What is the Patente Municipal License Tax?

What is the Patente Municipal License Tax?

What is Patente Municipal (or Volume of Business License Tax)?

A Patente Municipal is a tax levied and collected by the Municipalities of Puerto Rico (list). It is the largest source of income of the municipalities in the Commonwealth of Puerto Rico.

Who is obliged to pay Patente Municipal?

Any person for-profit dedicated to providing any service, sale of any property, any financial business or any business in the Municipality.

What are the requirements to enforce the patente municipal?

A Municipality may enforce the collection of this tax on any company or business dedicated to the sale of products or services within the Municipality jurisdiction (geographic).

What are the tax rates?

Please visit this table with all the tax rates for Fiscal Years 2016-2017. A patente municipal is calculated based on sales (turnover). Each Municipality has a its own rate.

Can I see the tax return?

Sure, click here and here (for addendums) and here for an example provide by the Municipality of San Juan.

When should I enroll in the Municipality to comply with the law?

Every business must register no later than 30 days after starting the operations.

After filing my first declaration of sales, must I continue filing every year?

Yes, as long as you keep your business open, the business is required by law to file and pay the municipal license.

As a rule, any business shall be required to make a declaration of sales no later than five business days to April 15 of each taxable year.

  • Next filing date: April 22, 2016 (five business days after April 15, 2016)

When should I pay my patente municipal?

Either each semester, July (50%) and January (50%). When the total annual payment is made at the time of filing the return, the business will be granted a discount equivalent to five percent 5% of the total amount of the “patente municipal”. This will only be available to the business if filed with the annual tax return and paying the full year.

What are the effects of not enroll in the municipality on time?

The possibility of a fine of $500 (in many cases); you may lose the right to exempt first semester; and may be imposed penalties, interest and penalties for late filing from the date came to required to file.

What do I have to process a patente municipal application?

In order to process your application, you should bring, among others, the following documents:

  • Authorization of the owner or president for representation;
  • copy of tax or employer identification number
  • local use permit issued by the Regulations and Permits Administration – ARPE;
  • lease and / or contract of purchase;
  • certificate of incorporation;
  • income tax return;
  • financial statements audited by a Certified Public Accountant, if required by law ($3,000,000 in sales or more).
    • Because each case individually, we recommend that you contact the offices of each Municipality to guide you as to what documents will be required to process your “patente municipal” application.

If I can not submit documents on time, what I can do?

Patente Municipal Act, as amended, grants an extension of up to six months to file your return on turnover. However, does not exempt from payment of the patente municipal, so you must estimate your income and pay the same at the time prescribed by this law. This can only be done by filing an extension on your tax return.

What are the forms used to process the Patente Municipal?

  1. Provisional Patente Municipal Application – This document is used to enroll a person who is going to start a business for the first time in the Municipality.
  2. Provisional Patente Municipal – a certificate to every person who starts a business for the first time in the Municipality and complied with Provisional “patente municipal” Application is issued.
  3. Sales Declaration (P&L) and/or Tax Return – Form where every person subject to the payment of the “patente municipal” or its authorized agent is obliged to perform under oath before any municipal official or the Commonwealth of Puerto Rico.
  4. Receipt of payment – receipt is issued immediately.
  5. “Patente Municipal”  – a certificate is issued once the taxpayer has complied with the payment and documents and / or information required.
  6. Tax Return – Form used to notify taxpayers on any unpaid balance.
  7. Application for Extension of Declaration – A document used when the taxpayer can not meet on the date prescribed by law, with the filing of the Declaration on sales.

In each of these documents, the following information must be included:

  • business name,
  • tax identification number or employer identification number
  • physical address of the business
    • (Other information might be required, on a case-by-case basis)

 


Porto Capital does not assume any responsibility on the accuracy of the Municipality’s tax rates nor we assume responsibility to update this information.

If you have a question, or comment related to the tax compliance under the Puerto Rico Tax Code, Municipal Ordinances and the Internal Revenue Code, feel free to send me an email to the contact information below.


Miguel Nicolas Moreda, CPA, CIRA

Miguel Nicolas is the founder of Porto Capital. Prior to working as a financial and restructuring advisor for small and medium-sized businesses, he worked at GFR Media Real Estate Division as Finance Manager. Before that, he worked in the Business Advisory Division at Ernst & Young US, LLP in the United States.

He is holds an undergraduate degree in accounting from the University of Puerto Rico. He also possess graduate degrees from the University of Puerto Rico School of Law and IE Business School in Spain. Miguel is a Certified Public Accountant (CPA) and a Certified Insolvency and Restructuring Advisor (CIRA).

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