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Puerto
Rico

Puerto Rico
Real Estate Investment

Bahia Beach is a world-class investment for the naturally sophisticated… an investment you can experience, an investment you can enjoy.

The opportunity to become a member of our very special resort community is now more accessible than ever. Puerto Rico’s incentive laws present unprecedented benefits and savings to buyers in real estate projects such as ours.

How to buy in
Puerto Rico

Puerto Rico law does not prohibit or restrict a foreign person from acquiring real estate in Puerto Rico. Under Puerto Rico law, title is referred to as fee simple (pleno dominio), and can be acquired by a purchase and sale, gift, inheritance, exchange or by adverse possession. Fee simple entitles the owner to sell, transfer, mortgage, encumber, lease and/or use the property, subject to zoning regulations and recorded easements, covenants and other liens and encumbrances.

 

Fee simple title can be acquired by a private contract between the transferor and transferee. However, if the parties wish for the transfer of title to affect third parties, title must be transferred by a public deed executed before a notary public in PR. A certified copy of this deed is then filed for recordation in the applicable Section of the Registry of Property of Puerto Rico (the “Registry.”) Parties to a real estate transaction must pay stamps and recording costs upon the execution of a deedwhich is to be filed in the Registry, the cost of which depends on the amount of the transaction (such as the purchase price in a purchase and sale transaction). The rate is approximately $5.65 per thousand. Notaries in Puerto Rico have to be admitted to practice of law and therefore, only lawyers may act as notaries in the legalization of documents that need to be registered at the Puerto Rico Registry of Property, such as deeds of purchase and sale. The maximum allowable notary fee in Puerto Rico is 1% of the property value for the first US $500,000 plus 0.5% of the amount in excess of $500,000 and notary charges tend to be close to the aforesaid maximum allowable amount. Prospective purchasers and mortgagees may examine title with respect to a parcel in PR by examining the records of the Section of the Registry which covers the municipality where the parcel is located. Title is usually examined by requesting a local title company to prepare a title study with respect to a parcel. Said title study will show who owns the parcel, the liens and encumbrances to which the parcel is subject and the priority of said liens, and any judicial or creditor liens that may been filed. A title study, if prepared properly, would reflect defects in the chain of title, if any.

 

It is recommended that a person who acquires fee simple title or any other real property right that it do so by means of a public deed, and that a certified copy thereof be filed for recordation in the Registry. The foregoing action, coupled with other requirements, would protect the acquirer as a “registered third party” from unrecorded rights and subsequent fraudulent sales by the seller/transferor. Also, it is typical in PR for an acquirer of fee simple title to obtain property title insurance. This insurance protects the insurers from damages sustained by reason of (I) title to the property being vested other than in the insurer, (II) any defect in or lien or encumbrance on title, (III) unmarketability of title, and (IV) lack of a right of access.

 

Act No. 132 enacted on September 2, 2010 provides a 100% income tax exemption (including total exemption from income tax withholding) on residential rental income derived by PR residents and non-residents and these benefits expire on December 31, 2020 (in order to claim the benefits the lessor must file a PR income tax return to declare the rental income as 100% exempt). On November 1st, 2011 Puerto Rico enacted Act No. 216 of 2011, which, together with various housing programs, is intended to promote the acquisition and investment in the housing market on the Island. Investors, executives and business owners already benefiting from other incentives laws in Puerto Rico or individuals simply wanting to invest in a property in Puerto Rico can benefit from this and other incentives that range from total exemption of property taxes to cash incentives for transaction costs. See the Economic Incentives in Puerto Rico section below.

Documents needed
to complete a Loan Application

Personal income documents

For salaried employment:

  • Copy of the last two paycheck stubs showing year-to-date income
  • Complete copy of the two previous years tax returns form and all its addendums.
  • Copy of W-2 form for the past year.

For self-employment, sole Proprietor:

  • Copy of the financial statements for the previous two years and year-to-date, including Profit and Loss statement.
  • Copy of the last six months of business bank statements

For corporation:

  • Copy of the Municipal Patent and Incorporation Certificate
  • Copy of year-to-date Profit and Loss statement
  • Copy of the previous two years of tax returns
  • The last two years of financial statements supported by six months of bank statements

For retirement income:

  • Original Social Security Award Letter of Pension Award Letter
  • Copy of the previous two years tax returns

For rental income:

  • Copy of complete tax return for previous two years (including Schedule E) or
  • Copy of lease or rental agreement for all properties

Asset documents:

  • Copy of the three most recent account statements for all checking, savings or other asset accounts

Liabilities (debts other than consumer credit accounts):

  • A copy of the fully executed divorce decree indicating the amount of child support, alimony or separate maintenance payments, if applicable.

Banks in Puerto Rico
Banco Popular de Puerto Rico 787-765-9800
Banco Santander 787-777-4100
Doral Bank 787-641-7704
FirstBank 787-792-8200
Oriental Bank 787-771-6800
Scotiabank 787-758-8989
Banco Cooperativo de Puerto Rico 787-641-2300

Puerto Rico
Property & Tax Guide

Puerto Rico is a Commonwealth of the United States. Puerto Ricans get the best of both worlds: gorgeous Caribbean beaches and the benefits of having an American citizenship.
 

Taxes
Rental Income: Generally, gross rental income of non-residents is taxed at a flat rate of 29%, withheld by the tenant.  Howver, as previously discussed, until December 31, 2020, under Act 132-2010 lessors may claim a 100% exemption from the Puerto Rico income tax on the rental income.

 

Income tax
A non-resident alien not engaged in a trade or business in Puerto Rico is generally taxed at a flat rate of 29% (withheld) on Puerto Rican-sourced profits and income including investment income, rental income (discussed above) and capital gains.

 

Currency
Puerto Rico uses the US Dollar (USD)

 

Property tax
In Puerto Rico real property is subject on an annual real property tax. Real property taxes are computed based on property values that date back to the fiscal year 1957-1958 (which was the last time that a general appraisal was conducted by the Government of Puerto Rico). The assessment is made as of January 1 of each year by the Municipal Revenue Collection Center (“CRIM”, for its Spanish acronym) by discounting the current fair market value (“FMV”) of the property to the 1957-1958 values. The rates, ranging from 8.03% to 11.83 %, of which vary depending on the municipality where the property is located. For example the rate in Rio Grande  for year 2013-2014 is 8.83%.  Under Act 216 a 5-year 100% real property tax exemption would be available for residential property acquired on or before August 31, 2015.

 

Capital gains tax
Earnings of nonresident individuals from the sale of a property are subject to a withholding tax of 25% (10% in the case of US citizens), which is levied on the gross selling price minus the cost of the property and certain selling costs incurred by the seller. This withholding tax can be credited to the nonresident’s final tax liability.  The final tax liability is based on the actual capital gain (which includes as a deduction the improvements realized to the property, said improvement costs are not considered for withholding purposes).  In the case of US citizens the applicable tax will be 10% on the actual net capital gain and in the case of other non-residents the applicable tax will be 29% on the actual net capital gain, assuming the property has been held for a period in excess of six months.

 

Notary fees
It is mandatory that a notary prepares the sale and purchase deed. Maximum allowable notary fee is 1% of the property value for the first US $500,000 plus 0.5% of the amount in excess of $500,000.

 

Registration and filing fees
Several fees must be paid to different offices such as the Municipal Revenues Collection Center (CRIM), Treasury Department and Registry of Property. These fees are minimal and are not expected to exceed 0.75% of property and mortgage value.

 

Internal revenue stamps
Internal Revenue Stamps are purchased to be canceled on the original of deed of purchase and sale and first certified copy of deed to be filed in the Registry of Property. The notary keeps the original while the certified copy is filed at the Registry. Before applying for registration, filing vouchers for the Registry of Property must be bought first. Internal revenue stamps and vouchers are acquired electronically by lawyers/notaries.

 

Attorney’s fees
Although not mandatory, it is highly advisable for foreign buyers to hire an attorney or lawyer. Attorney’s fees may vary depending on location and the complexity of the transaction. Most lawyers charge a percentage of the selling price, about 0.5% to 1%, for the real estate transaction and charge a fixed fee or on an hourly basis for consultations and engagements. Each party pays for their own lawyer.

Las Verandas

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