Friday, December 6, 2019

So far, only 25% of eligible businesses can charge lower sales tax on prepared foods

By on September 25, 2019

See which establishments are certified

SAN JUAN — Mere days before a lower sales and use tax (IVU by its Spanish acronym) on prepared food takes effect, only a quarter of eligible businesses have been certified to offer the reduced 7 percent rate, the Puerto Rico Treasury Department said Wednesday.

Treasury has sent reduced IVU certificates to 5,345 businesses that prepare food, or 25.5 percent of the 21,000 businesses registered under the North American Classification System (NAICS) that could qualify for the certification, Treasury Deputy Secretary Ángel Pantojas told Caribbean Business on Wednesday.

“We believe that with the ongoing [business] orientation on the certification process, those numbers will continue to increase,” he said.

In fact, Treasury Secretary Francisco Parés said in a release Wednesday that qualifying establishments may still obtain the Authorized Business Certificate in time to collect the reduced IVU by Tuesday, Oct. 1, when the new rate takes effect.

As certified IVU-withholding agents for Treasury, businesses that sell prepared food, such as restaurants and fast-food outlets, will be able to collect IVU at the reduced 7 percent rate, down from 11.5 percent.

On Tuesday, Treasury sent the 5,345 certificates to the Internal Revenue Unified System (SURI by its Spanish acronym) accounts of businesses that completed the compliance process for certification by Sept. 22, Parés said.

The certificate will be valid starting Oct. 1 and should be printed out and placed in a visible location at the entrance of the establishment so customers can identify that the business is authorized to charge the reduced IVU rate.

“We urge those business owners who did not receive the certificate yesterday [Tuesday] and want to be able to charge the reduced rate starting Oct. 1, that they still have this week to catch up and apply for the certificate through their SURI account,” the Treasury chief said in the release, while stressing that uncertified establishments cannot charge the lower rate.

He urged business owners with questions to visit the agency’s website, www.hacienda.pr.gov, or call 787-622-0123, option 8.

Besides possessing a valid merchant registration with a qualifying NAICS code number, businesses wishing to obtain certification must be up-to-date in tax filings, including IVU filings, and not have outstanding tax debt or be participating in a tax-debt payment plan, Parés Alicea explained, adding that businesses must also have a fiscal, or point-of-sale, terminal that is connected to Treasury.

To qualify, the merchant registration must have at least one of the following NAICS codes: 72231, 72232, 72233, 72241 and 72251, the Treasury chief said, adding that businesses currently selling prepared foods with registrations lacking these codes should update them. Once businesses have complied with the requisites, they may apply for the certificate through SURI, he said, noting that these applications are evaluated daily.

Parés said the 7 percent IVU can only be charged by businesses that sell prepared foods, carbonated beverages, and candy and sweets, as defined in Section 4010.01 of the 2011 Puerto Rico Internal Revenue Code, as amended. He said alcoholic beverages are not included in this list.

Treasury had sent automatic notifications Aug. 9 to businesses that qualified under the NAICS code, apprising them of the requirements to obtain the certificate. Then, on Sept. 6, the agency sent more than 17,000 notifications to businesses that had yet to fully comply with the requisites to be able to offer prepared food at the reduced IVU.

Which establishments can charge the lower rate?

Pantojas said many of the eligible businesses that have not been certified failed to have a proper fiscal terminal installed. He said merchants, regardless of their aggregate sales volume, who lack a fiscal terminal should contact any of the 13 processing companies certified by Treasury and identified in Administrative Determination 19-03, which can be accessed online, at www.hacienda.pr.gov.

Pantojas said the monthly maintenance fee of such terminals comes out to $8 to $10 a month, although he could not provide a number for the initial investment businesses must make to acquire the equipment.

“This should not be an impediment given that this system has been established for a decade,” he said.

Another sizeable group of businesses have been unable to get certified because they have outstanding tax debts, Pantojas said, adding that these businesses can become eligible for the reduced IVU certificate as soon as they have agreed to a payment plan with Treasury.

“They don’t have to erase their tax debt to comply; they just have to have an up-to-date installment plan with us,” he said.

The procedure to reduce the current 11.5 percent IVU to 7 percent on prepared food is automatic for businesses connected to SURI and business owners don’t have to visit Treasury offices to get an update on the requirements, given that the messages that have been sent to their accounts explain the steps that must be taken to benefit from the adjustment of the IVU rate, Parés said.

Treasury estimates that the lower IVU rate on prepared foods will result in a decrease of approximately $90 million a year in revenue, Pantojas said. He added, nevertheless, that the reduced rate will encourage prepared food establishments to comply with IVU collections, which he said could increase Treasury’s ability to increase revenues in this tax category. These businesses will likely see a greater influx of costumers due to the lower tax, he said.

See which establishments can charge the reduced IVU rate at SURI’s website, suri.hacienda.pr.gov; click on Authorized Business to charge the 7% on prepared foods.


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