Payment of taxes to the federal government, both personal and corporate, is done through the federal Internal Revenue Service (IRS), while payment of taxes to the Commonwealth government is done through the Puerto Rico Department of Treasury (Departamento de Hacienda).
Puerto Ricans on the island paid over $4 billion in federal taxes in fiscal year 2021.
Residents falling within the following categories must pay tax on their income to the United States federal government, via the Internal Revenue Service: Puerto Rico residents who: However, notwithstanding these requirements, some residents of Puerto Rico are not required to file federal income tax returns because their income falls below the poverty threshold.
[16][17] The IRS does not require individuals or households below the poverty threshold to pay federal income tax.
Only certain residents of Puerto Rico are required to file federal income tax returns.
According to the Internal Revenue Service: In general, United States citizens and resident aliens who are bona fide residents of Puerto Rico during the entire tax year, which for most individuals is January 1 to December 31, are only required to file a U.S. federal income tax return if they have income sources outside of Puerto Rico or if they are employees of the U.S. government.
United States citizens or resident aliens who are not bona fide residents of Puerto Rico during the entire tax year are required to report all income from whatever source derived on their U.S. income tax return.
[31] In general, "many federal social welfare programs have been extended to Puerto Ric[o] residents, but usually with caps inferior to those allocated to the states.
"[32][e] Residents of Puerto Rico who have paid into Social Security are eligible for benefits upon retirement.
On 10 April 2020, the U.S. Court of Appeals for the First Circuit ruled that residents of Puerto Rico were eligible for SSI benefits, finding that residents of Puerto Rico make substantial contributions to the federal treasury in higher amounts than taxpayers in at least six states and the territory of the Northern Mariana Islands.
Furthermore, half of the portion that belongs to the state government is destined to the Urgent Interest Fund Corporation (COFINA) to pay the public debt of Puerto Rico, making it a three-tier tax.
On 29 July 2007, the government approved Law Number 80, making the tax mandatory for all municipalities of the commonwealth.
[46] On 2 May 2016 the House of Representatives voted to repeal the adoption of value added tax (VAT), followed shortly by the Senate on 5 May 2016.