An ordinance in the Puerto Rican city of Caguas requires an additional “contribution” from certain individuals or entities having gross receipts exceeding a threshold amount. The “municipal entrepreneur contribution” will apply in Caguas (a city located approximately 20 miles from San Juan) beginning July 1, 2017.
The municipality of Caguas on June 13, 2017, approved the fiscal year (FY) 2016-17 municipal ordinance #28. This ordinance imposes an additional contribution on gross receipts, payable by those individuals or entities that are required to pay any type of municipal license in Caguas and that declare (or have an obligation to declare) that their gross receipts are U.S. $3 million more. This additional contribution on gross receipts is known as the “municipal entrepreneur contribution.”
The “municipal entrepreneur contribution” (MEC) is effective for fiscal years 2017-2018 thru 2020-2021 and will be imposed at a rate of 0.35% over the “volume of business” declared or subject to be declared.
Beginning July 1, 2017, and for each tax year during the period in which the contribution is effective, the municipality will invoice each subject taxpayer for the municipal entrepreneur contribution. The contribution will be due on August 15 in each year, but can be paid in four installments as of August 15, November 15, February 15, and May 15 of the corresponding year(s).
The payment of the contribution will be made to the autonomous municipality of Caguas and is to be accompanied by the appropriate form as designated by the municipality. The payment can be made by certified mail with return receipt; in person; or by other to-be-determined methods of payment.
A monthly penalty at a rate of 1% will apply to any unpaid, outstanding amount, up to a maximum penalty rate of 25% for any remaining amount due as of June 30 of each year.
In view of the current economic situation facing the central government of Puerto Rico, it appears that municipalities such as Caguas will turn toward additional municipal taxes in order to replenish lost revenues. Tax professionals believe more of this type of activity can be expected.
For more information, contact a KPMG tax professional in Puerto Rico:
Rolando Lopez | +1 787-756-6020 | email@example.com
<p>© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.KPMG International Cooperative (“KPMG International”) is a Swiss entity.</p> <p>Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.<br> </p>
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.