and 1022.02:
- a normal tax of 18.5% of net taxable income; and
- a surtax on net income above a $25,000 deduction, graduated from 5% up to 19% for income over $275,000.
At the top, the combined rate is 37.5%. Members of a controlled group share the $25,000 deduction. An alternative minimum tax can also apply.
Pass-through entities (entidades conducto), such as partnerships and LLCs that elect or qualify for that treatment, generally file an informative return, and the owners pay tax on their share.
Sole proprietors report business income on their individual return, Form 482, and are subject to 10% withholding on many payments for services. See Puerto Rico income tax basics.
Filing dates. According to Hacienda circular letters summarized by DDEC, calendar-year corporations filed their 2024 returns by April 15, 2025, and pass-through entities filed informative returns by March 15, 2025. Corporations with tax-exemption decrees file by June 15 under Section 1061.16(e). Our guides on corporate income tax and partnerships and LLCs have the forms and current dates.
Payroll
If you have employees in Puerto Rico, you take on obligations with Hacienda, the Puerto Rico Department of Labor and the IRS:
- Puerto Rico income tax withholding from wages, using Hacienda's tables, with periodic deposits.
- Quarterly and annual returns to Hacienda, and the year-end withholding statement for each employee, Form 499R-2/W-2PR.
- Unemployment and disability insurance contributions with the Puerto Rico Department of Labor.
- Federal Social Security and Medicare taxes, withheld and matched, and reported to the IRS on federal employment tax returns.
When you pay contractors for services, you generally withhold 10% of Puerto Rico income tax (Section 1062.03) and report the payments on Form 480.6SP. See our guides on employer obligations and informative returns.
Incentives
Puerto Rico's Incentives Code, Act 60, offers decrees that can lower these taxes for qualifying businesses. The best known for service firms is the Export Services decree, which taxes qualifying income at 4% and cuts the municipal license tax by 50%. Young entrepreneurs aged 16 to 35 can get three years of exemption on a new business. Start with our Act 60 guide.
Frequently asked questions
Do I need a separate merchant registration for each store?
Yes. Section 4060.01 requires the application for each commercial location.
Do I charge IVU on services?
Many services are taxable. Services to other merchants and designated professional services are taxed at 4% rather than 11.5%. Rules and exemptions are detailed, so check Hacienda's guidance or our IVU guide.
I have stores in two towns. Which patente do I pay?
Each municipality charges license tax on the volume of business attributable to operations in that municipality, so you may file and pay in both.
What certificates will banks and government agencies ask for?
Commonly, certificates showing you filed returns and have no tax debt, from Hacienda and the CRIM. See our guide to Hacienda certifications.
What do I do when I close the business?
You file final returns and cancel registrations with Hacienda, your municipality and other agencies. See our guide to closing a business.
Sources
- Puerto Rico Treasury (Hacienda), "Código de Rentas Internas de Puerto Rico de 2011, as amended". hacienda.pr.gov
- Office of Management and Budget of Puerto Rico (OGP), "Código Municipal de Puerto Rico, Ley 107-2020, as amended (rev. Sept. 9, 2026)". bvirtualogp.pr.gov
- DDEC Incentives Office, "Boletín Informativo Núm. DDEC 2025-008 (includes Bulletin 2025-007 summarizing Hacienda filing dates)". docs.pr.gov
- Office of Management and Budget of Puerto Rico (OGP), "Código de Incentivos de Puerto Rico, Ley 60-2019, as amended (rev. July 16, 2026)". bvirtualogp.pr.gov
- Puerto Rico Treasury (Hacienda), "Gobernadora envía proyecto para otorgar cheque de alivio contributivo" (Jan. 30, 2026, lists the 2025 tax laws in effect). hacienda.pr.gov
787TAX is an independent guide. It is not Puerto Rico's Departamento de Hacienda, the CRIM or the IRS. This page is general information, not tax or legal advice. Example figures are hypothetical. Found an error? Tell us.
