Puerto Rico Delay VAT Implementation Until June 1st

Puerto Rico aimed to introduce the implementation of Value Added Tax (VAT) or ‘IVA’ (its Spanish equivalent) on April 1st 2016, however, the Puerto Rican Treasury Department issued an Administrative Determination (DA16-04) on March 8th officially postponing this change until June 1st 2016. It is believed by some that the introduction of VAT could be postponed altogether.

The main reason for this postponement is so that the Legislature and Governors’ office have time to review a number of proposals for a tax reform that may supplement or replace the implementation of VAT altogether. Another issue that has affected the decision is the increasing concern shown by many businesses operating out of Puerto Rico at not being able to comply with their VAT requirements by April 1st. A 60-day grace period established within Act 72-2015 has allowed for this delay to be officially enforced.

More on Act 72-2015

In May 2015 the Puerto Rican Governor passed a law enacted as act 72-2015. This made changes to the previous internal revenue code and included the introduction of VAT as well as an increase in Sales and Use Tax. The measures outlined in the act are effective (taxable) from December 31st 2014, unless noted otherwise.

This change to the date in which the VAT Implementation will take effect indicates that new businesses, or businesses needing to renew certification that would have expired at the end of 2015, will need to register or renew under the current Sales Tax law as of March 1st . Any certificates expiring in 2016 can be used as normal until such time that the Department of Treasury announces new procedures or requirements to be met. Also any prior notice needed to be given by the Department of Treasure is no longer valid, despite the original information given in DA-16-04.