Puerto Rico: Sales tax on professional services, business-to-business services

Puerto Rico: Sales tax on professional services

The Treasury Department of Puerto Rico on August 31, 2015, issued guidance regarding the sales and use tax treatment of designated professional services and business-to-business services.

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The guidance—Determinación Administrativa Núm. 15-17 (Spanish)—is effective October 1, 2015.

Overview

The governor of Puerto Rico on May 29, 2015, signed Act No. 72 increasing the commonwealth part of the sales and use tax (known in Spanish as Impuesto sobre Ventas y Uso—IVU) from a rate of 6% to 10.5% effective July 1, 2015. 

Municipalities in Puerto Rico also levy IVU at a rate of 1%, but that levy remains unchanged. Consequently, the total IVU rate is increasing from 7% to 11.5%. 

Act No. 72 further provides that effective October 1, 2015, business-to-business services (B2B) that currently are not subject to IVU, and designated professional services will be subject to a commonwealth IVU of 4%. The municipal IVU will not apply on these services. 

The expansion of the IVU scope is considered as part of the transition to the new value added tax (VAT) that could replace the commonwealth IVU effective April 1, 2016.

 

Read a September 2015 report [PDF 74 KB] prepared by KPMG’s State and Local Tax practice.

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