The Treasury Department of the Commonwealth of Puerto Rico on February 19, 2016, published draft regulations for a value added tax (VAT) system. Effective April 1, 2016, Puerto Rico will replace its sales and use tax (imposed at rates of 10.5% and 4%) with a new VAT to be imposed at a rate of 10.5%.
Read the draft regulations for VAT (Spanish) [PDF 5.6 MB]
The VAT draft regulations are largely based on the existing regulations for sales and use tax, and provide further explanations and examples for the definitions for VAT purposes set forth in Subtitle DD of the 2011 Internal Revenue Code of Puerto Rico.
While the VAT draft regulations do not clarify the general sourcing rules for sales of goods and services, they provide detailed rules for the sourcing of telecommunication services. The VAT draft regulations:
Puerto Rico’s Treasury did not provide details on the future invoicing process which would be crucial to obtain adjustments, credits, and refunds. Also, the draft regulations are silent with respect to the registration and various certificates described in Subtitle DD of the 2011 Code.
Puerto Rico’s Treasury will also have to issue guidance with respect to the transition from the sales and use tax regime to the VAT system as well as publish draft VAT returns and guidance relating to their submission.
Comments and suggestions or questions regarding the VAT draft regulations may be sent to: ComentariosReglamentoIVA@hacienda.pr.gov.
For more information on the new VAT regime in Puerto Rico, contact a KPMG tax professional:
Leah Durner | +1 (202) 533-5542 | firstname.lastname@example.org
Carlos A. Molina | +1 (787) 622-5311 | email@example.com
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