Opening a business: everything Treasury will require of you

This guide gathers, in the order they are needed, the obligations the Treasury Department imposes when establishing a business in Puerto Rico. It does not replace this site’s separate guides on the Merchant Registry or on employer registration with the Labor Department: those are pieces of the same puzzle and each has its own process. What is gathered here is Treasury’s share, including the part almost never explained before the first contractor invoice arrives: the withholding at source on payments for services rendered, and the calendar of returns and informative declarations that go with it.

It applies to anyone establishing a business in Puerto Rico. Some pieces depend on what the business does. Employer registration applies if you will have employees. The Merchant Registry for sales tax purposes applies to merchants. Registration in the Sales Tax Fiscal Supervision Program is mandatory once you receive the Merchant Registration Certificate, unless you are registered as a temporary business or exhibitor. The Reseller Certificate is for a registered merchant engaged in selling goods or merchandise. The Exemption Certificate for manufacturing plants certifies the right to sales tax exemption on purchases of raw material, machinery and equipment used in the manufacturing process. And the 7% withholding applies, in general, to every payment made by a natural or legal person engaged in trade or business or in the production of income in Puerto Rico, to a corporation, partnership or individual, for services rendered in Puerto Rico.

• Obtaining the employer identification number from the IRS with Form SS-4PR, and then completing Treasury’s Form SC 4809 to create the employer record.Verified against the official source
• Registering in the Merchant Registry electronically through SURI.Verified against the official source
• Registering in the Sales Tax Fiscal Supervision Program by calling 787-200-7900 option 4, once the Merchant Registration Certificate is received; it does not apply to temporary businesses or exhibitors.Verified against the official source
• Withholding income tax from each payroll and asking each employee for Form 499 R-4, Withholding Exemption Certificate.Verified against the official source
• Withholding at source on payments for services rendered in Puerto Rico and depositing it with Form 480.9A. Treasury publishes 7% on this page and 10% on Withholding on Services Rendered.Verified against the official source

• IRS Form SS-4PR: Application for Employer Identification Number.
• Form SC 4809: Employer Identification Number Report — Organizations (Employers).
• Form 499 R-4: Withholding Exemption Certificate, completed by each employee.
• Form 499 R1B: quarterly withholding return.
• Form 480.9A to deposit and pay the 7% withholding on services.
• Informative Declarations 480.6A (income not subject to withholding) or 480.6B (income subject to withholding).
• Form 480.5, Summary of Informative Declarations, and Form 480.6B.1, Annual Reconciliation Statement of Income Subject to Withholding.
• Form SC 2764 if you opt into the Electronic Transfer System for withholding payments.

1. 1

   Step 1: Get the employer number from the IRS, not from Treasury

   Employer registration is done through the federal Internal Revenue Service using one of these options: online at www.irs.gov, by phone at 1-800-829-4933, or by fax or mail. The form is SS-4PR, Application for Employer Identification Number. Many people lose time looking for this step at Treasury; the number is assigned by the IRS.

2. 2

   Step 2: And then report that number to Treasury

   Once you have the number, you must complete Form SC 4809, Employer Identification Number Report — Organizations (Employers), provided by the Treasury Department, and submit it stating the number the IRS assigned and all the required information. This creates the employer record at Treasury. Without that step, the IRS knows you but Treasury does not.

3. 3

   Step 3: Register in the Merchant Registry through SURI

   The Merchant Registry for Sales and Use Tax purposes is done electronically through SURI. Treasury also warns that, as part of the transition to SURI, Merchant Registration Certificates issued under Section 4060.01 of the 2011 Internal Revenue Code had to be updated and new certificates were issued through SURI with new features. This site has a dedicated guide to the Merchant Registry with the details.

4. 4

   Step 4: Call the Sales Tax Fiscal Supervision Program

   Once you receive the Merchant Registration Certificate, you are obliged to register for the Sales Tax Fiscal Supervision Program by calling 787-200-7900, option 4. This does not apply to merchants registered as temporary businesses or exhibitors. You must answer a questionnaire to determine whether installing and using a sales tax fiscal terminal applies to you.

5. 5

   Step 5: If you resell or manufacture, request your certificate

   The Reseller Certificate is the document the Secretary issues to a merchant registered in the Merchant Registry, certifying that the merchant is engaged in selling goods or merchandise. The Exemption Certificate for manufacturing plants certifies that the merchant is a manufacturing plant entitled to sales tax exemption on purchases of raw material, machinery and equipment used in the manufacturing process. Both requests are made electronically through SURI.

6. 6

   Step 6: If you have employees, withhold from the first payroll

   In each payroll period the employer must deduct part of the total salary it will pay the employee during the tax year, on account of income tax. To determine how much to withhold, you must ask each employee to complete Form 499 R-4, Withholding Exemption Certificate. The withholding methods are in the Employer’s Manual: Income Tax Withholding at Source on Wages, which Treasury publishes on its site.

7. 7

   Step 7: Pay and file the payroll items on their four dates

   Withholding payments can be made through the Virtual Collections office, or by opting into the Electronic Transfer System by completing Form SC 2764. The quarterly return is Form 499 R1B and is filed electronically no later than 30 April, 31 July, 31 October and 31 January of each calendar year. And withholding statements are filed electronically on or before 31 January of the following calendar year, and must be given to employees no later than that same date.

8. 8

   Step 8: The 7% one: nobody knows until the invoice arrives

   In general, every payment made by a natural or legal person engaged in trade or business or in the production of income in Puerto Rico, to a corporation, partnership or individual for services rendered in Puerto Rico, is subject to a withholding at source. That is: if you pay a contractor, a consultant, a designer or a plumber for services rendered here, in general you do not hand over 100% of the invoice — you withhold and deposit. On the percentage, both of Treasury’s statements have to be given: this page sets it at 7%, and the Withholding on Services Rendered page, inside Employers and Withholding Agents, refers to 10%. Both are live; confirm which applies to you before withholding. Withheld amounts are paid or deposited no later than the tenth day of the month following the close of the calendar month in which the tax was deducted and withheld, using Form 480.9A.

9. 9

   Step 9: And in February, the informative declarations

   You must file electronically Informative Declarations 480.6A, for income not subject to withholding, or 480.6B, for income subject to withholding, on or before 28 February of the following calendar year, and give them to the people you paid for services rendered no later than that date. You must also file electronically a Summary of Informative Declarations, Form 480.5, and an Annual Reconciliation Statement of Income Subject to Withholding, Form 480.6B.1, no later than 28 February.

The employer number is requested from the IRS: www.irs.gov, 1-800-829-4933, or by fax or mail with Form SS-4PR. Form SC 4809 is submitted to the Treasury Department. The Merchant Registry, the Reseller Certificate and the Exemption Certificate for manufacturing plants are requested through SURI. The Sales Tax Fiscal Supervision Program answers at 787-200-7900, option 4. Withholding payments are made through Virtual Collections or the Electronic Transfer System with Form SC 2764.

• Paying 100% of a contractor’s invoice without withholding anything on services rendered.
• Depositing the withholding late: it is due on the tenth day of the following month, with Form 480.9A.
• Looking for the employer number at Treasury: the IRS assigns it with Form SS-4PR.
• Getting the number from the IRS and not reporting it to Treasury with Form SC 4809.
• Not calling 787-200-7900 option 4 after receiving the Merchant Registration Certificate.
• Forgetting the four 499 R1B dates: 30 April, 31 July, 31 October and 31 January.
• Filing informative declarations 480.6A or 480.6B but not giving them to the people who were paid.
• Forgetting the 480.5 Summary and the 480.6B.1 Reconciliation, also due 28 February.
• Being a reseller and not requesting the Reseller Certificate through SURI.

These are the government pages this guide is based on.

• Departamento de Hacienda de Puerto Rico

  Hacienda

  hacienda.pr.gov