Tax Update - Act 107 - Condo Associations Exempt from Sales and Value Added Tax

The most recent amendment to the Puerto Rico revenue code (Act 1 from 2011) was enacted on July 2, 2015. Act 107 effectively exempts providers of services to Condo Owner's Association in Puerto Rico from the responsibility to collect Sales and Value Added Tax.

The law also relieved Owner's Associations from the 4% "business to business" tax on professional services previously contemplated in Act 72 from May 29, 2015.

This is a welcomed relieve for all Owner's associations which were facing an inevitable 10-15% increase of all monthly maintenance fees billed to unit owners starting October 1, 2015 in order to be able to balance their operating budgets, if these taxes were to go into effect. 

Disclaimer

The information on this website is general information and is for educational use only and has not been verified for accuracy nor completeness. You, the reader, should further research your specific individual situation. In addition you should contact your accounting professional for professional advice derived from specific details from your structure and financial position.


IRS CIRCULAR 230 DISCLOSURE:

To comply with requirements imposed by the Department of the Treasury, Isla CPA informs you that any U.S. tax advice contained in this post (including any attachments) is not intended or written by the practitioner to be used, and that it cannot be used by any  taxpayer, for the purpose of (i) avoiding penalties that may be imposed on the taxpayer, and (ii) supporting the promotion or marketing of any transactions or matters addressed herein.

Tax Update - Sales and Use Tax (IVU) - Ley 72 de 29 de mayo de 2015

Last Friday, a new law was enacted. Below are the main points related to the Sales and Use Tax (IVU). Please do not hesitate to contact us with questions.

 - As of July 1st, 2015, transactions currently subject to the 7% IVU will be subject to a 11.5% Commonwealth (10.5%) and municipal (1%) IVU. This will be in effect until March 31, 2016.

 - Effective for periods commencing after June 30, 2015, merchants with a Re-seller Certificate may claim 100% credits for IVU paid on their inventory against IVU collected on their sales. The 75% limitation currently in place is eliminated.

 - Starting October 1st, 2015 and until March 31st, 2016:

      1. Business to business services that are currently taxable will be subject to an 11.5% IVU.

      2. Business to business services and designated professional services (e.g., certified accountants, lawyers, engineers) that were previously exempt from IVU will be subject to a Commonwealth IVU of 4%. No municipal IVU will apply to services subject to the 4%.

- In the case of services rendered by a non-resident, the recipient in Puerto Rico of the service will be the party responsible for remitting the IVU to the Treasury Department.

- Transactions occurring after March 31, 2016, will be subject to a new VAT (IVA) of 10.5% plus a 1% municipal IVU.

Disclaimer

The information on this website is general information and is for educational use only and has not been verified for accuracy nor completeness. You, the reader, should further research your specific individual situation. In addition you should contact your accounting professional for professional advice derived from specific details from your structure and financial position.


IRS CIRCULAR 230 DISCLOSURE:

To comply with requirements imposed by the Department of the Treasury, Isla CPA informs you that any U.S. tax advice contained in this post (including any attachments) is not intended or written by the practitioner to be used, and that it cannot be used by any  taxpayer, for the purpose of (i) avoiding penalties that may be imposed on the taxpayer, and (ii) supporting the promotion or marketing of any transactions or matters addressed herein.

Business Entity Registration in Puerto Rico

All Puerto Rico business operations should register with the required agencies. Certificates and registrations should be requested before the corporate commences operations on the island oftentimes probationary registrations are able to be promptly issued.  This list of agencies includes but isn't restricted to: Treasury Department, Municipal Revenue Collection & the Municipality,  Department of State, State Insurance, and also the Department of Labor & Human Resources. For Sales & Use Tax registration, a business should present a Merchant Registration Certificate.  One of the most significant changes that Puerto Rico is contemplating involves the replacement of the SUT with a VAT, effective January 1, 2016. We will post extensively when this proposed change is finalized.  Presently the Bill establishes that for the remainder of 2015 the provisions pertaining to sales and use tax will continue as per the Puerto Rico Internal Revenue Code of 2011

There are more rules and this post contains simplifications and is not comprehensive and my be forward looking. Additionally, as always, a professional should be consulted and be presented with specific information.

***

Disclaimer

The information on this website is general information and is for educational use only and has not been verified for accuracy nor completeness. You, the reader, should further research your specific individual situation. In addition you should contact your accounting professional for professional advice derived from specific details from your structure and financial position.


IRS CIRCULAR 230 DISCLOSURE:

To comply with requirements imposed by the Department of the Treasury, Isla CPA informs you that any U.S. tax advice contained in this post (including any attachments) is not intended or written by the practitioner to be used, and that it cannot be used by any  taxpayer, for the purpose of (i) avoiding penalties that may be imposed on the taxpayer, and (ii) supporting the promotion or marketing of any transactions or matters addressed herein.

Expatriate Tax Information

Expatriates who live in Puerto Rico are subject to Puerto Rico taxation.  This includes US citizens who live in Puerto Rico for at least 183 days per year.  For non-us expatriates there are comprehensive tax and employment visa requirements.  Personal tax returns are due the first April 15 following the end of the tax year.  Extensions are available.

The following must file a Puerto Rico income tax return:

• Individuals (Puerto Rico residents), who had gross income over $5,000; 

• Individuals (non-resident of Puerto Rico, citizen of the United States) who had a gross income over $5,000 provided that the taxes have been paid at source

• Individuals (non-resident aliens) who had a gross income from sources within Puerto Rico. 

There are more rules and this post contains simplifications and is not comprehensive and my be forward looking. Additionally, as always, a professional should be consulted and be presented with specific information.

 

***

 

Disclaimer

The information on this website is general information and is for educational use only and has not been verified for accuracy nor completeness. You, the reader, should further research your specific individual situation. In addition you should contact your accounting professional for professional advice derived from specific details from your structure and financial position.

 

IRS CIRCULAR 230 DISCLOSURE:

To comply with requirements imposed by the Department of the Treasury, Isla CPA informs you that any U.S. tax advice contained in this post (including any attachments) is not intended or written by the practitioner to be used, and that it cannot be used by any  taxpayer, for the purpose of (i) avoiding penalties that may be imposed on the taxpayer, and (ii) supporting the promotion or marketing of any transactions or matters addressed herein.

Individual Retirement Accounts Modification in 2014

In 2014 Puerto Rico made adjustments to certain aspect of individual retirement accounts ("IRA").   The adjustment included the ability to elect to prepay

at a reduced income tax rate of 8% all or part of their accrued and undistributed balances in IRAs (this does not include the ability to prepay for 2014 interest).

A penalty for early withdrawal of 30% (formerly a 10% penalty) - will apply to any distribution from an IRA of prepaid amounts if the holder of the IRA or its beneficiary has not attained age 60.  Under the act, there is no penalty will apply to a distribution made from an IRA to prepay the 8%.  Interest paid or accrued after June 30, 2014 will be subject to the 17% income tax rate.

There are more rules and this post contains simplifications and is not comprehensive and my be forward looking. Additionally, as always, a professional should be consulted and be presented with specific information.

 

***

 

Disclaimer

The information on this website is general information and is for educational use only and has not been verified for accuracy nor completeness. You, the reader, should further research your specific individual situation. In addition you should contact your accounting professional for professional advice derived from specific details from your structure and financial position.

 

IRS CIRCULAR 230 DISCLOSURE:

To comply with requirements imposed by the Department of the Treasury, Isla CPA informs you that any U.S. tax advice contained in this post (including any attachments) is not intended or written by the practitioner to be used, and that it cannot be used by any  taxpayer, for the purpose of (i) avoiding penalties that may be imposed on the taxpayer, and (ii) supporting the promotion or marketing of any transactions or matters addressed herein.

Modifications to Acts 20/22 Incentives

On November 21st and  November 24th, 2014, Senate bills 864 and 1020 were sent to La Fortaleza for the governor's signature.  These bills will work to broaden the pool of people and companies eligible for Acts 20/22 incentives. Among the modifications to the Acts is a reduction in the minimum time one must have lived away from Puerto Rico to qualify for incentives.  The incentives include exemptions from passive investment income taxes, including capital-gains.  Presently the time period away from PR is 15 years, the amendments will reduce it 6 years. In addition there are modifications to Puerto Rico's mandatory inheritance laws.  

Act 1020  has provisions to allow trading companies,  distribution and logistics, assembly, and bottling and management services as types of businesses and services eligible for of Act 20/Act 73 incentives.  These incentives reduce the corporate tax rate to 4% on income generated from the export of certain professional services, including but not limited to financial, legal, and technology services.  

There are more rules and this post contains simplifications and is not comprehensive and my be forward looking. Additionally, as always, a professional should be consulted and be presented with specific information.

 

***

 

Disclaimer

The information on this website is general information and is for educational use only and has not been verified for accuracy nor completeness. You, the reader, should further research your specific individual situation. In addition you should contact your accounting professional for professional advice derived from specific details from your structure and financial position.

 

IRS CIRCULAR 230 DISCLOSURE:

To comply with requirements imposed by the Department of the Treasury, Isla CPA informs you that any U.S. tax advice contained in this post (including any attachments) is not intended or written by the practitioner to be used, and that it cannot be used by any  taxpayer, for the purpose of (i) avoiding penalties that may be imposed on the taxpayer, and (ii) supporting the promotion or marketing of any transactions or matters addressed herein.

Puerto Rico Tax Changes Affecting Individual Taxpayers

In July 2014, Act 77 was codified into law.  In it were several amendments to the Internal Revenue Code of Puerto Rico.  Changes affecting individual taxpayers include, but were not limited to, changes in the alternate basic tax bracket, credits for prior year alternate tax payments, changes to individual long-term capital gains, and individual dividend distribution tax rate.  The individual long-term capital gains rate for individuals increased to 15% for all transaction occurring after June 2014.   Similarly, the individual tax rate for dividend distributions was also increased to 15% for all transaction occurring after June 2014. There are more rules and this post contains simplifications and is not comprehensive. Additionally, as always, a professional should be consulted and be presented with specific information.

 

***

 

Disclaimer

The information on this website is general information and is for educational use only and has not been verified for accuracy nor completeness. You, the reader, should further research your specific individual situation. In addition you should contact your accounting professional for professional advice derived from specific details from your structure and financial position.

 

IRS CIRCULAR 230 DISCLOSURE:

To comply with requirements imposed by the Department of the Treasury, Isla CPA informs you that any U.S. tax advice contained in this post (including any attachments) is not intended or written by the practitioner to be used, and that it cannot be used by any  taxpayer, for the purpose of (i) avoiding penalties that may be imposed on the taxpayer, and (ii) supporting the promotion or marketing of any transactions or matters addressed herein.