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Puerto Rico Enacts Further Tax Amnesty Law

by Mike Godfrey, Tax-News.com, Washington

03 April 2015


Puerto Rican Governor Alejandro Garcia Padilla enacted legislation on April 1 to establish a tax amnesty to encourage the payment of overdue taxes, effective immediately, until June 30, 2015.

The amnesty waives interest and penalties on overdue amounts of income tax, estate and gift taxes, sales and use tax (IVU), and excise tax. The Government is looking to raise around USD290m during its operation, to help reduce the territory's fiscal deficit this year.

The legislation, Incentives for the Payment of Taxes in Advance of the Tax Transformation Project Act, has also been presented as a precursor to the proposed restructuring of Puerto Rico's tax system, which would expand its consumption tax base by replacing the IVU and Gross Receipts Tax with a value-added tax and introduce a personal income tax-exempt threshold.

Until April 30, 2015, taxpayers can prepay, at incentivized rates, tax that will be payable in the future on the capital gains arising from the increased value of certain assets, including equity investments, and contributions to individual retirement and savings accounts.

In addition, any payment of dividends made during the period from January 1, 2015, and April 30, 2015, will be subject to a special tax of five percent (instead of 15 percent) on the total amount received by the shareholder. Dividend distributions made between May 1 and June 30, 2015, will be subject to a special tax of eight percent.

The incentive scheme does not apply to income tax returns made for tax years beginning after December 31, 2013, but does apply to a taxpayer who has received or accrued income subject to tax on or before that date and who has not filed appropriate (or correct) forms or paid the tax then due.

In those cases, the tax payable will be subject to a 20 percent surcharge, but relief will still be available for interest and penalties.

TAGS: individuals | capital gains tax (CGT) | compliance | tax | investment | value added tax (VAT) | sales tax | tax compliance | law | retirement | equity investment | excise duty | legislation | tax rates | gift tax | Puerto Rico | tax breaks | dividends | penalties | individual income tax | Tax

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