Puerto Rico enacts tax reform; issues guidance
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Tuesday, January 8, 2019

Puerto Rico enacts tax reform; issues guidance

By Payroll and Entitlements Editorial Staff

On December 10, 2018, the Governor of Puerto Rico signed into a law a tax relief package including reductions in tax for businesses. Under the law, the corporate tax rate will decrease, among other things. There is also an increase for the withholding tax on services. This rate is now 10% subject to exceptions. (Act No. 257 of December 10, 2018.)

Rules for deposits of withholding at the source made under Section 1062.01. The Treasury Department (Department) issued guidance to: (i) modify the rules for the deposit of taxes withheld on salaries, specifically the Minimum Quantity Rule, to standardize them to those established by the IRS, and (ii) repeal CC RI 07-05. The new law amends the provisions of Code Sec. 6080.05 for the purpose of obliging the Department to review the Minimum Quantity Rule, so that it is uniform with the limit amount established by the federal IRS. The provisions of this Administrative Determination have immediate effect and will be effective for the deposits of the withheld taxes on salaries paid as of January 1, 2019. (Puerto Rico Administrative Determination No. 18-14, December 10, 2018.)

Changes for withholding taxes in the transition to SURI. A Circular Letter was issued with the purpose of notifying that, effective December 10, 2018, changes will come into force in Unified Internal Revenue System (SURI) in relation to the transactions related to withholding tax at source. All transactions related to withholding tax at source, in Subtitle A of the Internal Revenue Code of Puerto Rico of 2011, including the deposit of income tax withheld and the electronic filing of withholding receipts and informative declarations, will be completed through SURI. In addition, in accordance with the provisions of Circular Letter of Internal Revenue No. 18-16, in order to carry out any transaction in SURI, the employer, withholding agent or payer must be registered and have a taxpayer account in SURI. (Puerto Rico Circular Letter No. 18-17, (CC RI 18-17),  December 7, 2018.)

SURI registration process.  On December 10, 2018, the Department of the Treasury will complete Launch 2 of the transition to the (SURI). Therefore, effective on said date, all transactions related to: (i) withholding tax, including the filing of withholding receipts and corresponding informative statements; (ii) estates and gifts, and (iii) excise taxes, taxes on alcoholic beverages and license fees, can only be made electronically through SURI. The guidance was was issued with the purpose of establishing the procedure that, effective on Monday, December 10, 2018, must be followed at SURI to: (i) register an existing taxpayer; (ii) register a new taxpayer; (iii) create a Contributory Account; (iv) establish the types and levels of access in each Tax Account, and (v) notify the procedure to claim any discrepancy in the information transferred to SURI in the conversion that will be carried out as part of Launch 2. (Puerto Rico Circular Letter No. 18-16 (CC RI 18-16), December 7, 2018.)

Postponement of the due date of all filings or payments from December 5 and 20, 2018. On December 3, 2018, the Department issued guidance on postponing until December 21, 2018, the date of expiration of any return, declaration, payment or any other transaction related to any contributory type and whose expiration date is between December 6 and 20, 2018. The Department issued the guidance to provide notice that the postponement period will also include all the filings, payments or transactions of any tax type whose expiration date was Wednesday, December 5, 2018. (Puerto Rico Informative Bulletin No. 18-22, December 5, 2018.)

Relief certificate for withholding tax on payments for services rendered for 2019.  The Department issued guidance to establish the new procedure of: (i) issue of the Automatic Relays, and (ii) request and issuance of the Relief and Relief of New Businesses for 2019. Code Sec. 1062.03 establishes the general obligation to all persons, natural or legal, that in the exercise of an industry or business activity or for the production of income in Puerto Rico, make payments to another person for services rendered, to deduct and retain seven percent on said payments as income tax. Section (g) of said section authorizes the Secretary of the Treasury to grant partial and total relief of the 7% Withholding, subject to the terms and conditions established therein. For these purposes, the Department issues to the person receiving the payment a Certificate of Relief of Withholding at Source on Payment for Services Rendered, if it is determined that they qualify for the relief. Section 1062.03 (b) (8) of the Code establishes that the 7% Withholding will not apply to payments for services to individuals, corporations and companies during the first three (3) years of the beginning of an activity of provision of services. For these purposes, the guidance clarifies the term "commencement of a service provision activity" and establishes the evaluation criteria used by the Department to consider a business as an entity. "New business" subject to the New Business Relief provided by Section 1062.03 (b) (8) of the Code. On October 2, 2018, the Department issued the Internal Revenue Information Bulletin No. 18-16 with the purpose of establishing that, effective Monday, December 10, 2018, all transactions related to withholding at the source could only be made electronically through SURI. (Puerto Rico Circular Letter No. 18-15, December 5, 2018.)

Postponement of due dates from December 6 to 20, 2018. On December 10, 2018, the Department will integrate in SURI all transactions related to: (i) withholding at source; (ii) estates; (iii) gifts, (iv) excise taxes and taxes on alcoholic beverages, and (v) Internal Revenue License rights. Therefore, all transactions related to these tax rates will only be made electronically through SURI. Taking into consideration the limitations in the availability of the aforementioned services, the Department is notifying filers that any return, declaration, payment or any other transaction related to any contributory type and whose expiration date is between days December 6 and 20, 2018, will be postponed until Friday, December 21, 2018. (Puerto Rico Informative Bulletin No. 18-21, (BI RI 18-21), December 3, 2018.)

Validation of documents and certificates issued through SURI. On December 10, 2018, the Department of the Treasury will complete Launch 2 of the transition to SURI. As part of this Launch, all documents and certificates issued by the Department to a taxpayer to carry out procedures with any person or agency related to: (i) withholding at source; (ii) Estates and Gfts, and (iii) Excise taxes, taxes on alcoholic beverages and Internal Revenue Licenses, will only be issued electronically through SURI. Information Bulletin No. 18021 was issued with the purpose of: (i) clarifying that all Certificates issued through SURI will be as valid as any previous format used by the Department, and (ii) notifying about the process to validate any of these Certificates or any other document to be issued by the Department through SURI. (Puerto Rico Information Bulletin No. 18-20 (BI RI 18-20), November 30, 2018.)

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