PUERTO RICO Law and Practice Contributed by: Antonio Santos, Donald Hull and Paola Canino, Pietrantoni Mendez & Alvarez LLC
In addition, the Notarial Law mandates the payment of a notarial tariff, to be calculated on the basis of the stated amount of the transaction – for example, the purchase price or the amount of the mortgage. For transactions with stated amounts not exceeding USD10,000, the applicable notarial tariff is USD150. With regard to transactions with stated amounts between USD10,000 and USD5 million, the parties may negotiate the notarial tariff, but in no event may the tariff be greater than 1% of the transaction amount or less than 0.5% of the transaction amount. For transactions with stated amounts of more than USD5 million, the parties are free to negotiate the notarial tariff but the tariff in those cases will never be less than USD25,000. 2.11 Legal Restrictions on Foreign Investors There are no local legal restrictions on foreign invest - ment in real estate. However, it is important to note that any federal laws restricting foreign investment in the USA are also applicable in Puerto Rico. 3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate Commercial real estate acquisitions in Puerto Rico are principally financed by financial institutions located in Puerto Rico or the mainland USA. There have been some financings with alternative sources such as insurance companies and private capital firms. 3.2 Typical Security Created by Commercial Investors Lenders in Puerto Rico will typically require a real property mortgage and a security interest over per - sonal property assets (including rents and other con - tract receivables generated by the property) to secure repayment of commercial loans for the acquisition or development of real estate. 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders There are no Puerto Rican restrictions on the granting of security to foreign lenders, nor on repayments made to foreign lenders under a loan agreement. Although each case must be examined in light of its particular
facts and circumstances, interest payments made to non-Puerto Rican lenders are generally not subject to a Puerto Rican withholding tax, unless the payor and the recipient are related parties. 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security The stamp taxes and recording fees payable in con - nection with the granting and cancellation of mortgag - es are similar to those payable with regard to transfers of title. The Internal Revenue stamp taxes for the original of the deed of constitution and the deed of cancellation of mortgage are calculated at the rate of USD2 for the first USD1,000 (or fractions thereof), and USD1 for every USD1,000 thereafter, based on the amount of the mortgage plus an additional amount equal to 10% of the mortgage to cover protective advances. The Internal Revenue stamp taxes for the certified copies are calculated at the rate of USD1 for the first USD1,000 (or fractions thereof), and USD0.50 per USD1,000 thereafter. Legal Assistance stamps are also required to be affixed to the deeds and are cal - culated at 0.0001 times the amount of the mortgage plus an additional amount equal to 10% of the mort - gage to cover protective advances for the deeds of constitution and cancellation of mortgage (and half of that amount for the certified copies). The fees for recording the deeds of constitution and cancellation of mortgage in the Registry of Property are calculated at the rate of USD2 per USD1,000 (or fractions thereof) for the first USD25,000, and USD4 per USD1,000 for amounts in excess of USD25,000, plus a filing fee of USD15.50. The calculation of record - ing fees is based on the amount of the mortgage. In addition, the Notarial Law requires payment of a notarial tariff to be calculated on the basis of the amount of the mortgage transaction. For transactions with stated amounts up to USD10,000, the applicable notarial tariff is USD150. With regard to transactions with amounts between USD10,000 and USD5 million, the parties may negotiate the notarial tariff, but in no event may the tariff be greater than 1% of the trans - action amount or less than 0.5% of the transaction amount. For transactions with mortgage amounts of
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