Tuesday, January 18, 2022

Treasury Secretary Delays Value-Added Tax Until June 1

By on March 7, 2016

SAN JUAN – Treasury Secretary Juan Zaragoza announced Monday that he will exercise the power conferred in Section 6110.04 of the Internal Revenue Code of 2011, and will extend the duration of the Sales and Use Tax (IVU by its Spanish acronym) until May 31, 2016. Therefore, the Value Added Tax (IVA) will come into effect in Puerto Rico on June 1, 2016.

“The Internal Revenue Code gives me the power to extend the term of the IVU for a period not exceeding 60 days, starting March 31, 2016. Following numerous complaints received by the department by merchants seeking to postpone the date the IVA would take effect, and in consideration of the proposals being considered by both the executive [branch] and the Legislature to modify our current tax system, I believe it is prudent to extend the effective date of the IVA until June 1, 2016,” Zaragoza’s Monday statement reads.

Puerto Rico Treasury Secretary Juan Zaragoza

Puerto Rico Treasury Secretary Juan Zaragoza

“The Treasury Department is ready to start the IVA on 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 the tax proposals under consideration or that will soon be submitted,” the secretary stated.

Zaragoza explained he will revise the guidelines for merchants with the new dates for the transition to the IVA’s implementation, adding that the 4 percent tax on services between businesses and designated professional services, known as B-to-B is still in effect.

On the possible effect on the estimated revenues of the IVU / IVA, due to the 60-day extension of the IVA’s introduction, the secretary indicated that a portion will be offset with current B-to-B revenue, “whose behavior has exceeded the monthly estimate.”
“We hope to minimize this impact [on revenue] by expanding and intensifying the oversight strategies that have been taking place in recent months,” he said, referring to the interventions conducted on tax-evading businesses.

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