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Puerto Rico Broadens Sales And Use Tax Base

by Mike Godfrey, Tax-News.com, Washington

05 October 2015


Puerto Rico's Governor has signed legislation that, on October 1, introduced a four percent sales and use tax (SUT) rate on certain previously exempt professional and business-to-business services.

There are certain exemptions to the new tax rate, including services provided by businesses that total less than USD50,000 a year; legal services, including notary fees; advertising and promotional services; and maritime, air, and land transportation services.

Taxable services rendered to other businesses include those provided by a non-resident person to a person in Puerto Rico. In that case, the legislation clarifies that the person responsible for the payment of the tax will be the person that uses the service in Puerto Rico.

Both the special four percent and normal 10.5 percent SUT rates are now intended to remain in effect until the advent, on April 1, 2016, of Puerto Rico's new value added tax (VAT), the first in the United States.

All transactions subject to the SUT (including those newly subject from October 1) will then be subject to VAT at an expected overall rate of 10.5 percent. The additional one percent SUT currently imposed by municipalities will continue to apply after April 1, 2016.

TAGS: tax | business | value added tax (VAT) | sales tax | law | legislation | tax rates | Puerto Rico | United States | services | Tax

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