To help ease the administration of retirement plans in Puerto Rico during the coronavirus outbreak, on March 24, 2020, the Puerto Rico Department of the Treasury (commonly known by its Spanish name as Departamento de Hacienda de Puerto Rico) issued Administrative Determination No. 20-09 (AD 20-09), to extend, among other things, the due dates for:

• filing the local informative return on distributions from qualified retirement plans completed in 2019; and

• depositing with Hacienda the Puerto Rico income taxes withheld at source on benefit payments completed during February 2020 through May 2020.

Tax Reporting Extension

Distributions from retirement plans qualified in Puerto Rico to participants, beneficiaries, and alternate payees who at the time of distribution are residents of Puerto Rico (together, Puerto Rican participants) must be reported to Hacienda through the filing of local tax form 480.7C, Informative Return – Retirement Plans and Annuities. Form 480.7C is essentially the local equivalent to the Internal Revenue Service (IRS) Form 1099-R.

Since February 2020, Form 480.7C must be filed electronically through Hacienda’s online portal (commonly known by its Spanish name as Sistema Unificado de Rentas Internas or SURI). Mailing a hardcopy of Form 480.7C is no longer an option.

Ordinarily, Form 480.7C is due by the last day of February of the year immediately following the year of distribution. Therefore, retirement plan distributions completed in 2019 were supposed to be reported by February 29, 2020.

AD 20-09 extended to May 15, 2020, the due date for reporting 2019 retirement plan distributions.

Tax Withholding Extension

Distributions from retirement plans qualified in Puerto Rico to Puerto Rican participants are also subject to the withholding of Puerto Rico income tax at source.

Generally, lump-sum distributions are subject to a 20 percent tax withholding (i.e., similar to the 20 percent United States income tax withholding on eligible rollover distributions of Internal Revenue Code § 3405(c)), and hardship withdrawals and other in-service distributions are subject to a 10 percent tax withholding. Monthly pensions, on the other hand, are subject to a 10 percent tax withholding, but only on the excess of the annual pension amount over $35,000 ($31,000 if by the end of the year the pensioner has not yet reached age 60). For example, if a pensioner who is age 65 receives a pension of $3,000 per month ($36,000 per year), the 10 percent tax withholding would only apply on the $1,000 over $35,000 (i.e., a $100 tax withholding).

Amounts withheld must be deposited with Hacienda, also electronically through SURI, by the 15^th day of the month immediately following the month of distribution. For example, a $10,000 lump-sum distribution completed in January 2020 would be subject to a Puerto Rico tax withholding at source of $2,000, which would have to be deposited electronically with Hacienda by February 15, 2020.

AD 20-09 extended to June 15, 2020, the due date for depositing with Hacienda the taxes withheld on distributions completed in February 2020 and March 2020. The due date for depositing with Hacienda taxes withheld on distributions completed in April 2020 and May 2020 has been extended to July 15, 2020.