PUERTO RICO Law and Practice Contributed by: Simón Carlo Valentín, Anthony O. Maceira Zayas and Carlos M. Fontán, Maceira Zayas
the employer is not otherwise engaged in a trade or business in Puerto Rico. Specifically, Act 27-2024 (the Remote Work Act), enacted on 17 January 2024, establishes a dedicated statutory framework governing remote work arrange - ments for employers with no business presence or taxable sales activity in Puerto Rico. For Puerto Rico- domiciled employees who are classified as exempt under the Fair Labor Standards Act (FLSA) – execu - tives, administrators and professionals – and who work remotely for a covered employer, the employ - ment relationship is governed exclusively by the par - ties’ contract and is exempt from Puerto Rico’s pro - tective labour legislation, provided that the employer maintains insurance coverage at least equivalent to that required by Puerto Rico law. The nexus protection is codified in Act 52-2022, which amended the Puerto Rico Internal Revenue Code to provide that allowing employees to work remotely from Puerto Rico does not constitute an “economic nexus” with Puerto Rico, even where the employee’s home office is a condition of employment, the employer reimburses home office expenses, or the employee performs certain duties from an employer-designated location. Together, Act 27-2024 and Act 52-2022 remove the two principal deterrents – employment law exposure and tax nexus risk – that had led many mainland and international companies to prohibit employees from relocating to Puerto Rico. For non-domiciled employees who voluntarily relocate to Puerto Rico on a temporary basis to work remotely for a covered employer, the exemption from Puerto Rico employment law is broader: it applies to both exempt and non-exempt employees, and the employ - ment relationship is governed by the contract or the law of the employee’s domicile jurisdiction. This exemp - tion ends if the non-domiciled employee decides to become domiciled in Puerto Rico – at which point the FLSA exempt-employee requirement applies, and a non-exempt employee who acquires Puerto Rico domicile loses the protection of Act 27-2024 entirely and becomes subject to Puerto Rico labour law. The Department of Labor and Human Resources confirmed this framework in Opinion of the Secretary No. 2024-02, issued 10 September 2024, which also
clarifies that tax treatment for all covered employees continues to be governed by the Puerto Rico Internal Revenue Code regardless of the labour law exemp - tions Act 27-2024 provides. 3.6 Other Income Puerto Rico applies special rules to certain categories of income, particularly: • Intellectual property income • Licensing arrangements • Manufacturing income under incentive regimes These rules are often governed by Act 60, which pro - vides targeted incentives rather than relying on treaty- based relief. 4. OECD/G20 Global Tax Reform 4.1 Pillar One – Amount B Puerto Rico does not independently implement OECD initiatives, including Pillars One and Two. Any impact arises indirectly through US federal adoption or mul - tinational group transfer pricing governance, rather than through incorporation of the OECD framework. 4.2 Pillar One – Amount A Puerto Rico does not have an independent position on Amount A, as it lacks sovereignty in international tax negotiations. Puerto Rico taxpayers may still be indirectly affected by Amount A outcomes through multinational group compliance, US federal rules and global changes to allocation of taxing rights. 4.3 Pillar Two Puerto Rico has not implemented the global minimum tax. A multinational group with Puerto Rico operations may nonetheless face Pillar Two exposure in other jurisdictions, potentially affecting the group’s effective tax rate calculations and placing practical pressure on Puerto Rico incentive modelling, intercompany pricing and documentation. 4.4 Specific Features or Deviations of Pillar Two The global minimum tax framework has not been implemented in Puerto Rico. However, during 2024,
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