How Does the COVID-19 Pandemic Affect Puerto Rican Residents?
- Posted: April 30, 2020
- Posted by: Travis Lynk
- Last Reviewed: May 21, 2021
The COVID-19 pandemic has affected nearly every country and territory on Earth, upending life as we know it all across the planet. Puerto Rico is no exception, with the crisis being declared a major disaster and residents being confined to their homes by law. The pandemic affects Puerto Rican residents both on and off the island, as bona fide Puerto Rico residents, including many Act 20, 22, and 60 decree holders, are riding out the pandemic in the US and other countries, stuck in their temporary homes off the island. Here’s how COVID-19 and the associated restrictions are affecting Puerto Rican residents.
Effective March 15, 2020, Puerto Rico issued an island-wide lockdown to help curb the spread of COVID-19. It was originally supposed to last until March 30, but as the pandemic raged on, it was eventually extended to May 25, 2020. What happens after May 25 remains to be seen, but even if the lockdown is lifted, Puerto Ricans will be going back to a new normal.
Under the lockdown, non-essential businesses are closed, and residents are confined to their homes, only allowed out between 5 a.m. and 7 p.m. for essential trips, such as buying food or medicine, attending a medical appointment, or going to work (in the case of essential workers). Face masks are mandatory when venturing outdoors, and enhanced security at the island’s main airport has seen more than 200 people placed in isolation upon arrival.
On May 1, Governor Vázquez issued a new executive order that eased some of the lockdown restrictions. The order allowed certain businesses to resume operations, provided they draft “COVID-19 Exposure Control Plans” and provide their employees with the necessary personal protective equipment. They are still urged to encourage employees to work from home whenever possible.
Restricted Travel Opportunities
In addition to the various travel restrictions Puerto Rico residents might face traveling abroad during the crisis, from a mandatory two-week isolation period upon arrival to flat-out denial of entry, there are fewer flights to and from Puerto Rico during the pandemic. Airlines are canceling flights due to a lack of demand, and the governor has also pushed to temporarily ban flights from COVID-19 hotspots in the US, such as New York, Florida, and Illinois.
All arriving air passengers are subject to rapid tests upon arrival, which helps officials determine who should be quarantined. However, anecdotal reports suggest that the quarantine is not necessarily always enforced.
COVID-19 Exemption Period
The U.S. Department of the Treasury has drafted tax relief measures for nonresident individuals who are stuck in the US, announcing that time spent outside Puerto Rico due to COVID-19 will not be counted as “substantial presence” days for certain tax considerations. For 60 consecutive days starting somewhere between February 1 and April 1, 2020, non-U.S. residents stuck in the US due to the pandemic may invoke their “COVID-19 Emergency Period,” which voids the time they spend in the US for those 60 days in terms of certain tax considerations.
To be eligible, an individual has to have not been a U.S. resident at the end of the 2019 tax year, not become a resident at any point during the 2020 tax year, be physically present in the US for all consecutive days claimed, and not spend enough time in the US outside of the COVID-19 Emergency Period to become a U.S. resident in 2020. An individual does not need to be infected with COVID-19 to claim these emergency free presence days.
Non-U.S. residents riding out the pandemic in the US are also permitted to engage in business activities without incurring a U.S. tax burden for employment income. Similarly, the employers of such individuals will also be exempt from a U.S. tax burden. The applicant must only demonstrate that they only conducted those business activities in the US because of travel disruptions. Simply feeling unsafe traveling during the pandemic is included under the scope of “travel disruptions.”
Holders of Act 20, 22, and 60 decrees must note that these free presence days apply to “substantial presence” for various purposes, not physical presence for the Puerto Rico bona fide residency test. If you are unsure whether you can benefit from this emergency period, consult your tax advisor.
Around the world, countless workers have lost their jobs in the midst of the COVID-19 pandemic, and Puerto Rican workers are no exception. Like many other governments, the Puerto Rican government has doled out financial relief initiatives to help Puerto Rican residents suffering financially.
In the US, the IRS is providing stimulus checks to qualifying residents whose adjusted gross income is under a certain threshold. Since Puerto Rico is a U.S. territory, Puerto Rican residents are also entitled to the IRS stimulus checks, which are distributed on the island by Hacienda. The checks are for $1,200 or $2,400, depending on the applicant’s marital status, plus $500 per dependent child.
Puerto Rican workers who are not receiving their wages in the pandemic may also receive unemployment benefits. However, only employees are eligible—self-employed individuals are not. Self-employed individuals were instead able to apply for a one-time $500 grant until May 1. Businesses may similarly apply for a one-time $1,500 grant as long as they employ no more than 50 workers and have a business volume of no more than $10 million.
For the self-employed, independent contractors, and others who do not otherwise qualify for regular unemployment benefits, the U.S. federal government also offers special Pandemic Unemployment Assistance (PUA). The benefit is available for up to 39 weeks starting on or after January 27, 2020, and ending on or before December 31, 2020. The amount is based on the weekly benefit amounts stipulated in the respective state’s unemployment insurance laws. According to the Puerto Rico Department of Labor, nearly 90,000 PUA applications have already been filed on the island.
Disclaimer: Neither PRelocate, LLC, nor any of its affiliates (together “PRelocate”) are law firms, and this is not legal advice. You should use common sense and rely on your own legal counsel for a formal legal opinion on Puerto Rico’s tax incentives, maintaining bona fide residence in Puerto Rico, and any other issues related to taxes or residency in Puerto Rico. PRelocate does not assume any responsibility for the contents of, or the consequences of using, any version of any real estate or other document templates or any spreadsheets found on our website (together, the “Materials”). Before using any Materials, you should consult with legal counsel licensed to practice in the relevant jurisdiction.
Read MoreApril 30, 2020
Read MoreDecember 12, 2019