Municipal business tax: filing and payment

It is the calendar and the process of the municipal business tax: when the volume-of-business declaration is filed, what documents go with it, when payment falls due, what discount there is for paying in full on filing, what certificate is received and where it is posted, and what a business opening for the first time does. It is in Articles 7.207 to 7.210 of the Municipal Code. Who pays and how the amount is computed is the subject of the earlier articles in the same chapter.

The duty to file the declaration falls on every person subject to the patente or their authorised agent, under Article 7.207(a). Article 7.210 adds anyone starting a newly created industry or business subject to the patente, who must notify the Director de Finanzas no later than thirty days after starting the activity. And Article 7.209 further reaches every natural or legal person about to renew a licence or colegiación issued by a regulatory, quasi-public or private agency authorised by law or by the Government: they must present evidence of paying the patente before the renewal.

• Filing the volume-of-business declaration on or before the five (5) business days following 15 April of each tax year (Article 7.207(a)(1)).Verified against the official source
• For businesses covered by a tax-exemption decree subject to Section 1061.16(e) of the Internal Revenue Code, filing it five (5) business days after 15 June (Article 7.207(a)(1)).Verified against the official source
• Attaching a copy of the pages or schedules detailing gross income and operating expenses as submitted to the Secretary of the Treasury for the income tax return (Article 7.207(b)).Verified against the official source
• Attaching the taxpayer’s certification that those documents are a true and exact copy of those filed with Hacienda, on the form designed and approved by the Oficina de Asuntos Municipales; without it the declaration is considered not filed (Article 7.207(b)).Verified against the official source
• Paying the patente in advance within the first fifteen (15) days of each semester of the economic year, with semester due dates on 1 July and 2 January (Article 7.208).Verified against the official source
• Posting the patente in a visible place at the office of the establishment or business concerned (Article 7.209).Verified against the official source
• Presenting evidence of paying the municipal patente before renewing a licence or colegiación issued by a regulatory, quasi-public or private agency authorised by law or by the Government (Article 7.209).Verified against the official source
• If starting a newly created business, notifying the municipality’s Director de Finanzas no later than thirty (30) days after starting the activity (Article 7.210).Verified against the official source

• The volume-of-business declaration, on the form or model the Oficina de Gerencia y Presupuesto establishes by regulation (Article 7.207(a)(2)).
• A copy of the gross income and operating expense pages or schedules submitted to Hacienda; if the business is a Disregarded Entity under Section 1010.01 of Act 1-2011, the pages of the taxpayer that recognised that income (Article 7.207(b)).
• The taxpayer’s true-and-exact-copy certification, on the Oficina de Asuntos Municipales form, which is part of the declaration (Article 7.207(b)).
• The patente with the permanent number recorded on it, signed by the Director de Finanzas or their designee, posted in a visible place (Article 7.209).
• The certificate the Director de Finanzas issues when granting an extension, agreeing a payment plan or where the taxpayer takes up a statutory benefit, which serves as provisional evidence for issuing the licence or colegiación (Article 7.209).

1. 1

   Step 1: Five business days after 15 April

   It is the date that opens the year, so it goes first. Article 7.207(a)(1) says every person subject to the patente or their authorised agent shall be obliged to file a volume-of-business declaration on or before the five business days following 15 April of each tax year. There is a different date for businesses covered by a tax-exemption decree that are subject to filing the return under Section 1061.16(e) of the Internal Revenue Code: for them the deadline is five business days after 15 June.

2. 2

   Step 2: If Hacienda postpones, the town must postpone

   The same Article 7.207(a)(1) adds a rule worth knowing in extension years. For tax years begun after 31 December 2021, if the Secretary of the Treasury issues an Administrative Determination under Sections 6080.12(e) or 6051.11 of the Internal Revenue Code, every municipality shall be obliged to postpone the declaration filing date, by the same period as the return’s postponement, and that postponed date shall be considered the original filing date for all purposes of the Code. Article 7.208 repeats the same rule for the payment date.

3. 3

   Step 3: Without the certification, the declaration does not count

   Article 7.207(b) requires attaching a copy of the pages or schedules detailing gross income and operating expenses as submitted to the Secretary of the Treasury for the income tax return. If the business is treated as a Disregarded Entity under Section 1010.01 of Act 1-2011, the pages of the taxpayer that recognised that income are presented. Those documents must be accompanied by a taxpayer certification that they are a true and exact copy of those filed with Hacienda, on a form designed and approved by the Oficina de Asuntos Municipales, and that certification is part of the declaration. The sentence closing the subsection is the one to remember: any declaration that does not meet this legal requirement shall be considered not filed.

4. 4

   Step 4: Your Hacienda figures are confidential

   Article 7.207(b) itself adds a safeguard: the information in the income tax return shall be considered confidential, and all the penalties, violations and restrictions on using that information provided by Act 1-2011, known as the Puerto Rico Internal Revenue Code of 2011, shall apply to municipal employees and to anyone with access to it.

5. 5

   Step 5: Due on 1 July and 2 January

   Article 7.208 says the patente shall be paid in advance within the first fifteen days of each semester of the economic year, on the basis of the previous year’s volume of business, and adds the sentence that sets the calendar: patentes shall fall due in semester instalments on 1 July and 2 January each year. It is paid to the official collectors of the municipalities where the businesses or industries are located. The same article clarifies that no patente shall be charged to a business or industry in the semesters following the one in which it ceased operating.

6. 6

   Step 6: Five per cent off for paying it all on filing

   It sits in a single sentence of Article 7.208, and it is the only discount that article publishes: where payment is made in full at the time of filing the return, as the Chapter provides, a discount of five per cent on the total amount of the patente payable shall be granted. It is on the total, and it is for paying everything at once at the moment of filing, not for paying the first semester early.

7. 7

   Step 7: The certificate goes on the wall, and it is not optional

   Article 7.209 says that once the first instalment is satisfied, the municipality’s Director de Finanzas shall issue the person a permanent number recorded on the patente, duly signed by that Director or a designated official, as evidence that the person is registered in the municipality’s patente register. And it adds: that patente must be posted in a visible place at the office of the establishment or business concerned. If the person does not comply, they commit a misdemeanour and may be sentenced to a five-hundred-dollar fine or up to six months in jail, or both, at the court’s discretion, independent of the Code’s other penalties.

8. 8

   Step 8: No current patente, no licence renewal

   Article 7.209 extends the requirement beyond commerce: it shall be the duty of every natural or legal person subject to the Code’s provisions to present evidence of paying the corresponding municipal patente before renewing a licence or colegiación issued by a regulatory, quasi-public or private agency authorised by law or by the Government of Puerto Rico. And it provides a way out: where the Director de Finanzas grants an extension to pay, a payment plan is agreed, or the taxpayer takes up any statutory benefit, they must issue a certificate containing the agreement reached, and that certificate shall be provisional evidence sufficient for the licence or colegiación to be issued.

9. 9

   Step 9: New business: thirty days and a provisional patente

   Article 7.210 says anyone starting any newly created industry or business subject to the patente shall be obliged to notify the corresponding municipality’s Director de Finanzas no later than thirty days after starting that activity. The Director shall issue them a provisional patente free of payment for the semester in which the activity begins. At the start of the next semester, that person shall file a declaration computed as the Chapter provides and shall pay, at the time of filing it, the full amount of the patente for that semester; for successive semesters it is computed under Article 7.204 and paid under Article 7.208.

10. 10

    Step 10: Not reporting that you opened is a misdemeanour

    The same Article 7.210 says it without hedging: a person who does not give the notice that article requires, unless the omission is shown to be for reasonable cause and not wilful neglect, commits a misdemeanour and may be sentenced to a five-hundred-dollar fine or up to six months in jail, or both, at the court’s discretion, independent of other penalties that may be imposed under other sections of the Code.

11. 11

    Step 11: Municipalities cannot invent registration requirements

    Article 7.210 sets a useful limit for anyone opening in several towns: the Oficina de Gerencia Municipal shall establish by regulation uniform documentation requirements to be submitted with the notice, and the Directors de Finanzas shall not impose other initial-registration documentation requirements different from those that Office establishes. That said, the same article clarifies that the Directors de Finanzas’ authority to inspect books and things and to take statements and oaths is not impaired.

12. 12

    Step 12: When the clock starts for an exempt firm

    Article 7.210 closes with a rule for firms exempt under industrial or tax incentive laws: the start-of-operations date set by the Oficina de Exención Contributiva Industrial shall be used as the start date of the industry or business. And it adds that exempt businesses must comply with the Code’s other provisions in order to take up the benefits they provide.

Before the municipality where the businesses or industries are located. The declaration goes on the form or model the Oficina de Gerencia y Presupuesto establishes by regulation, with the certification on the Oficina de Asuntos Municipales form. Payment is made to the municipality’s official collectors. The permanent number and the patente are issued by the municipality’s Director de Finanzas, who also receives a new business’s notice and issues the certificate where there is an extension or payment plan. The uniform documentation requirements for initial registration are set by the Oficina de Gerencia Municipal.

• Filing exactly on 15 April: the deadline is the five business days following 15 April.
• Using the April date while holding a tax-exemption decree: for those businesses the date is five business days after 15 June.
• Filing without the true-and-exact-copy certification: without it the declaration is considered not filed.
• Attaching the whole return instead of the gross income and expense pages or schedules the Act asks for.
• Waiting for the semester to end to pay: the patente is paid in advance within the first fifteen days of each semester.
• Forgetting the two due dates: 1 July and 2 January.
• Losing the discount: the five per cent is for paying the total at the moment of filing.
• Keeping the patente certificate in a drawer: it must be posted in a visible place, and not doing so is a misdemeanour with a five-hundred-dollar fine.
• Going to renew a colegiación without evidence of paying the municipal patente.
• Not asking the Director de Finanzas for the certificate where there is an extension or payment plan: it serves as provisional evidence for the colegiación.
• Opening the business and not notifying within thirty days: it is a misdemeanour with a five-hundred-dollar fine.
• Believing the first semester’s provisional patente is free forever: at the start of the next semester a declaration must be filed and that semester’s full amount paid.

These are the government pages this guide is based on.

• Municipios de Puerto Rico

  Municipios

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