August 7, 2017
I. Puerto Rico Treasury Department Administrative Determination 17-07
The Puerto Rico Treasury Department (the "Department") has issued Administrative Determination Number 17-07 ("AD 17-07") to provide guidance to merchants following recent amendments to Sections 4042.03 and 4042.04 of the Puerto Rico Internal Revenue Code of 2011 (the "Code").
Specifically, section 4042.03(a)(2) of the Code, as amended by Act 46 of 2017, establishes the requirement of paying SUT to the Department in two semimonthly payments during the month in which the taxable and payable event occurs. The Department has determined that the semimonthly deposit shall only be applicable to the SUT to be deposited with the Treasury. For now, the portion of SUT payable to the municipalities will remain payable with the SUT monthly return filing on or before the twentieth (20th) day of the following month in which the taxable transaction takes place.
II. Merchants subject to new semimonthly SUT remittal
- "Large Taxpayers" as defined in Section 1010.01(a)(35) of the Code.
- Merchants whose monthly volume of SUT deposited during the prior natural year exceed two thousand dollars ($2,000) a month (the "$2,000 Criteria").
III. Simplified method of determining Merchants subject to new semimonthly
The Department has determined that merchants that sell tangible personal property or taxable services subject to the 10.5% SUT in excess of $228,600 during the prior taxable year shall fall within the $2,000 Criteria and shall be subject to the semimonthly SUT remittal. For merchants whose operation began during the prior taxable year, the $2,000 Criteria shall be met if the total monthly sales for the months in operation average more than $19,050 (that is, $228,600 divided by 12 months).
The Department has further determined that for merchants dedicated exclusively to the sale of services between merchants ("B2B") or designated professional services subject to the 4% SUT, such merchants with sales in excess of $600,000 during the prior taxable year shall fall within the $2,000 Criteria and shall be subject to the semimonthly SUT remittal. For merchants whose operation began during the prior taxable year, the $2,000 Criteria shall be met if the total monthly sales for the months in operation average more than $50,000 (that is, $600,000 divided by 12 months).
The determination of whether a certain taxpayer is subject to semimonthly remittals of SUT shall be made once a year based on the information of total taxable sales realized during the prior taxable year. Once the determination has been made, the merchant shall be bound to carry on with the semimonthly payments for the entirety of the natural year. For purposes of determining the obligation to make deposits of SUT in semimonthly payments, the information reflected on the Monthly SUT Returns, Form SC 2915 filed via the Sistema Unificado de Rentas Internas ("SURI"), shall be used.
Finally, merchants subject to both the 10.5% and 4% SUT rates shall be obliged to make semimonthly payments if prior natural year sales exceeded $228,600.
IV. Semimonthly Payment Due Dates
Section 4042.03(a)(2)(A)(ii) of the CODE establishes the following due dates for remittal of semimonthly payments:
- 1st Semimonthly Payment - 15th of each month.
- 2nd Semimonthly Payment - last day of the month.
V. Minimum remittal amounts of each semimonthly payment
Pursuant to 4042.03(a)(2)(A)(iii) of the Code, a merchant subject to semimonthly SUT payments shall be deemed in compliance with the remittal obligation if the sum of both semimonthly payments deposited with the Department for a given month, totalized at least one of the following amounts:
- Eighty Percent (80%) of the SUT determined for such month. For purposes of this amount, the term "determined" shall mean the "Total SUT Determined" reflected in the Monthly SUT Return, net of the following allowable credits:
- Credit for taxes paid by a reseller in the purchase or import of inventory for resale.
- Credit for uncollectable amounts.
- Credit for the sale of merchant's property, and
- Overpayment of prior period to be credited to the current tax liability (collectively, the "Applicable Credits").
- Seventy Percent (70%) of SUT remitted during the same month of the prior year. For these purposes, the term "remitted" shall mean the "Total SUT Determined" reflected in the Monthly SUT Return of the same month of the prior year, net of Applicable Credits. (collectively, the "80/70 Rule".)
Additionally, merchants subject to the semimonthly SUT payments must remit as 1st payment the lesser of: (1) eighty percent (80%) of the collected SUT over sales realized during days 1 through 14 of each month, net of Applicable Credits; or (2) half of seventy percent (70%) of SUT determined, net of Applicable Credits, according to the Monthly SUT Return corresponding to the same month of the prior year.
VI. Penalty for Failure to Deposit Semimonthly Payments
A ten percent (10%) penalty shall be imposed over the failed semimonthly tax deposit amount.
VII. Merchants currently under the Taxpayer Rehabilitation Program.
Notwithstanding the new provisions of Section 4042.03 of the Code regarding semimonthly SUT deposits, taxpayers under the Taxpayer Rehabilitation Program established under the Internal Revenue Circular Letter 17-05 shall continue to remit their SUT in weekly payments, as established in their payment agreement. However, such taxpayers must also comply with the 80/70 Rule and failure to comply will result in the penalty established in the foregoing section.
VIII. Effective Date of the SUT Semimonthly Payments
The Department has determined that in order for merchants to accommodate to the new amendments, the new semimonthly SUT payment obligation shall commence in: (1) August 2017 for "Large Taxpayers" and (2) September 2017 for those meeting the $2,000 Criteria.
The provisions of AD 17-07 were effective immediately.