The Puerto Rico SDI tax is a 0.60% payroll contribution on the first $9,000 of each employee’s annual wages, split evenly between employer and employee at 0.30% apiece. It funds SINOT (Seguro de Incapacidad No Ocupacional Temporera), the territory’s short-term disability program for illnesses and injuries that happen off the job. The maximum anyone pays in a year is $27 on the employee side and $27 on the employer side per worker.
Rate, Wage Base, and How the Split Works
The rate is fixed by statute: 0.30% employee, 0.30% employer, 0.60% combined. Wages for this purpose include base salary, commissions, and bonuses. Withholding stops once a worker hits $9,000 in year-to-date covered wages with a given employer, so anyone earning above the cap sees an effective rate well below 0.30% of total pay.
An employer can voluntarily pay the employee’s share, but the combined rate does not change. What does change, and often surprises workers who switch jobs, is that the $9,000 cap resets with each new employer. If you leave one job in June after your prior employer already withheld the full $27, your next employer starts withholding SINOT from your first paycheck. Puerto Rico has no mechanism for crediting prior-employer contributions.
What the Tax Buys
SINOT replaces 65% of a qualifying worker’s average weekly wage during a non-occupational disability, with a floor of $12 per week and a ceiling of $113 per week. Agricultural workers, where covered, face a lower ceiling of $55. Benefits can run up to 26 weeks in any 52-week period after a seven-day waiting period, which may be waived if the worker is hospitalized.1Social Security Administration. Puerto Rico Public Disability Benefits (PDB)
The program also pays dismemberment benefits of $2,000 to $4,000 and a $4,000 lump-sum death benefit to direct dependents, plus any accrued unpaid disability benefits.
Who Is Covered and Who Is Exempt
Act 139 of 1968 applies to all for-profit businesses in Puerto Rico and covers most private-sector employees. Three groups are carved out of mandatory coverage:
- Agricultural workers
- Domestic workers employed in a private residence
- Workers already enrolled in the Chauffeur’s Social Security program under Act 428 of 1950, which has its own disability structure
Remote work changed the analysis. Under Law 27-2024, effective January 2024, nondomiciled employees temporarily living in Puerto Rico are generally exempt from SINOT. For employees domiciled in Puerto Rico, coverage depends on FLSA status. Domiciled, FLSA-exempt workers can be excluded from Puerto Rico employment laws by agreement, but SINOT, workers’ compensation, and unemployment insurance still apply unless the employer provides equal or greater coverage through an approved private plan. Domiciled, nonexempt employees are covered by all Puerto Rico employment laws, SINOT included, with no exceptions.
Government Fund or Approved Private Plan
Employers can meet the SINOT mandate through the government-run fund or through a private plan filed with and approved by the Puerto Rico Department of Labor and Human Resources. Both fully insured and self-insured private plans are allowed, and larger employers often choose this route to offer richer benefits.
The calendar is unforgiving. Every private plan takes effect July 1, and the application must reach the Department of Labor by April 30 of the same year. Miss April 30 and the employer stays in the government fund for the full plan year. Transfers between private carriers follow the same July 1 effective date and April 30 filing deadline.
Employee contributions under a private plan cannot exceed what the worker would have paid into the government program. If the private plan costs more, the employer covers the difference; some employers pay the full premium as a benefit. Canceling a private plan requires at least one year of participation. Where employees do not contribute, the employer submits written notice by April 30 for a July 1 termination. Where employees do contribute, cancellation needs a majority vote (50% plus one) and can take effect at the start of any calendar quarter.
Employer Quarterly Reporting and Payment
Employers report SINOT contributions each calendar quarter using a quarterly contribution report filed with the Department of Labor. The Portal de Patronos, the Department’s online employer services platform, handles electronic filings, payments, and account management.2Departamento del Trabajo y Recursos Humanos de Puerto Rico. About the Portal of Services to Employers
Each report requires the employer’s federal EIN, the total number of employees who worked during the quarter, and total wages paid to each employee up to the $9,000 annual cap. Payroll systems need to stop calculating contributions at exactly $9,000 of cumulative year-to-date wages per employee, which matters most for workers who cross the threshold mid-quarter.
Deadlines are the last day of the month following each quarter: April 30, July 31, October 31, and January 31. Paper filing by mail is allowed, with payment by electronic transfer or by check payable to the Secretary of the Treasury. Electronic filing produces an immediate transaction record, which helps if a return is later audited.
Federal Income Tax Treatment
The employee’s 0.30% withholding comes out of after-tax wages and does not reduce federal taxable income. On the benefit side, the IRS treats disability payments from a state or territorial fund as taxable income to the extent the employer paid for the coverage.3Internal Revenue Service. Life Insurance and Disability Insurance Proceeds 1 Because SINOT is funded equally by employer and employee, roughly half of a SINOT benefit is generally federally taxable; the portion attributable to the employee’s own after-tax contributions is not taxed again. Workers who collect SINOT should expect a tax document at year-end.
Penalties for Late Filing or Payment
The Department of Labor enforces the quarterly deadlines strictly. Late filings and missed payments draw administrative penalties and interest, and continued noncompliance can escalate to collection action. Configuring payroll to track the $9,000 wage base per employee and calendaring the four quarterly due dates is the cheapest way to avoid any of that.