P.R. Laws tit. 7, § 232w
(a) Income derived by the international banking entities duly authorized by this chapter, from activities described in subsection (a) of § 232j of this title, shall not be included in the gross income of said entities and shall be exempt from the tax imposed by §§ 8006 et seq. of Title 13, known as the “Puerto Rico Internal Revenue Code of 1994” or its preceding law, except for the provisions of subsection (b) of this section.
(b) General rule. —
(1) Excess net income derived in the taxable year by every international banking entity subject to taxation, as said term is defined in paragraph (A) of this clause, shall be subject to the tax rates established in the Puerto Rico Internal Revenue Code of 1994, as amended, for corporations and partnerships. For the purposes of this subsection, the following terms shall mean:
(A) Taxable international banking entity. — Means an international banking entity that operates as the unit of a bank organized under the Puerto Rico Banking Act, whose net income derived from activities described in subsection (a) of § 232j of this title exceeds twenty percent (20%) of the net income derived in the taxable year by said bank (including income derived by said unit). Said net income shall be computed pursuant to the provisions of §§ 8421—8428 et seq. of Title 13.
(B) Excess net income. — Means the net income, computed pursuant to the provisions of §§ 8421—8428 et seq. of Title 13, derived by the taxable international banking entity from the activities described in subsection (a) of § 232j of this title, which exceeds twenty percent (20%) of the total net income derived in the taxable year by the bank of which it operates as a unit (including the income derived by said unit).
(2) The income generated by the international banking entities that, as determined by the Commissioner, function as an affiliated unit or entity of a business that operates under the industrial incentive laws, as said terms are defined in §§ 10101 et seq. of Title 13, known as the “Tax Incentives Act of 1998”, or any preceding or successor act thereof, shall not be included in the gross income of said entities and shall be exempt from the tax imposed in clause (1) of this subsection and in §§ 8006 et seq. of Title 13, known as “Puerto Rico Internal Revenue Code of 1994”.
(3) Taxable years beginning after December 31, 2008, and before January 1, 2012. — Notwithstanding the provisions of §§ 8401—8697 of Title 13, and this chapter, during each of the taxable years beginning after December 31, 2008, and before January 1, 2012, every international banking entity shall be subject to a special five-percent (5%) tax on the amount of its net income for the taxable year, to be computed in accordance with the provisions of §§ 8401—8697 of Title 13, but only to the extent that said net income does not constitute an excess net income for the purposes of clause (1) of this subsection. Unless otherwise provided by the Secretary of the Treasury by regulation, circular letter or other administrative determination or communication of a general nature, such tax shall be reported, paid, and collected in such form and manner as established in §§ 8401—8697 of Title 13, for corporations to pay general income taxes.
(c) The interest, finance charges, dividends or shares in partnership profits received by international banking entities duly authorized by this chapter shall not be deemed gross income from sources in Puerto Rico for the purposes of clauses (1) and (2) of subsection (a) of § 8523 of Title 13, or of any analogous provision from any preceding or subsequent Act.
(d) The provisions of § 8547 of Title 13, or of any analogous provision from any preceding or subsequent act, which imposes the obligation to withhold income taxes at source in the case of payments made to nonresident individuals, shall not apply to interest, finance charges, dividends or shares in partnership profits received from international banking entities duly authorized by this chapter.
(e) The provisions of § 8550 of Title 13, or of any analogous provision from any preceding or subsequent act, which imposes an obligation to withhold income taxes at source in the case of payments made to resident or foreign corporations and partnerships which have not received income actually connected with a trade or business in Puerto Rico, shall not apply to interest, finance charges, dividends or shares in partnership profits received from international banking entities duly authorized by this chapter.
(f) Income derived by a nonresident foreign individual consisting of interest, finance charges, dividends or shares in partnership profits received from international banking entities duly authorized by this chapter, shall not be subject to the tax levied by § 8605(a)(1) of Title 13, or by any analogous provision from any preceding or subsequent Act.
(g) Income derived by a foreign corporation or partnership consisting of interest, finance charges, dividends or shares in partnership profits received from international banking entities duly authorized by this chapter, shall not be subject to the tax levied by § 8615(a)(1)(A) of Title 13, or by any analogous provision from any preceding or subsequent Act.
(h) The provisions of § 8616 of Title 13, known as the “Puerto Rico Internal Revenue Code of 1994”, or any analogous provision from any preceding or subsequent act, shall not be applicable to international banking entities duly authorized by this chapter.
(i) The interest and other income derived from [finance] granted to projects in areas of priority for the Government of Puerto Rico, that have been designated as extraordinary by the Secretary of the Treasury and the Commissioner pursuant to § 232j of this title, shall be treated as [nonexempt] for the exclusive purpose of assigning deductions to income exempt under §§ 8418, 8423, and 8424 of Title 13, known as the “Puerto Rico Internal Revenue Code of 1994”. Furthermore, the obligations resulting from said financing shall not be considered exempted obligations for the purposes of the above indicated sections of the Puerto Rico Internal Revenue Code of 1994.
[(j)] None of the provisions of this section shall be construed as a limitation to the power of the Secretary of the Treasury to apply to the international banking entity or to any other person the provisions of §§ 8006 et seq. of Title 13, known as the “Puerto Rico Internal Revenue Code of 1994”, or of any analogous provision from any preceding or subsequent act.
History —Aug. 11, 1989, No. 52, p. 178, § 25; Aug. 11, 1996, No. 121, § 10; Jan. 8, 2004, No. 13, § 1; Mar. 9, 2009, No. 7, § 29; July 10, 2009, No. 37, § 22.