Sunday, July 20, 2014

Puerto Rico Real Estate Investment Trusts (REIT)

Under Puerto Rico law Real Estate Investment Trusts are permitted to be formed allowing real estate ventures to receive a tax designation for corporations investing in real property that reduces or eliminates corporate income taxes.  This is designation is similar to REIT structures in the United States.  The definition of "Real Property" includes, Apartment Buildings, Hospital facilities, Hotels, Manufacturing buildings, Office buildings, Parking facilities, Shopping facilities, etc.

In order to become a REIT one needs to conform with type-of-income and source-of income requirements in the Puerto Rico code.  The rules include but are not limited to a requirement that Puerto Rico REITs must have 95% or more of the gross income be derived from:  
• Dividends; 
• Interest; 
• Rents from real property; 
• Gain from the sale or other disposition of securities or real property (with certain rules)

Additionally, at least 75% of gross income must be derived from:  
•  Rents from Puerto Rico real property;  
•  Interest on obligations secured by mortgages in Puerto Rico;  

There are more rules and this post contains simplifications and is not comprehensive. Additionally, as always, a professional should be consulted and be presented with specific information.


The information on this website is general information and is for educational use only and has not been verified for accuracy nor completeness. You, the reader, should further research your specific individual situation. In addition you should contact your accounting professional for professional advice derived from specific details from your structure and financial position.

To comply with requirements imposed by the Department of the 
Treasury, we inform you that any U.S. tax advice contained in this communication (including any 
attachments) is not intended or written by the practitioner to be used, and that it cannot be used by any 
taxpayer, for the purpose of (i) avoiding penalties that may be imposed on the taxpayer, and (ii) 
supporting the promotion or marketing of any transactions or matters addressed herein.

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