P.R. Laws tit. 13, § 30272
(a) Indemnity payments received on judicial proceedings or in extrajudicial claims that constitute taxable income for the purpose of this part.— Every employer, insurance company or any other person required to make indemnity payments under a court order or extrajudicial claim, shall be required to withhold seven percent (7%) of the amount of those payments made which constitute taxable income for purposes of this part. For purposes of this section, taxable income includes, among others, the following items:
(1) Any compensation portion representing or substituting loss of income or salaries, including lost profits, and
(2) indemnity for lost salaries in the case of destitution or suspension from employment and salary, or for illegal dismissal.
(b) Withholding subject to provisions on withholding at source on wages.— Deductions and withholdings under subsection (a) shall be subject to the provisions of this part that apply to income tax withheld at source on wages as it relates to the manner and time to make the deposit of the amounts withheld and the payer’s responsibilities with respect to the amounts withheld. Likewise, there shall apply the penalties established for employers who fail to withhold and deposit the amounts withheld established in §§ 33001 et seq. of this title, including any person that has failed, at the time of filing his income tax return, to remit to the Department of the Treasury the total amount deducted and withheld on payments described in subsection (a) of this section corresponding to the taxable year reported on the return, shall not claim such payments as operating expenses.
(c) Information returns.— The Secretary shall prescribe by regulations to that effect, the manner in which the payments described under subsection (a) and the amounts withheld thereunder shall be reported.
(d) Withholding as credit against tax.— Every person to whom withholding at source and or subsection (a) has been made may claim the amount withheld during the taxable year as a credit against his/her tax liability.
(e) Exception.— The requirement to deduct and withhold set forth in subsection (a) will not apply to payments by reason of indemnity under a sentence pronounced by the court or under an extrajudicial claim made to nonresident individuals or foreign corporations or partnerships not engaged in trade or business in Puerto Rico who are subject to the withholding set forth in §§ 30278 and 30281 of this title.
History —Jan. 31, 2011, No. 1, § 1062.02, retroactive to Jan. 1, 2011; Dec. 10, 2011, No. 232, § 66.