When you form a business with other people, or set up a limited liability company (LLC) to keep your personal assets separate, there are two different questions: what type of entity it is for the Departamento de Estado (Puerto Rico's Department of State), and how it is taxed by the Departamento de Hacienda (Puerto Rico's Treasury Department, "Hacienda"). This guide covers the second question. The answer depends on the entity and on the elections you make under the Código de Rentas Internas de 2011 (Internal Revenue Code of Puerto Rico of 2011).
The three ways to be taxed
The Code, as amended by Act 52-2022, recognizes three main treatments for these entities:
| Treatment | Who pays the tax | Entity's return |
|---|---|---|
| Corporation | The entity, at corporate rates | Form 480.2 |
| Pass-through entity (entidad conducto) | The partners or members, on their distributive share | Form 480.2(EC), an informative return, plus one Form 480.6EC per owner |
| Disregarded entity (entidad ignorada) | The sole owner, as if the entity didn't exist for tax purposes | Doesn't file its own return |
Partnerships
A partnership (sociedad) includes civil, commercial, professional or any other kind of partnership, whether or not it is set out in a deed, and also two or more people who carry on a joint venture for profit (Section 1010.01(a)(4)). The rule in Section 1071.01 is that the partnership doesn't pay income tax: each partner pays on their share of the income, gain, loss, deductions and credits. Partnerships that already existed when the Code took effect in 2011 could elect to keep being taxed as corporations.
Limited liability companies (LLCs)
Section 1010.01(a)(3) provides that an LLC organized under the Puerto Rico General Corporations Act, or under similar laws of another state or country, is taxed the same as a corporation, unless it elects otherwise:
- Pass-through entity, subject to the rules of Subchapter H of Chapter 7, even if it has a single owner.
- Disregarded entity, if it has a single owner who is a resident individual, for tax years beginning after December 31, 2021. For tax years beginning after December 31, 2023, the election is available even if the sole owner is not a resident individual.
LLCs from outside Puerto Rico. A foreign LLC that is taxed as a partnership or a disregarded entity for the IRS or in its own country is treated in Puerto Rico as a partnership or pass-through entity, or as a disregarded entity if it has a single member, for tax years beginning after December 31, 2022. That LLC can't elect to be taxed as a corporation in Puerto Rico. There are exceptions for some LLCs with older tax exemption decrees.
Corporations
The definition of a pass-through entity (Section 1010.01(a)(43)) also lets a corporation elect to be taxed as a pass-through entity, even if it has a single owner. Special worker-owned corporations can't make that election. If your entity is taxed as a corporation, see corporate income tax.
How and when to make the election
Under Section 1010.01(a)(3), an LLC's election is filed on or before the due date of the income tax return for the year of the election, including extensions, in the manner the Secretary of the Treasury provides. Section 1078.03 applies the same rule to the disregarded entity election.
In practice, decide on the treatment before the end of the business's first year. Changing treatment can have tax consequences, which Section 1078.02 governs, so don't do it without professional advice.
Pass-through entities: return, reports and deadlines
Carta Circular de Rentas Internas Núm. 26-04 (Internal Revenue Circular Letter No. 26-04), issued for tax year 2025, sums up the obligations:
- Return: Form 480.2(EC), Planilla Informativa sobre Ingresos de Entidades Conducto (informative return of income from pass-through entities), is filed only electronically, through one of the software programs certified by Hacienda.
- Deadline: the last day of the third month after the end of the tax year, under Section 1061.03(a), as amended by Act 65-2025. For calendar year 2025, it was March 31, 2026. An entity with a year ending April 30, 2026 has until July 31, 2026.
- Report to each owner: Form 480.6EC, Declaración Informativa Entidad Conducto (pass-through entity informative return), is filed electronically together with the return and delivered to each partner, member or shareholder on the same date.
- Supporting documents: these are uploaded through SURI (Hacienda's online system) no later than the fourth business day after the due date, including the extension.
- Automatic extension: six months, if requested no later than the due date (Section 1061.03(c)).
- Financial statements: the return must include the financial statements required by Section 1061.15, depending on business volume.
Estimated payments for the owners. Section 1062.07 requires the entity to determine and remit estimated payments on the distributive share of its partners or members. As a general rule, it is 30% of the estimated share in certain income items, minus amounts already withheld, with exceptions; for example, when the partner certifies that they have enough losses or credits. Section 1061.03(a) provides that any amount owed for those estimated payments must be paid no later than the return's due date, not counting extensions.
What about the owners? Each partner includes their distributive share, as shown on Form 480.6EC, on their own return. If you are an individual, that goes on your individual return; see how to file your return.
Luis and Marta each own 50% of a design services LLC that elected to be taxed as a pass-through entity. In 2025 the LLC had net income of $120,000. The LLC doesn't pay income tax: it files Form 480.2(EC) no later than March 31, 2026 and gives each owner a Form 480.6EC showing a $60,000 distributive share. Luis and Marta each include that $60,000 on their own individual returns.
Disregarded entities
A disregarded entity isn't required to file a return, and its owner reports the income and expenses using the owner's own tax year and accounting method (Section 1078.03). Watch out for two details:
- Patente municipal (municipal license tax). The official business volume declaration form (Declaración de Volumen de Negocios, OGP PA01) treats the disregarded entity as subject to the license tax and asks for the return of the owner who reported the income, along with details of the entity's operations. See municipal license tax.
- Financial statements. The audit requirement doesn't apply to the disregarded entity on its own, but its business volume is added to the owner's to determine whether the owner has to submit audited statements (Section 1061.15(a)(7)).
A disregarded entity is still a merchant for IVU (sales and use tax) purposes and an employer if it has employees, with its own obligations for the Registro de Comerciantes (merchant registration), IVU and employer withholding.
Which treatment is right for you
There is no single answer. Some factors a CPA or attorney will consider with you:
- How much the business earns and whether you will reinvest or distribute. In a corporation, the entity pays 18.5% plus the additional tax; in a pass-through entity, the income is taxed at each owner's rate.
- Early losses. In a pass-through entity, losses pass through to the owners, subject to limits.
- Who the owners are: residents or nonresidents, individuals or corporations, and whether any of them has a decree under Act 60.
- Federal treatment, if any owners are taxed by the IRS.
- The administrative workload: the entity's own return, reports to partners and estimated payments.
Frequently asked questions
How is my LLC taxed if I didn't make any election?
As a corporation. That is an LLC's default treatment under the Code. If you want a different treatment, the election is made on or before the due date of the return for the year of the election, including extensions.
Does my single-owner LLC have to file a return?
If it elected to be a disregarded entity, it doesn't file its own return: you report its income and expenses on yours. If it is taxed as a corporation, it files Form 480.2; if it is a pass-through entity, Form 480.2(EC).
When is a pass-through entity's return due?
On the last day of the third month after the end of the year. For calendar year 2025, it was due March 31, 2026. You can request an automatic six-month extension no later than that date.
What is Form 480.6EC?
It is the informative return the pass-through entity gives each owner showing their share of the income, losses and other items. It is filed electronically with the return and delivered to the owners on the same date.
Can my Delaware LLC be taxed as a corporation in Puerto Rico?
No, for tax years beginning after December 31, 2022. A foreign LLC that is taxed as a partnership or disregarded entity in its own jurisdiction is treated in Puerto Rico as a pass-through entity, or as a disregarded entity if it has a single member, and can't elect to be taxed as a corporation, except for certain exceptions for older decrees.
Sources
- Código de Rentas Internas de Puerto Rico de 2011, según enmendado (Secciones 1010.01(a)(2)-(4) y (43), 1061.03, 1062.07, 1071.01, 1078.01 y 1078.03), Departamento de Hacienda. hacienda.pr.gov
- Departamento de Hacienda, "Carta Circular de Rentas Internas Núm. 26-04 (Planilla Informativa sobre Ingresos de Entidades Conducto, Formulario 480.2(EC), año contributivo 2025)", 27 de febrero de 2026. hacienda.pr.gov
- Departamento de Hacienda, "Carta Circular de Rentas Internas Núm. 26-06 (planilla de corporaciones 2025)". hacienda.pr.gov
- Oficina de Gerencia y Presupuesto, "Declaración de Volumen de Negocios, formulario OGP PA01 (rev. febrero 2025)". guaynabocity.gov.pr
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.
