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.

 

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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.

Issues with PICO and the collection of Sales and Use Tax (IVU) at the Ports

Puerto Rico encountered problems in implementing the 6% IVU Sales and Use Tax collection at the ports during its September roll-out.  The problem was due to the PICO system - which presently is an optional system of filing the tax. Despite the roll-out problems, the tax is still required to be paid via the traditional means by utilizing paper forms.  Once fully implemented the PICO system will be the only way to make IVU payments at the ports.

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.

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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, we inform 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 Sales and Use Tax Modifications in 2014

On July 1st, 2014 Act No. 80 of 2014 was passed.  In the act were amendments regarding the Sales and Use Tax for Puerto Rico.

Modifications we made to: Monthly Sales and Use Tax Returns, Sales and Use Tax bond for Importers, Exempt Purchases Certificates, Foreign Trade Zones, and Sales and Use Tax Credit Limitations.

Some details of the modifications include: a new date for monthly Sales and Use Tax filing, a new form " Use tax Declaration for Release of Tangible Personal Property", and a new requirement for the Importers Bond to cover 100% of the Sales and Use Tax obligation plus an additional 25% for penalties and fees.  In addition, for the purposes of the Sales and Use Tax, tangible personal property destined for foreign trade zones within Puerto Rico must be declared and will be subject to Sales and Use Tax.

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, we inform 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.

Tourism Development in Puerto Rico

The Tourism Development Act of Puerto Rico of 2010 (Act 74) provides incentives for tourism businesses. This act covers hostels, guesthouses, hotels, condo-hotels, and timeshares/vacation clubs. In addition it includes theme parks, golf courses, marinas for tourism, however casinos are excluded.  

The Act also establishes a tax credit of the minimum of 10% of the total cost of the project or 50% of equity invested (including land). The credit is made available over a two year period. Any unused tax credits may be carried forward.  Additionally, the tax credits may be assigned, transferred or sold.  

In order to qualify, a business must be utilizing new facilities, substantially improved facilities or existing facilities which have not been used for three or more years. 

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, we inform 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.

International Insurer and Reinsurer (Act 98)

Act 98 which is known as the International Insurer and Reinsurer Act (IIRA) enables the creation of international insurers, reinsurers and holding companies. These companies are eligible for attractive tax treatment. The intent of the act was to facilitate the growth of export insurance and reinsurance sectors by establishing a level playing field for Puerto Rico insurers to compete with Bermuda, Cayman Islands etc. Only insurer/reinsurers or another international insurer holding companies that are approved by the Commissioner of Insurance are eligible for this attractive tax treatment. Generally, the tax treatment is 0% on income tax dividends, distributions from liquidation, as well as other taxes. In addition, revenues for non-residents may also be exempt. 

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, we inform 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 Real Estate Investment Trusts (REIT)

Under Puerto Rico law Real Estate Investment Trusts are permitted to be formed allowing real estate ventures to receive a tax designation for corporations investing in real property that reduces or eliminates corporate income taxes.  This is designation is similar to REIT structures in the United States.  The definition of "Real Property" includes, Apartment Buildings, Hospital facilities, Hotels, Manufacturing buildings, Office buildings, Parking facilities, Shopping facilities, etc.

In order to become a REIT one needs to conform with type-of-income and source-of income requirements in the Puerto Rico code.  The rules include but are not limited to a requirement that Puerto Rico REITs must have 95% or more of the gross income be derived from:  

• Dividends; 

• Interest; 

• Rents from real property; 

• Gain from the sale or other disposition of securities or real property (with certain rules)

Additionally, at least 75% of gross income must be derived from:  

•  Rents from Puerto Rico real property;  

•  Interest on obligations secured by mortgages in Puerto Rico;  

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, we inform you that any U.S. tax advice contained in this communication (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.

Export Service Companies - Act 20 Grant

Act 20, which provides incentives for export service companies of bona-fide residents of Puerto Rico provides certain incentives in the form of a grant.  The grant that is issued is actually a form of contract between the Puerto Rico resident and the government of Puerto Rico.  As such, the export services rendered and the services described under the under the contract must be materially be the same.  For the activities described in the contract, a 4% income tax rate is applicable.  However, for the services outside of those described in the contract, the regular Puerto Rico corporate income tax rate applies.

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.