Puerto Rico is a territory of the USA.

Puerto Ricans can:

  • not vote for president
  • vote in presidential primaries
  • not pay federal taxes
  • go to work for the US army
  • are US citizen
  • work in any state without any visas (obviously they are US Citizens)

Why is the banking system different? If I open an IRA in a Puerto Rican bank, then it will be considered as income there before I can roll it over to a US bank.

Where can I get more information on the differences in the banking system?


4 Answers 4


Mentor Millonario say's:

The banking system if not that different from the one in the U.S. What is different is the tax rules established for Puerto Rico by the U.S.

For IRA purposes its like living abroad.

From IRS code:

Credits and deductions. If you claim the exclusion, you cannot claim any credits or deductions that are related to the excluded income. Thus, you cannot claim a foreign tax credit or deduction for any foreign income tax paid on the excluded income. Nor can you claim the earned income credit if you claim the exclusion. Also, for IRA purposes, the excluded income is not considered compensation and, for figuring deductible contributions when you are covered by an employer retirement plan, the excluded income is included in your modified adjusted gross income.


Puerto Rico has their own Internal Revenue Code under the Commonwealth of PR. IRAs are subject to different rules and taxation. You cannot transfer or rollover an IRA that was established in PR to USA and vice verse. The contribution limits are different, the age to begin distributions in PR is also different, in US you must begin taking IRA distribution when you reach the age of 70 1/2 versus PR that is when you reach the age of 75! IRA distribution in PR are not subject to Federal Income Taxes, IRA distributions in US are subject to Federal and State Income Taxes.


Geo - this sounds more like a taxation question than a banking question. PR does have an independent taxation system (ie. independent of the US) and income generated there will catch the eye of the PR tax guys. See http://www.sisterstates.com/statetaxforms.php?id=43 for more info on the tax system and possible tax liabilities for US nationals.

Side note: all PR banks fall under FDIC regulations, and I believe they operate much like any mainland US bank. Again, I don't see a bank issue here, just a tax issue. Apologies if I'm missing something in your question.

  • I think you are right, this is a tax question, because I used the IRA question. I was trying to make a more broader question. Related to domestic vs. International considerations, but I think I will need to split these topics in a few questions. More to come.
    – Geo
    Commented Dec 4, 2010 at 22:33

The first thing you need to determine is, are you a resident or a nonresident. If you live in Puerto Rico and own a residence in the US that you intend to return to, you would be a Puerto Rico nonresident. As a nonresident, US citizen, you will be subject to US Tax. If you have wages, you can contribute to a US IRA or a Puerto Rico IRA. You would be able to deduct your contributions to a Puerto Rico IRA on your Puerto Rico Tax Return but not on your US tax return. If you contribute to a US IRA, you would be able to deduct those contributions on your US tax return but not on your Puerto Rico Tax Return. There are duel IRA plans, that allow deductions on both tax returns. If you are a resident of Puerto Rico, with Puerto Rico wages, you do not have to file a US tax return. You cannot roll over a Puerto Rico IRA to a US IRA. It is my understanding that a Puerto Rico IRA has restrictions on what the custodian can invest the funds in. The custodian must invest 66% in Puerto Rico securities, entities. If you are single and your wages are over $61,500 you are in the 33% bracket. At this bracket, I would think you would want to contribute to a Puerto Rico IRA. A PR IRA allows up to $5,000 in contributions, A US IRA allows up to $5,500.

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