Puerto Rico’s B2B tax is a 4% sales and use tax (IVU) charged on qualifying services one merchant provides to another, well below the 11.5% rate that applies to most retail sales on the island. The Department of the Treasury (Hacienda) administers it through the SURI online portal, where you file monthly and pay by the 20th of the following month. Whether you actually charge 4%, charge 11.5%, or charge nothing at all depends on the type of service, the size of your business, and who your client is.
Why the Rate Is 4% Instead of 11.5%
The standard 11.5% IVU is built from a 10.5% state portion and a 1% municipal portion. The B2B rate strips out the municipal component entirely and reduces the state portion, leaving a flat 4% that goes to the Commonwealth treasury.1Departamento de Hacienda de Puerto Rico. Regulation to Amend Articles of the Puerto Rico Internal Revenue Code of 2011 You remit the full amount to Hacienda; no municipality gets a share.
Getting the rate wrong is the most common compliance mistake. If your invoicing system defaults to 11.5% on a service that qualifies for 4%, you overcollect and create a reporting mismatch. Charging 4% on a service that should carry 11.5% leaves you liable for the difference out of pocket.
Which Services Get the 4% Rate
Two categories qualify. The first is any service provided to a person engaged in a trade, business, or income-producing activity, where both provider and recipient are merchants registered with Hacienda and the service is rendered in Puerto Rico or received by someone located there.
The second is a fixed list of designated professional services:
- Architects and landscape architects
- Certified public accountants
- Engineers and surveyors
- Brokers, sellers, and real estate companies
- Professional real estate appraisers
- Tax return specialists certified by Hacienda
- Agronomists
- Geologists
- Professional draftspersons
- Continuing education providers certified by a government agency, the Puerto Rico Supreme Court, or a private nonprofit serving professionals in the designated fields
Subcontracted services qualify too. When a contractor hires a subcontractor to deliver part of a qualifying service, the subcontractor’s charge to the contractor is itself a B2B service at 4%.
B2B Services That Still Carry 11.5%
Puerto Rico carves out several service categories and taxes them at the full 11.5% even when the buyer is another business. These are where misclassification happens most often, because the transactions look like ordinary B2B work:
- Bank charges, including demand-account fees and transaction costs
- Account collection services
- Security services, including armored transport and private investigations, except when provided to homeowner or condominium associations
- Cleaning services, except those provided to residential or condominium associations
- Laundry services
- Non-capitalizable repair and maintenance of real or tangible personal property, except services to residential or condominium associations
- Telecommunications services
- Waste pickup services, except those provided to residential or condominium associations
- Ordinary motor vehicle leasing
If your business provides any of these, you collect at 11.5% regardless of your client’s status. The homeowner and condominium association exceptions are narrow and apply only within the categories listed.
The $300,000 Small Business Exemption
Merchants whose annual volume of business does not exceed $300,000 are exempt from collecting the B2B tax on services provided to other merchants.1Departamento de Hacienda de Puerto Rico. Regulation to Amend Articles of the Puerto Rico Internal Revenue Code of 2011 The threshold took effect July 1, 2020.
There is a catch for owners of multiple entities. If you belong to a controlled group of corporations, Hacienda aggregates the volume of business across every member of the group. Partnerships, special partnerships, and corporations of individuals are treated as corporations for this purpose.1Departamento de Hacienda de Puerto Rico. Regulation to Amend Articles of the Puerto Rico Internal Revenue Code of 2011 Running a consulting practice plus two S-corps that provide services means all three revenue streams get added together against the $300,000 line.
Keep documentation that supports your position. If Hacienda audits and your records don’t back the exemption, you owe the uncollected tax plus penalties and interest.
Other Exemptions
- Intercompany services within a controlled group. Services between members of a controlled group are exempt when both entities are engaged in business in Puerto Rico.
- Services to government. Services rendered directly to the government of Puerto Rico or the U.S. federal government are excluded.
- Exported services. Services delivered to a client outside Puerto Rico are exempt, even when the work is performed on the island.
- Nonresident-to-related-party services. Services rendered by a nonresident to a related party holding a tax grant under incentives legislation such as Act 73-2008 or Act 20-2012 are excluded.
Exemption Certificates and Invoice Rules
Every B2B invoice needs the merchant’s legal name and registration number, the transaction date, a description of the service, the taxable amount, and the 4% IVU shown as a separate line item. Do not add a municipal tax line; the 1% municipal component does not apply.
When a buyer claims the reduced rate or an exemption, the buyer must give the seller Form AS 2916.1, the Certificate for Exempt Purchases, at the time of the transaction. The form releases the seller from the obligation to collect at the standard rate.2Departamento de Hacienda de Puerto Rico. Form AS 2916.1 – Certificate for Exempt Purchases The buyer submits it along with supporting documents such as a Merchant Registration Certificate or Reseller Certificate. Sellers keep these forms for six years. A fraudulent exemption certificate makes the buyer personally liable for the unpaid tax plus penalties.
Filing and Paying Through SURI
All IVU returns go through the Sistema Unificado de Rentas Internas (SURI). You log in, open the Monthly Sales and Use Tax Return, and report the 4% B2B tax on its dedicated lines, separate from any retail sales taxed at 11.5%. Keeping those figures separated in your books before filing saves time and prevents errors.
The return and payment are due by the 20th of the month after the reporting period.3Departamento de Hacienda de Puerto Rico. Sales and Use Tax Monthly Return Publication Payment runs through the portal by ACH debit or credit. SURI generates a confirmation receipt after submission. Save digital copies alongside the underlying transaction records.
Before your first return, you need a Merchant Registration Certificate (Registro de Comerciante). Anyone conducting business in Puerto Rico must apply through Hacienda with details about the business, its owners, and every location where sales or services occur.4Justia. Puerto Rico Code 13 32141 – Registro de Comerciantes Operating without one exposes you to fines of up to $10,000.
Penalties
Missing the 20th triggers a 10% late-filing penalty on the tax shown on the return. Late-payment penalties start at 5% of the unpaid amount and add another 5% each month. First-time offenders cap at 50% of the liability; repeat offenders can hit 100%. Interest accrues on top.
Failing to collect in the first place is a separate exposure. If Hacienda finds you should have charged the 4% B2B tax and didn’t, you owe the uncollected amount plus penalties and interest. The merchant carries this liability, not the client. That is why the $300,000 threshold and the 11.5% carve-outs matter so much: treating a taxable transaction as exempt puts the whole bill on you.
If Your Provider Is Outside Puerto Rico
Businesses located outside the territory that provide services to island clients face economic nexus rules. Once an out-of-territory seller exceeds $100,000 in gross sales or 200 transactions in Puerto Rico during a year, it must register through SURI, collect, and remit IVU. Registration must be completed at least 30 days before the business begins selling with economic nexus.
When the nonresident provider does not collect the tax, the obligation shifts to the Puerto Rico buyer. The local business self-assesses the 4% use tax on the imported service and remits it on the same monthly return. This catches many companies off guard when they hire mainland U.S. consultants, software developers, or other service providers with no Puerto Rico presence and no obligation to register.
Don’t Confuse the 4% IVU With the 7% Income Tax Withholding
A separate rule sits alongside the B2B sales tax and often gets tangled with it. Anyone engaged in business in Puerto Rico that pays for services rendered on the island must withhold 7% of the payment for income tax purposes; the provider can elect a higher rate of 10% or 15%. The first $1,500 paid to any service provider during a calendar year is excluded from withholding. For corporations or partnerships operating through branches, the $1,500 exclusion applies to each branch individually at the withholding agent’s option.5Justia. Puerto Rico Code Title Thirteen 30273 – Withholding at Source on Services Rendered
New businesses can apply for a Total Waiver of the withholding by submitting Form SC 2678 (individuals) or Model SC 2680 (corporations and partnerships) during their first year.6Departamento de Hacienda de Puerto Rico. Informative Booklet Regarding the Withholding at Source in Case of Services Rendered An approved Waiver Certificate expires annually; you hand a copy to each payer so they know not to withhold.
Both obligations can apply to the same payment. The 4% IVU is a sales tax collected from the buyer and remitted by the seller. The 7% withholding is income tax deducted by the buyer from what the seller is paid. Handling one does not satisfy the other.