Puerto Rico is an Associated State of the United States of America and although it has autonomy to issue certain regulations, due to the application of the Territorial Clause of the US Constitution, it is subject to certain rulings of the Congress. Therefore, matters such as banking and insurance are subject to guidelines of the United States laws.
One of Puerto Rico’s main objectives is to be an international reference in regard to insurance and reinsurance matters. The benefits it derives from its relationship with the United States as well as from its legislative autonomy in certain matters such as taxation, make the island a very attractive regime for the rest of the world.
According to the stipulations in Puerto Rico’s Insurance Code, individuals who wish to act as insurers or reinsurers in the Puerto Rican territory must have an authorization to practice said activity in the Island. In the case of those who render life insurance services, they cannot provide other insurance services unless they are authorized to do so.
In regard to tax, life insurance in Puerto Rico is not levied with Value Added Tax or Sales Tax, and the indemnity (?) obtained for the damage covered by the insurance is exempted from the payment of Income Tax.
Additionally, in terms of tax information exchange, Puerto Rican insurance companies are obliged to comply with the applicable US norms, specifically those set by the FATCA (Foreign Account Tax Compliance Act). Likewise, insurance companies are not obliged to comply with the OECD (Organization for Economic Co-operation and Development) norms related to the Common Reporting Standard, given that the United States does not form part of this initiative.
Image: Siebe Warmoeskerken
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