Puerto Rico: Sales and use tax continues, delayed VAT implementation

Puerto Rico: Sales and use tax continues, delayed VAT

The Puerto Rico Treasury Department (Departmento de Hacienda) this week announced that the planned transition from the current Commonwealth sales and use tax to the new value added tax (VAT)—originally scheduled to be effective April 1, 2016—has been delayed until June 1, 2016. Therefore, the Commonwealth sales and use tax remains applicable at the rate of 10.5% for most sales of goods and services and at the special rate of 4% for sales of business-to-business services and designated professional services.

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The March 7 announcement (Spanish) did not modify the municipal sales and use tax, imposed at 1%, and that remains applicable to all sales currently subject to the Commonwealth sales and use tax rate of 10.5%.

Follow-up guidance

In Determinación Administrativa 16-04 (Spanish) issued March 8, 2016, the Puerto Rico Treasury Department explained that it delayed the VAT effective date because of requests received from merchants. Additionally, it appears the Puerto Rico executive and legislative branches are considering amendments to the tax system. The guidance:

  • Clarifies that any certificates of reseller, municipal sales and use tax exemption certificates, and exemption certificates for manufacturing plants that are in force as of December 31, 2015, are automatically extended until further notice
  • States that any renewal applications for certificates that expired after December 31, 2015, are cancelled
  • Provides that for all certificates that expired on or before December 31, 2015, merchants must submit a renewal application pursuant to the process established for the sales and use tax 
  • Reiterates that merchants that have either a private letter ruling or a closing agreement with the tax authorities and for which they want to maintain its validity under the new VAT system must obtain a “letter of ratification”


Read a March 2016 report [PDF 40 KB] prepared by KPMG LLP: Puerto Rico Delays Effective Date of VAT Implementation

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