Puerto Rico


Puerto Rico Law establishes that Transfer Pricing obligations must be performed under the United States Transfer Pricing Rules set forth in Section 482 of the U.S. Internal Revenue Code and its related provisions.

On May 11, 2021, the Treasury Department issued Administrative Determination No. 21-05 for establishing the procedure to comply with the requirement to file a Transfer Pricing Study, admitting as a deduction the total expenses paid to related entities not carrying out transactions in Puerto Rico or to a main office located out of Puerto Rico when filing the income tax return.

Related Parties

Parties are related when there is a direct relationship or indirect control, either legally established or simply in practice. There is a presumption of control if income or deductions are arbitrarily manipulated.

Transfer Pricing Methods

We must consider that there are three types of intercompany transactions recognized by law: (i) Transfers of tangible property, (ii) transfers of intangible property, and (iii) intercompany services. In this regard, the acceptable methods vary depending on the type of transaction. 

There are 6 methods recognized for transfers of tangible property:

  • Uncontrolled Comparable Price Method
  • Resale Price Method
  • Cost Plus Method
  • Comparable Earnings Method
  • Profit Split Method
  • Unspecified methods

There are 4 methods recognized for the transfer of intangible assets:

  • Uncontrolled Comparable Price Method
  • Comparable Earnings Method
  • Profit Split Method
  • Unspecified methods

There are 7 methods recognized for intercompany service transactions:

  • Service Cost Method
  • Comparable Uncontrolled Price Method
  • Service Gross Margin Method
  • Service Cost Plus Method
  • Comparable Earnings Method
  • Profit Split Method
  • Unspecified methods

Transfer Pricing Documentation

Transfer Pricing documentation must be filed along with the company’s Puerto Rico Income Tax Return for taxpayers requesting the 51% disallowance exemption on intercompany transactions. It can be drafted in Spanish or English. 

Section 1033.17(a) of the Puerto Rico Internal Revenue Code provides for a 51% disallowance of the number of deductions an entity may claim for income tax purposes on expenses paid to related entities located out of Puerto Rico or on allocations of expenses made to the Puerto Rico entity. 

Conversely, such 51% disallowance does not apply to those entities performing a Transfer Pricing Study to support the related entity charges and filing a certification to that effect along with the income tax return.

This Transfer Pricing requirement is effective for taxable years beginning after December 31, 2018.

Transfer Pricing Study

Taxpayers requiring a Transfer Pricing Study are those corporations or partnerships taking as deduction expenses incurred or paid to related entities that do not perform business transactions in Puerto Rico. Likewise, those receiving allocations of expenses incurred by a related entity out of Puerto Rico.


There are no specific penalties for Transfer Pricing requirements violations. Conversely, if the tax authority challenges the Transfer Pricing Study, it would disallow the 51% deduction for intercompany expenses.


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