United States

Puerto Rico: Tax Commission Recommends Pursuing Implementation of VAT

Aug 31, 2015
From KPMG TaxWatch

Loading the player...

On August 12, 2015, the Commission to Consider Alternatives to Transform Consumption Taxes (the Commission) created by Act No. 72 published its report on whether excise taxes should be imposed instead of a value added tax (VAT). Recall, on May 29, 2015, the Governor of Puerto Rico signed Act No. 72, which replaces the Commonwealth’s sales and use tax (IVU) with a new VAT system effective April 1, 2016, or following any extended sunset date of the IVU. The Act also created the Commission, which had 60 days from the effective date of the Act to make its recommendations on the viability of tax reform options in Puerto Rico. According to the Commission, the Commonwealth of Puerto Rico should not return to the excise tax system also known as “arbitrio general.” Returning to the arbitrio general would have “distorting repercussions in the supply chain and on prices of both imported and locally produced goods.” The Commission concluded that a VAT system is a more efficient alternative for taxing consumption. Consequently, Puerto Rico will pursue the VAT implementation included in Act No. 72, unless the state legislature repeals the indirect tax reform. Entities doing business in Puerto Rico are also reminded that significant sales and use tax changes take effect October 1, 2015. In particular, the scope of the IVU is expanded to include business-to-business services and designated professional services. For more information on Puerto Rico’s indirect tax reform, please contact Carlos A. Molina at 787-370-2340 or Jeremy Gray at 267-256-3497.

For more information about TWIST or to view archived episodes, please visit our TWIST homepage.

 Subscribe to TWIST via iTunes, or  Subscribe via RSS.

To receive TWIST e-mails each Monday morning, make sure that state, local and indirect is checked off as one of your topics of interest on the KPMG TaxWatch registration site.

The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.