With slightly over three and a half weeks until Value Added Tax (VAT) was scheduled to take place, the Puerto Rico Department of Revenue has announced that the reports of the death of sales and use tax have been greatly exaggerated. Ley 72-2015 authorized a 10.5% Commonwealth Value Added Tax to begin April 1, 2016, and specifically granted the Secretary of Treasury the power to postpone the effective date of VAT up to 60 days. The Secretary of the Treasury, Juan Zaragoza Gomez, issued a press release notifying taxpayers of the intended delay of VAT until June 1, 2016.
“The Internal Revenue Code gives me the power to extend the term of IVU (sales and use tax) for a period not exceeding sixty (60) days from March 31, 2016. Following numerous complaints the Department has received by vendors seeking to postpone the effective date of VAT, and in consideration of the proposals being considered by both the Executive and the Legislature to modify our current tax system, it is prudent to extend the effective date of VAT to June 1, 2016. The Department of Finance is ready to start VAT from April 1, 2016, however we understand that the postponement until June 1, 2016, as established by Law, is necessary to give space to a weighted analysis of tax proposals under consideration or soon under consideration,” said the Secretary (translation by Isabel Garces).
While Ley 72-2015 authorizes an extension of up to 60 days, it is unclear whether there will be any future modification or delays to VAT. Thomson Reuters is monitoring Puerto Rico’s implementation of VAT. Please continue to check back for up to date analysis and insight.