United States

Puerto Rico: New Guidance on SUT Returns and Introduction of Value Added Tax

Jan 11, 2016
From KPMG TaxWatch

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On December 29, 2015, the Treasury Department of the Commonwealth of Puerto Rico (Treasury) issued Administrative Determination (AD) 15-25 providing guidance on the new monthly Sales and Use Tax return (Form SC 2915 F) and AD 15-26 regarding the introduction of value added tax (VAT) in the Commonwealth. Effective October 1, 2015, the Commonwealth of Puerto Rico expanded the scope of its sales and use tax (SUT) to designated professionals, business to business, and services rendered by a non-resident, which are now subject to a special four percent SUT rate and are reported on a new return, Form SC 2915 F. In AD 15-23, issued on October 30, 2015, the Treasury stated that any merchant that for SUT purposes is a withholding agent, is required to submit Form SC 2915 F, even if a merchant does not have any reportable service. According to AD 15-25, 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 SUT scope, Act No. 72, dated May 29, 2015, replaces the Commonwealth SUT with a new value added tax Commonwealth VAT of 10.5 percent effective April 1, 2015, which the Secretary of the Treasury may postpone for 60 days. According to AD 15-26, the VAT will take effect on April 1, 2016 progressively. Effective April 1, 2016, all taxable transactions (including taxable services currently taxable under the SUT at 4 percent) will be subject to the new Commonwealth VAT of 10.5 percent. 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 SUT will remain in effect until the certificates are issued under the new VAT. Finally, Eligible Resellers for SUT purposes will remain exempt until June 1, 2016. The Treasury will soon issue regulations, circular letters, administrative determinations, and relevant newsletters providing further guidelines for the transition to the new VAT. For more information, please contact Leah Durner at 202-533-5542 or Carlos A. Molina at 787-622-5311.

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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.