Hey Rey... great job with this forum. Thanks for the response. I spoke to an accountant and an attorney and was informed that I would pay the 30% PR tax and receive credit for the 24% federal tax. I will continue to search for the correct information.
Interested in the answer myself, I did some non-expert research and believe this advice is correct. You will be taxed on the U.S. sourced pension in the U.S. and in PR, subject to credit in PR for the U.S. tax paid.
According to the accounting firm KPMG:
The general rule is that a person who is a resident of Puerto Rico is taxed on the individual’s worldwide income. Non-residents are generally taxed on income derived directly or indirectly from sources within Puerto Rico. Although Puerto Rican nationals are US citizens, bona fide residents of Puerto Rico are exempt from US federal income tax on income derived from sources within Puerto Rico.
. . . .
Income taxes paid or accrued to the US and its possessions or to foreign countries during the taxable year may be credited against the Puerto Rican income tax in order to avoid double taxation. As a general rule, only residents are in a position to claim the foreign tax credit against their Puerto Rican tax because, in principle, only they are subject to Puerto Rico taxes on their worldwide gross income. The foreign tax credit is subject to two limitations, a per-country limitation and an overall limitation.
I found another source (tax preparer H&R Block) saying the same thing:
If you are a bona fide resident of Puerto Rico during the entire tax year, you’ll file the following returns:
1. A Puerto Rico tax return (Form 482) reporting your worldwide income.
2. A U.S. tax return (Form 1040) reporting your worldwide income. However, this 1040 will exclude your Puerto Rico income.
If you report U.S. income on your Puerto Rico tax return, you can claim a credit against your Puerto Rico tax, up to the amount allowable, for income taxes paid to the U.S.
