Tax: Puerto Rico

Yes.  A sales tax is imposed on the sale, use, consumption or storage of a taxable item in Puerto Rico.  The term “sale” includes any transfer of title or ownership of taxable items (like aircrafts), be it conditional, on installments, or otherwise, in any manner or by any means, in exchange for consideration or remuneration, including exchange, transfer, or licensing for use, among others.  13 L.P.R.A. § 32021.  

Puerto Rico is part of the United States of America (USA) and not a member of the EU.

Except for the reciprocity requirement concerning the collection of sales and use taxes in Puerto Rico, the taxable items (as the aircrafts) sold for use or consumption outside Puerto Rico shall be exempt from the payment of the sale and use tax established in the PR Internal Revenue Code of 2011 (“the Code”), as amended, even when the sale takes place in Puerto Rico.  In order for the  taxable items thus sold to be exempt from the taxation, they must be exported within sixty (60) days as of the date of sale. 13 L.P.R.A. § 32053. 

The goods comprised in the cases indicated below shall be exempt from the payment of PR taxes: 

(a) Goods in transit in Puerto Rico consigned to persons outside Puerto Rico, as stated in the shipping documents while they remain in the custody of the carrier or customs authorities, or deposited in a bonded warehouse, or in the warehouses of the shipping company that is the intermediary consignee in Puerto Rico, and that are stripped from Puerto Rico within one hundred and twenty (120) days from the date of their introduction; 

(b) Goods introduced into Puerto Rico consigned to dealer-importers with the intention of exporting them while they remain in the custody of the customs authorities or in the foreign trade zones in Puerto Rico. 13 L.P.R.A. § 31661. 

Any person who imports into Puerto Rico taxable items (as the aircraft) subject to the use tax shall  file a declaration pursuant to § 31630 of the Code.  

According to the Code, the use tax is imposed on account of use, consumption, or storage of any  tangible goods imported into Puerto Rico.  The term “use” shall not include: 

(1) When the taxable item is subsequently the object of commerce in the ordinary course of business in Puerto Rico; 

(2) the use of taxable items temporarily introduced into Puerto Rico that are directly related to film production, construction, trade shows, seminars, conventions, or for other purposes, and which will be re-exported from Puerto Rico. 

The law generally requires that the use of the aircraft creates a sufficient nexus or connection with  PR before use taxes can be imposed.  In most cases, if the aircraft is based in PR, the PR Treasury  Department is going to assess a use tax.  

In regard to the declaration required by the Code, it shall be filed on the deadline for the  corresponding tax payment.  If a person is unable to furnish evidence of being a reseller or holding  an exemption, it shall be presumed that all items imported are subject to the use tax and shall pay  such use tax. 13 L.P.R.A. § 32092. 

There are no PR stamp duties or documentary taxes on this type of transaction.

Puerto Rico is part of the United States of America (USA) and in this area is subject to the jurisdiction of the Federal Aviation Administration (FAA), and its applicable regulations.  Puerto Rico is treated as a State for these purposes. 

There are no special registry taxes or duties in Puerto Rico.  FAA aircraft registry applies. 

No. There is no state legislation governing this matter in Puerto Rico.

In the case of foreign entities (corporations and partnerships) not engaged in trade or business in Puerto Rico, there shall be deducted and withheld at the source, a tax equal to twenty-nine percent  (29%) of said income. 

In those cases where the withholding agent shows to the satisfaction of the Secretary of the Treasury, or when the Secretary himself determines, that the withholding provided in the Code will cause  undue hardship without any practical result whatsoever because the amounts thus withheld would have to be reimbursed to the recipient of the income, or the withholding would be excessive, the Secretary may, under such rules and regulations as he/she may prescribe, relieve the withholding agent of the obligation of withholding, in whole or in part. 13 L.P.R.A. § 30281. 

FAA rules apply. There is no current State regulation. 

Section 1113 of the Federal Aviation Act of 1958, as amended (49 U.S.C. App. 1513), establishes that no State (as such term is defined under subsection (d)(2)(E)) or political subdivision shall levy or  collect any tax on or with respect to any flight of a commercial aircraft or any activity or service on  board such aircraft unless such aircraft takes off or lands in such State or political subdivision as part of such flight. 

One of the most important questions that must be addressed is when the use of private aircraft is considered an ordinary and necessary business expense.  Once the ordinary and necessary requirement is met, the next question is to determine which costs are deductible and which are not.  If the aircraft is owned by an entity, costs need to be apportioned to each passenger on each flight and then allocated between business and personal (which includes personal nonentertainment and personal entertainment). 

If the aircraft is owned by an individual, there is a different allocation methodology to determine any expenses that may not be deductible.  

There is no state legislation covering this matter in Puerto Rico.

There is no state legislation covering this matter in Puerto Rico.

There is no state legislation covering this matter in Puerto Rico, but Article 3.8 of Regulation 6980 of the Puerto Rico Ports Authority (“Authority”) imposes passenger fees.  These fees are assessed  according to the flight origin and destination for space used in common by the air carriers using the Luis Muñoz Marín International Airport (LMM). 

Charges for Common Use Space cover the equivalent rent for holdrooms, sterile passenger circulation areas, baggage makeup areas, and baggage claim areas. 

Yes.  Section 3020.06 (a) of the Code, states that an excise tax shall be imposed, collected, and paid on each gallon or fraction thereof of the following fuels:

(1) Gasoline – 16 cents;

(2) Aviation fuel – 3 cents;

(3) Gas oil or diesel oil – 4 cents;

(4) Any other fuel – 8 cents.

However, gasoline, aviation fuel, gas oil or diesel oil or any other fuel subject to the provisions of the above-mentioned excise tax shall be exempt from the sale and use tax established in the Code.

No additional taxes are imposed by Puerto Rico, but the Authority charges several fees to the operators and users of LMM. 

Article 3.2 of Regulation 6980, supra, establishes that any operator that is not a signatory to an Airline Operating Agreement shall pay a landing fee equal to 125 percent of the Signatory Landing Fee.  Non  Signatory Landing Fees are calculated by multiplying the applicable rate by the quotient of the aircraft’s maximum allowable gross takeoff weight (MAGTOW) at which an aircraft may take off from an airport as certificated by the Federal Aviation Administration and recited in flight manuals governing that aircraft type divided by 1,000 pounds.  In no case will an operator pay less than the Minimum Landing Fee.  

 In addition, Article 3.4 of Regulation 6980, supra, states that an aircraft parked at Luis Muñoz Marin Airport (LMM) on paved or unpaved ground not under lease, and designated by the Authority for  such use (as available), will be charged for calendar day or fraction per 1,000 pounds of MAGTOW.   However, no parking fee will be assessed in respect to an aircraft parked within an area leased by  fixed base operators, aircraft owners, or operators and is receiving an authorized service of those included in the contract with the Authority. 

Article 3.6 of Regulation 6980, supra, establishes certain exclusions to Landing Fees and/or Parking  Fees.  For example, landing and parking of an aircraft in the case of a return landing or a landing not  originally destined for LMM for mechanical, meteorological, bomb search, or other emergency reasons and landing and parking of an aircraft if the arrival and departure is for the purpose of  fueling, crew change, or cabin service without enplaning or deplaning of revenue passengers, or the loading or unloading of revenue items of any kind, and no revenue is derived from the operation (in  this case, the aircraft operator must submit a certified statement within the next five calendar days after the flight or said flight will be subject to payment of charges as they apply to revenue flights).