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Puerto Rico Defers VAT Plans

by Mike Godfrey,, Washington

16 March 2016

Puerto Rico's Treasury announced on March 7, 2016, that the territory has decided to defer until June 1, 2016, the replacement of the sales tax with a value-added tax.

Treasury Secretary Juan Zaragoza Gomez said: "The Internal Revenue Code gives me the power to extend the term of [the sales tax], for a period not exceeding sixty days from March 31, 2016. Following numerous complaints [they have received from] traders seeking to postpone the effective date of VAT, and in consideration of the proposals being considered, both the Executive and the Legislature [have agreed to] extend the effective date of VAT…"

"The Department of Finance is ready to start the VAT from April 1, 2016, however we understand that the postponement until June 1, 2016, as established by Law," will allow more time for businesses to prepare for the transition, he said.

He explained that the Government has sought to make the transition to VAT as "less invasive and [as] simple as possible."

Puerto Rico's sales and use tax is levied at a combined 11.5 percent rate, comprising a 10.5 percent federal element and a one percent municipal element. A tax on certain professional services was introduced, with a four percent rate, on October 1, 2015. The Government has confirmed that this will continue to be levied. The value-added tax, which will apply to a broad range of goods and services will feature the same 11.5 percent rate, to prop up the Government's finances.

TAGS: Finance | tax | business | value added tax (VAT) | sales tax | VAT legislation | legislation | Puerto Rico | services

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