Samira Yassin

Small and medium-sized businesses, also known as PyME or PyMEs (for its Spanish translation), represent an important sector of the Puerto Rican economy, as they play a substantial role in generating employment opportunities for the Island and boosting economic growth. According to the Department of Economic Development and Commerce (DEDC) PyMEs Annual Report, in 2019 PyMEs accounted for 91.4% of the total establishments in Puerto Rico, contributing 44.8% of the total jobs in the private sector, and representing 39.2% of the total payroll in Puerto Rico’s private sector during such year.

Are you happy that your number of YouTube subscribers is growing or that your followers in your Insta account are multiplying? If your income tax return does not reflect this growth, you may be liable for tax evasion. As any other taxpayer, Youtubers, Influencers, and Bloggers are required to declare their income received from these activities in their individual income tax returns. Staying compliant with your income tax responsibilities should be a top priority. Especially nowadays, as the Puerto Rico Department of Treasury (“PRDT”) has increased its scrutiny in this area and has been noticeably public about it. In this article, we take a closer look at tax rules for influencers in Puerto Rico (“PR”) and the implications they may face for failing to comply with your income tax responsibilities.

It has been months of candid discussion since the enactment of Act 52 of June 30th, 2022, known as the Puerto Rico Public Finances Stabilization Act (hereinafter “Act 52-2022”). Act 52-2022 introduced a potpourri of amendments to tax-related legislation. Amendments impacted the 2011 Puerto Rico Internal Revenue Code (“PR Code”), the Puerto Rico Incentives Code, and the Puerto Rico Municipal Code to position Puerto Rico as an attractive destination to do business. As a significant change presented by Act 52-2022, disregarded entities (“DREs”) were recognized for the first time for PR income tax purposes. As stated in the Statement of Motives of Act 52-2022, this adoption seeks to simplify tax compliance burdens for the PR working class. Subsequently, the PR Treasury Department issued Administrative Determination 22-10 (“DA 22-10”) and Administrative Determination 23-01 (“DA 23-01”), which shed light and provide a set of rules for entities that want to elect or revert its taxable treatment. Many business owners frequently structure their businesses as Limited Liability Companies (“LLCs”). It also aligns Puerto Rico with the tax regimen of the US federal tax code and other US states that have adopted this tax treatment for these entities. One of the most important decisions when creating a business is electing the most suitable business organization form. This decision will impact aspects of your business including taxation, and your personal legal liability. Here in we discuss, in general terms, the most common ways to do business in Puerto Rico (“PR”) using a legal entity and what you should know about the implications that the enactment of Act 52-2022, and related publications, bring with respect to DREs.