Puerto Rico: Renewed focus on tax debt collection

Puerto Rico: Renewed focus on tax debt collection

The Treasury Department of Puerto Rico has undertaken an aggressive campaign in collecting outstanding balances in taxpayers’ accounts. While the Secretary has publicly recognized that a significant portion of the receivables in Treasury’s books may be time-barred—and thus, not enforceable—there is a clear intent to make every effort for collecting taxes owed and in clearing these collectibles off of Treasury’s records.

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Collection process

The tax collection process normally begins with the issuance of a tax notice to the taxpayer’s last known address.  Depending on the nature of the notice, the taxpayer must respond within a certain period of time.  A lack of response may deem the alleged debt enforceable—again, depending on the circumstances.   

The Puerto Rican government has been strictly following the rules for how much time taxpayers have to object to tax notices and has been proceeding with collection by any legal means available, including the filing of tax liens on bank accounts. This tax collection policy can result, at a minimum, in an inconvenience for taxpayers and may significantly impair the taxpayer’s ability to operate. Thus, it is prudent to address tax notices promptly and appropriately.

Review of common tax notices

The following is a reminder of the most common notices that the Treasury Department of Puerto Rico can issue: 

  • Notice of mathematical or clerical error: Taxpayers have 60 days, following the sending of the notice, to request an adjustment.  
  • Notice of deficiency: The taxpayer can request a reconsideration of such deficiency and an administrative hearing within 30 days following the deposit of the notice in the mail (or within the extension of time granted by the Secretary). 
  • Jeopardy assessment: This is a statutory instrument that the Secretary can use to safeguard tax revenue if the ordinary assessment and collection of a deficiency may be jeopardized by delay. The Secretary must mail a notice of deficiency to the taxpayer and allow the taxpayer to provide a response within 30 days following the deposit of the notice in the mail (or within the extension of time granted by the Secretary). 
  • Certificate of tax lien: This device may be issued by the Secretary when a tax liability has been established, and the taxpayer neglects or fails to pay within the time previously provided by the Puerto Rico Treasury. Generally, the certificate of tax lien is issued with a 30 day-notice after which the Secretary may execute the tax lien.  

 

For more information, contact a tax professional with KPMG in Puerto Rico: 

Rolando Lopez | +1 (787) 622-5330 | rlopez@kpmg.com 

Carlos Molina | +1 (787) 622-5311 | cmolina@kpmg.com

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