Puerto Rico: Tax reform enacted; certain changes effective July 1

Puerto Rico: Tax reform enacted

Newly enacted tax law in Puerto Rico makes changes to the income tax, sales and use tax (known in Spanish as impuesto a las Ventas y Uso—IVU), and excise tax regimes.

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Beginning July 1, 2015, the current IVU rate of 7% will increase to 11.5% (this rate consisting of a commonwealth tax rate of 10.5% and a municipal tax rate of 1%). For periods after June 30, 2015, merchants with a “reseller certificate” may claim a credit equal to 100% of the amount of IVU paid on inventory against the amount of IVU collected on their sales.

Effective October 1, 2015, business-to-business services that are currently subject to IVU will be subject to tax at the 11.5% rate. Business-to-business services and designated professional services, such as those rendered by accountants, lawyers, and engineers, that are not currently subject to IVU will be subject to IVU at a rate of 4% (but not subject to a municipal IVU).

Effective April 1, 2016, or following any extended sunset date of the IVU, the IVU will expire and will be replaced by a new value added tax (VAT) system. VAT at a rate of 10.5% will apply to the introduction into Puerto Rico of taxable articles and to taxable transactions, including a merchant’s sale into Puerto Rico of goods and services, a non-resident’s rendering of a service to a person in Puerto Rico, and other combined transactions. The municipal IVU of 1% will remain in effect.

 

Read a June 2015 report [PDF 57 KB] prepared by KPMG LLP: Puerto Rico comprehensive tax reform enacted

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