House Finance Committee hears bill to extend 4% tax rate to residents’ interest, dividends and long-term capital gains

The House of Representatives Committee on Finance on Sept. 24 held a public hearing on Proyecto de la Cámara 501 (P. de la C. 501), a bill to add section 10.23.26 to Law 1 of 2011 (the Puerto Rico Internal Revenue Code) to allow a special contribution rate for interest, dividends and long-term capital gains and to extend to Puerto Rico residents a tax treatment similar to that available to resident investors under Law 22 (2012)/Law 60 (2019).

Committee members heard presentations from the Department of Economic Development and Commerce (DDEC), the Office of Incentives for Business in Puerto Rico, the Department of Hacienda (Treasury), and the Puerto Rico Fiscal Agency and Financial Advisory Authority (AFAF). DDEC said the measure aims to “proveer al residente de Puerto Rico igualdad de beneficios contributivos en cuanto a la tributación de intereses, dividendos y ganancias de capital” (to provide Puerto Rico residents equality of tax benefits for interest, dividends and capital gains), a change the agency framed as promoting local investment and entrepreneurship (Luis Méndez del Nido, legal counsel, Department of Economic Development and Commerce).

Why it matters: Committee members and agency witnesses focused on the bill’s fiscal impact, enforcement capacity and how quickly the Treasury’s electronic filing systems could be adjusted. Treasury officials and the legislative budget office offered differing revenue estimates; the discrepancy and the measure’s possible interaction with a companion bill (P. de la C. 505) that would raise the rate for future resident-investor decree holders were central points of debate.

Hacienda’s fiscal estimate and implementation concerns

An official identified in the hearing as the secretary of the Department of Hacienda (referred to in the record by the given name “Cristian”) told the committee…