PUERTO RICO Law and Practice Contributed by: Antonio J Santos and Donald E Hull, Pietrantoni Mendez & Alvarez LLC
2.11 Legal Restrictions on Foreign Investors There are no local legal restrictions on foreign investment in real estate. However, it is impor - tant to note that any federal laws restricting for - eign investment in the USA are also applicable in Puerto Rico.
The Internal Revenue stamp taxes for the origi - nal of the deed of transfer are calculated at the rate of USD2 for the first USD1,000 or fraction thereof, and USD1 for every USD1,000 there - after, based on the purchase price of the real estate. The Internal Revenue stamp taxes for the certified copy (which is the document that is actually filed for recording) are calculated at the rate of USD1 for the first USD1,000 or fraction thereof, and USD0.50 per USD1,000 thereafter. Legal Assistance stamps are also required to be affixed to the deed and are calculated at.0001 times the purchase price for the original of the deed of sale and half of that amount for the certi - fied copy. The fees for recording a deed of purchase and sale 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 recording fees is based on the greater of the purchase price of the real estate and the sum of all the amounts that are secured by the mort - gages that encumber the real estate at the time of the sale. In addition, the Notarial Law man - dates payment of a notarial tariff to be calculated on the basis of the stated amount of the trans- action – 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.
3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate
Commercial real estate acquisitions in Puerto Rico are principally financed by commercial banks located in Puerto Rico or the mainland USA. There have been some financings with alternative sources such as insurance compa - nies 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 personal property assets (including rents and other contract receivables generated by the property) in order to secure the repayment of commercial loans for the acquisition or develop - ment of real estate. 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders There are no Puerto Rico restrictions on the granting of security to foreign lenders or on repayments made to foreign lenders under a loan agreement. Although each case must be examined in light of its particular facts and cir - cumstances, 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.
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