The patente municipal (municipal license tax) is the tax Puerto Rico's municipalities charge to anyone doing business within their limits. It is governed by the Código Municipal de Puerto Rico (Municipal Code, Act 107-2020, as amended) and is calculated on volume of business (volumen de negocios), which in simple terms is your gross income. It does not depend on whether the business made or lost money.
The patente is different from the 1% municipal IVU (sales and use tax) you charge your customers (we explain it in the IVU guide) and from the personal property tax paid to CRIM (Municipal Revenue Collection Center; see personal property tax). They are three different municipal obligations.
Who pays the patente
According to the instructions for the official Declaración de Volumen de Negocios form (volume of business return, OGP PA01, revised February 2025), every private individual or legal entity engaged for profit in the following is subject to the patente:
- providing any service, including professional services;
- selling any goods, at retail or wholesale;
- any financial business;
- any other industry or business in a municipality.
This includes self-employed individuals, partnerships, corporations and disregarded entities (for example, a single-owner LLC that is not a separate taxpayer for the Departamento de Hacienda, Puerto Rico's Treasury Department, "Hacienda"). If you are a self-employed professional, it applies to you too. See also our guide for self-employed workers.
Exemption for small volume. The same instructions state that businesses whose volume of business does not exceed $5,000 are exempt. The Municipal Code has other specific exemptions (Article 7.206), and each municipality may offer incentives by ordinance for certain industries or areas.
The rates: what the law allows
Article 7.202 of the Municipal Code, as cited in Ordinance No. 5 (Series 2024-2025) of the Municipality of Barranquitas, sets these caps:
| Type of business | Maximum rate on the volume of business attributable to the municipality |
|---|---|
| Financial businesses | 1.50% |
| Services, sales and any other industry or business | 0.50% |
Each municipal legislature sets its rate within those caps and can set lower rates, tiered rates or exemptions to encourage certain industries, sectors or areas, as long as it treats businesses of the same nature uniformly. That is why the patente varies from town to town. The law also sets a minimum patente of $25, according to the current text of Article 7.202 cited in Senate Bill 1094.
Pending proposals. In 2026, bills were filed to amend the patente, such as Senate Bill 1094 (P. del S. 1094), which proposes a maximum rate of 0.25% for low-margin businesses. As of October 12, 2026, we have not found that it became law. Until it does, the 0.50% and 1.5% caps apply.
How volume of business is calculated
Volume of business is gross income for the immediately preceding accounting year, minus sales returns. The accounting year is the same one you use for your income tax return. If you do not file a return, it is the calendar year. That is why the patente for the municipal fiscal year that begins July 1, 2026 is based on what you billed in 2025.
There are special rules for some businesses:
- Gas stations: volume for gasoline is calculated based on gross profit per gallon, with the supplier's certification.
- Banks and savings associations: income is split among branches according to each branch's share of deposits.
- Businesses with several locations: the main office prepares one return for the municipality where it is located and separate returns for each municipality where it has branches, offices or warehouses. The form's instructions provide that all of them are filed with the Finance Director of the municipality where the main office is located, with a copy to each municipality.
Deadlines: the return and the payments
The return. According to the instructions for form OGP PA01, the Declaración de Volumen de Negocios is due within the five business days after April 15 of each year, or the date Hacienda sets for the income tax return. For example, the Municipality of Caguas set April 22, 2024 for fiscal year 2024-2025. Check your municipality's notice every year.
The payment. The patente is due in two semiannual installments, on July 1 and January 2. Some municipalities indicate that the installment can be paid within the first 15 days of each semester. Caguas, for example, set July 15, 2024 and January 15, 2025.
The discount. If you pay the full patente when you file the return, you get a 5% discount.
The extension. If you do not have the information ready, you can ask the municipality for an extension on or before the deadline. Caguas, for example, requires the request to explain the reasons and include an approximate calculation of the patente.
A cabinetmaking shop billed $400,000 in 2025, and its municipality applies the maximum rate of 0.50% for non-financial businesses.
- Annual patente: $400,000 × 0.50% = $2,000
- If it pays everything when it files in April: $2,000 minus 5% = $1,900
- If not: two installments of $1,000, one in July and one in January
If it files the return 45 days late, the penalty would be 5% for the first period plus 5% for the second, or 10%: $200.
What documents go with the return
The form's instructions require:
- A copy of the pages or schedules of your income tax return that show gross income and expenses, as filed with Hacienda. If the business is a disregarded entity, you submit the return of the owner who reported the income and the detail of the entity's operations.
- Audited financial statements, if Hacienda requires them of you or if you submitted them voluntarily. Under Section 1061.15 of the Código de Rentas Internas (Internal Revenue Code of Puerto Rico), they are mandatory when volume of business is $10 million or more. Between $3 million and $10 million, you can instead submit an Agreed Upon Procedures report or a Compliance Attestation report prepared by a CPA licensed in Puerto Rico.
A return that does not include the required financial statements is treated as not filed.
Penalties
According to the form's instructions, if you do not file the return on time and do not show reasonable cause, 5% is added to the patente if the delay is less than 30 days, and an additional 5% for each 30-day period or fraction, up to 25% in total. If you also pay an installment late, check with your municipality about the charges it applies to late payments.
When you open or close a business
When you start, contact your municipality's Finance Department to register and find out what you need to file the first year. Many municipalities ask for your Certificado de Registro de Comerciantes (merchant registration certificate) from Hacienda. See Registro de Comerciantes.
When you close, form OGP PA01 has a Planilla Final (final return) box. File that return and ask the municipality to close your account. We explain the other steps in closing a business.
Frequently asked questions
Do I pay the patente even if my business lost money?
Yes. The patente is calculated on volume of business, meaning gross income, regardless of whether there was a profit or a loss.
Do I have to pay the patente in every town where I work?
The patente is paid on the volume of business attributable to operations in each municipality. If you have offices, branches or warehouses in several municipalities, you prepare a return for each one. If your situation is complex, for example if you provide services in many towns without an office in them, consult an accountant.
What is the patente rate in my municipality?
It depends on each municipality's ordinance, within the maximum of 0.50% for non-financial businesses and 1.5% for financial businesses. Ask the municipal Finance Department or check its website.
Does the patente replace the Hacienda return?
No. They are separate obligations. In fact, the volume of business return is prepared with information from your income tax return, which is why their deadlines line up in April. See our tax calendar.
What happens if I do not file the return?
Besides the penalty of up to 25%, the patente is still owed and the municipality can start collection efforts. If you will not have the information in time, the prudent step is to request an extension before the deadline instead of letting it pass.
Sources
- Oficina de Gerencia y Presupuesto, "Declaración de Volumen de Negocios, formulario OGP PA01 (rev. febrero 2025) e instrucciones", publicado por el Municipio de Guaynabo. guaynabocity.gov.pr
- Municipio de Barranquitas, "Ordenanza Núm. 5, Serie 2024-2025 (cita el Artículo 7.202 del Código Municipal, Ley 107-2020)", Biblioteca Virtual OGP. bvirtualogp.pr.gov
- Municipio Autónomo de Caguas, "Fecha límite para la radicación de la Declaración sobre Volumen de Negocios para el año fiscal 2024-2025". caguas.gov.pr
- Senado de Puerto Rico, "P. del S. 1094 (enmiendas a los Artículos 7.200 y 7.202 del Código Municipal)". senado.pr.gov
- Código de Rentas Internas de Puerto Rico de 2011, según enmendado (Sección 1061.15), Departamento de Hacienda. hacienda.pr.gov
787TAX is an independent guide. It is not Puerto Rico's Departamento de Hacienda, the CRIM or the IRS. This page is general information, not tax or legal advice. Example figures are hypothetical. Found an error? Tell us.
