The deemed dividend amount is computed using the lesser of the average value of the total foreign assets or the accumulated earnings and profits of the corporation. A foreign owner is defined as any non-resident person (or entity not engaged in a trade or business in Puerto Rico) who directly owns 50% or more of the corporation's stocks. Tax on deemed dividendsĪ 10% tax is imposed on certain corporation on the deemed dividend amount attributable to a foreign owner. The AMT credit can be carried forward indefinitely. Also, the amount of the tax credit available with respect to the AMT paid in prior years that may be claimed against the current year regular tax is limited to 25% of the current net regular tax over the AMT for such taxable year. In determining the alternative minimum net income, the NOL is limited to 70% of the alternative minimum net income. Notwithstanding, if the corporation submits audited financial statements, an agreed upon procedure, or a compliance attestation report issued by a Puerto Rico CPA certifying the expenses as ordinary and necessary with its income tax return, the corporation may claim the same deductions it claims for regular income tax for purposes of computing its income subject to AMT, subject to AMT limitations on depreciation and NOLs, among others. In this regard, some of these expenses must be reported in informative returns to be deductible. Such minimum tax is subject to an 18.5% flat rate, or 23% in the case of taxpayers with gross proceeds of USD 10 million or more.Ī corporation is not allowed to claim the same deductions it claimed for regular income tax purposes. Instead, a corporation is allowed to claim a limited amount of deductions such as wages, rents, utilities, marketing, depreciation, insurance, health plan contributions, charitable donations, bad-debts, and certain taxes. The AMT includes various AMT adjustments in order to calculate the tentative minimum tax. The determination of the applicable surtax rate is made on a consolidated basis for controlled groups and related companies, so the net taxable income of all the entities subject to tax in Puerto Rico within said groups has to be combined for the determination of the applicable surtax rate.
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