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Tax in Puerto Rico on J1 visa

Tax in Puerto Rico on J1 visa

Old Jan 31st 2011, 11:39 am
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Default Tax in Puerto Rico on J1 visa

Dear All,

I understand that visiting US to work on a J1 visa (Academic visitor, UK citizen), I am able to avoid income tax if I stay for less than two year, thanks to the magic of US/UK tax treaties. Does anyone know if this (or something analogous) also applies in Puerto Rico.

Thanks,

ajsp
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Old Jan 31st 2011, 1:17 pm
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Default Re: Tax in Puerto Rico on J1 visa

Would assume so since Puerto Rico is under the same federal laws as the States within the union.
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Old Jan 31st 2011, 1:23 pm
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Default Re: Tax in Puerto Rico on J1 visa

Originally Posted by Rete View Post
Would assume so since Puerto Rico is under the same federal laws as the States within the union.
Thanks, but I'm not so sure it's that simple: they seem to have different tax arrangements than the US (they do not pay US income tax), and a separate tax dept (Hacienda). I don't know whether that kind of tax treaty trumps that kind of thing. Any experience out there??
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Old Jan 31st 2011, 1:47 pm
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Default Re: Tax in Puerto Rico on J1 visa

Originally Posted by ajsp View Post
Dear All,

I understand that visiting US to work on a J1 visa (Academic visitor, UK citizen), I am able to avoid income tax if I stay for less than two year, thanks to the magic of US/UK tax treaties. Does anyone know if this (or something analogous) also applies in Puerto Rico.

Thanks,

ajsp
If it's a tax treaty then PR must be included, because that would be the Federal Government, but you might not be able to avoid state taxes.
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Old Feb 1st 2011, 1:31 am
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Default Re: Tax in Puerto Rico on J1 visa

Originally Posted by anotherlimey View Post
If it's a tax treaty then PR must be included, because that would be the Federal Government, but you might not be able to avoid state taxes.
Puerto Rico is not a US state. And a US tax treaty may not necessarily apply to a US territory. Just like on the UK side, things are different in the Isle of Man and Channel Islands even though the inhabitants are British citizens.
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Old Feb 1st 2011, 2:19 am
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Default Re: Tax in Puerto Rico on J1 visa

This is probably a good place to start:

http://www.irs.gov/pub/irs-pdf/p570.pdf

You will need to determine both (and separately) whether you are a resident of Puerto Rico for tax purposes, and / or a resident of the US for tax purposes (publication 519: http://www.irs.gov/pub/irs-pdf/p519.pdf). The answers to those two questions will determine how and what you file.

Last edited by AdobePinon; Feb 1st 2011 at 2:21 am.
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Old Feb 4th 2011, 10:52 am
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Default Re: Tax in Puerto Rico on J1 visa

Thanks for the suggestions. It seems I won't know for sure till I get settled. According to the university there, it is likely that I'll pay about 7% (rather than a 'normal rate' of 28-35%), but I don't have any detail of how or why. If I learn anything more, I'll try and post here, in case it's of interest to anyone.....
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Old Sep 4th 2011, 5:15 pm
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Default Re: Tax in Puerto Rico on J1 visa

Turns out that they were right, about 7%, although I had to do a lot of paperwork, and my first pay cheque was ca. 30% taxed on an emergency/default rate.
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Old Sep 6th 2011, 2:35 pm
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Default Re: Tax in Puerto Rico on J1 visa

Originally Posted by ajsp View Post
I understand that visiting US to work on a J1 visa (Academic visitor, UK citizen), I am able to avoid income tax if I stay for less than two year, thanks to the magic of US/UK tax treaties. Does anyone know if this (or something analogous) also applies in Puerto Rico.
Read IRS publication 519, usually people on J visas are exempt by filing a 1040NR and 8843 every year - this is because people in academic classifications tend to get financial support from abroad, and so that money doesn't get taxed you file the 8843.

Bear in mind however this makes you non-resident for tax purposes in the US, so any income you receive from abroad will be taxed where you came from (usually, depends on local law).

This is not a tax treaty provision, it applies generally to all people in these immigration classifications who meet the eligibility criteria.

US-source income is however subject to taxes, and in Puerto Rico the tax system does work differently. However, if you file an 8843 every year you are exempt from FICA (payroll taxes). On W-4 you should state that you are exempt in answer to question 6 (if you are, depends on what you're doing on J-1). If the employer incorrectly withholds FICA you can claim it back on Form 843. Income tax however does apply.
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