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A Special Bulletin by Elisa Vélez-Pérez
In the latest edition of The Tax Advisor Special Bulletin, Elisa Vélez-Pérez shares the latest tax news on the topic of Disregarded Entities from Alvarado, our firm in Puerto Rico.
In 2011 the Government of Puerto Rico adopted, as part of a tax reform, the Puerto Rico Internal Revenue Code of 2011 (the “Code”). This new code introduced to Puerto Rico’s tax system the concept of “Partnerships,” by mainly adopting in Puerto Rico the Partnership provisions included in the United States’ Internal Revenue Code (“USIRC”), with minor exceptions. However, the concept of “disregarded entities” was not, at that time, incorporated into our tax system. Unlike partnerships, under the USIRC disregarded entities are “ignored” for income tax purposes, and it is considered that its sole owner directly performs the business activities of the entity. It is an income tax status reserved only for non corporate entities that provide limited liability to its sole owner and its goal is to simplify the income tax compliance of the entity.
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