The Treasury Department of the Commonwealth of Puerto Rico, on December 29, 2015, issued two guidance items—administrative determinations (ADs)—concerning the new monthly sales and use tax return and concerning the introduction and implementation of a value added tax (VAT) system.
Puerto Rico expanded the scope of its sales and use tax to designated professionals, business to business, and services rendered by a non-resident. These services are now subject to a special 4% rate of sales and use tax and are reported on a new return—Form SC 2915 F—effective October 1, 2015.
In AD 15-23 (October 30, 2015), the Puerto Rico Treasury stated that any merchant that, for sales and use tax purposes, is a withholding agent must submit Form SC 2915 F, even if a merchant does not have any reportable services.
Effective retroactively (October 30, 2015), if a merchant sells exclusively tangible personal property and has not received services from a non-resident, the merchant will not be required to file the new return.
In addition to the expansion of the scope of the sales and use tax, Puerto Rico Act No. 72 (May 29, 2015) replaces the Commonwealth sales and use tax with a new VAT, imposed at a rate of 10.5% effective April 1, 2015. That law included a measure that the Puerto Rico Treasury Secretary could postpone for 60 days application of the VAT provisions.
AD 15-26 announces that the VAT will be effective April 1, 2016. Accordingly, beginning April 1, 2016, all taxable transactions—including taxable services currently subject to the sales and use tax at a 4% rate—will be subject to the new VAT at a rate of 10.5%. In addition, all VAT credits will be available, effective April 1, 2016. However, refunds of excess VAT credits will only be granted effective June 1, 2016.
AD 15-26 further provides that the tax receipt, debit notes, and credit notes for VAT purposes will be accepted temporarily by a manual or alternative method effective April 1, 2016. Certificates issued under the sales and use tax system will remain in effect until the new VAT certificates are issued.
Finally, eligible resellers for sales and use tax purposes will remain exempt until June 1, 2016.
The Puerto Rico Treasury is expected soon to issue regulations, circular letters, administrative determinations, and relevant newsletters providing further guidelines for the transition to the new VAT.
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