Get IRS Provides Guidance For Residents Of Puerto Rico To Claim ...

While the Commonwealth government has its own tax laws, Puerto Rico residents are also required to pay US federal taxes, but most residents do not have to pay the federal personal income tax.

Thus, under these general definitions, a corporation organized under the laws of Puerto Rico is a foreign corporation and is subject to tax under Code Sections 881, 882, and 884. 4 Code § 882(a). 5 Code § 864(b). term presence of employees – including you, the proprietor – may be enough.

(5) The term “foreign country” means any country or territory, excluding the United States, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, the Trust Territory of the Pacific Islands, American Samoa, Guam, the Virgin Islands, and other territories or possessions of the United States.

If you're a bona fide resident of Puerto Rico, you generally aren't required to file a U.S. federal income tax return if your only income is from sources within Puerto Rico.

The term "foreign country" does not include U.S. territories such as Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, the U.S. Virgin Islands, or American Samoa.

Bona Fide Residents of Puerto Rico: Generally, you are a bona fide resident of Puerto Rico if during the tax year, you: Meet the presence test • Do not have a tax home outside Puerto Rico, and • Do not have a closer connection to the United States or to a foreign country than to Puerto Rico.

Puerto Rico is an unincorporated territory of the United States and Puerto Ricans are U.S. citizens; however, Puerto Rico is not a U.S. state, but a U.S. insular area. Consequently, while all Puerto Rico residents pay federal taxes, many residents are not required to pay federal income taxes.

The source of your earned income is the place where you perform the services for which you receive the income. Foreign earned income is income you receive for performing personal services in a foreign country. Where or how you are paid has no effect on the source of the income.