Tax insight

Puerto Rico tax amendments impact entity classification rules, tax incentives, and information reporting

Insight
8 minute read
August 14, 2025

What happened?

Between April and July 2025, the Puerto Rico legislature approved various tax laws (namely, Act 12-2025, Act 65-2025, Act 66-2025, Act 67-2025, and Act 72-2025) that collectively reshape critical areas of the Puerto Rico Internal Revenue Code of 2011, as amended (PR-IRC), the Puerto Rico Incentives Code of 2019, as amended (PR Incentives Code), and the Puerto Rico Municipal Code of 2020, as amended (PR-MC). Key changes include updates to entity classification rules, new elective tax treatments, revised tax reporting requirements, expanded eligibility for the cash method of accounting, and targeted incentives for strategic sectors such as agriculture.

Why does it matter? 

These amendments aim to reduce administrative burdens, better align Puerto Rico’s tax framework with US federal tax practice, and drive economic growth by enhancing regulatory clarity and simplifying compliance.

Actions to consider?

Taxpayers should consider how these new provisions may affect their operations, compliance and tax planning in Puerto Rico, including any entity-classification elections and determinations of whether they are engaged in a trade or business in Puerto Rico. Taxpayers should review how the changes could influence their accounting processes, filing requirements and overall tax structure.