PUERTO RICO Law and Practice Contributed by: Simón Carlo Valentín, Anthony O. Maceira Zayas and Carlos M. Fontán, Maceira Zayas
5.4 Reporting Obligations and Disclosure Regimes Compliance is supported through withholding returns, information reporting, payroll filings, and decree- based reporting requirements for incentive recipients. Decree-based compliance reporting for Act 60 grant - ees often requires annual compliance submissions, agreed-upon procedures, and documentation of eli - gible activity, headcount and local expenditure. 5.5 Role of Tax Authorities and Enforcement Measures The Puerto Rico Department of Treasury has broad authority to conduct audits, request information, assess deficiencies and impose penalties. Cases involving fraud may be referred to other governmen - tal authorities. 6. Penalties and Sanctions 6.1 Tax Penalties Penalties include: • Interest (PRIRC §6040.01) • Surcharges • Penalties These are enforced by the Puerto Rico Department of Treasury. 6.2 Criminal Penalties Criminal sanctions may apply to wilful evasion, fraud, falsification of returns or records, and intentional fail - ure to remit withheld taxes. Exposure can include monetary fines and imprisonment, often alongside civil assessments, interest and administrative penal - ties. 6.3 Interaction Between Tax and Criminal Procedures Puerto Rico tax matters that present fraud indica - tors may be referred to the Puerto Rico Department of Justice for criminal investigation and prosecution. Co-ordination typically occurs through information sharing and parallel processes, where the tax author - ity continues civil assessment work while prosecu -
then governor Pedro Pierluisi proposed legislation in anticipation of its impact on the island. Regarding implementation, in this case Puerto Rico’s deviation from the framework is structural due to its inability to implement. It is not a sovereign jurisdiction and therefore does not implement OECD reforms inde - pendently. 4.5 Digital Services Tax Puerto Rico has not implemented a digital services tax. Digital and technology-related income is taxed under general sourcing and business income rules. However, many digital and technology-related opera - tions are eligible for tax incentives under Act 60. 5. Anti-Avoidance and Anti-Evasion Measures 5.1 Definition and Identification of Tax Fraud, Evasion, Tax Avoidance and Abusive Schemes Puerto Rico distinguishes between unlawful tax eva - sion or fraud and legitimate tax planning. Indicators of abusive arrangements include lack of economic substance, non-arm’s-length pricing, circular transac - tions, and inconsistencies between reported income and financial records. 5.2 Anti-Avoidance Mechanisms Anti-avoidance enforcement relies on substance- over-form principles, withholding regimes, related- party scrutiny, and enforcement of incentive compli - ance requirements under Act 60. 5.3 Blacklists and Non-Cooperative Jurisdictions Puerto Rico does not maintain a formal blacklist of non-cooperative jurisdictions comparable to those used by the European Union. However, transactions involving low-tax or opaque jurisdictions may be sub - ject to heightened scrutiny, particularly where they raise concerns regarding substance, transfer pricing or withholding compliance.
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