Newsletter:

Amnesty for Municipal License Tax in Caguas and Retirement Plans Mandatory Amendments

30 December 2016

Volume of Business Tax Amnesty in the Municipality of Caguas

On November 1, 2012 the Autonomous Municipality of Caguas (“Municipality”) approved Ordinance Number 12B-22 (“Ordinance”). The Ordinance creates an amnesty program for Volume of Business Declarations (“VOBD”), also known as “patente” tax, not paid to the Municipality (“Amnesty”). The Amnesty starts on January 1, 2013 and ends on June 28, 2013. Taxpayers that did not fully pay their VOBDs to the Municipality for the fiscal years started July 1, 1993 through June 30, 2008 will be able to pay the amount owed without any interest, penalties or surcharges. Taxpayers that did not pay their VOBDs to the Municipality for fiscal years started July 1, 2008 through June 30, 2012 may pay the amount owed with only a 5% interest and without any surcharges or penalties. Moreover, Taxpayers may enter into a Closing Agreement with the Municipality, requesting full or partial exemption for these periods. If a Closing Agreement is subscribed, the same cannot be reopened, modified or audited. Taxpayers which have been sued by the Municipality for the payment of debts covered by the Amnesty can pay the amount owed under the Amnesty. In these cases, in addition to the aforementioned terms of payment, taxpayers must pay an additional 10% (for a total of 15%) over the outstanding balance. In order to be eligible for the Amnesty, the Taxpayer must: (1) file all VOBDs not filed between 1993-1994 through 2011-2012; (2) have filed and paid the VOBD for the fiscal year 2012-2013; (3) be current in the filing and payment of the municipal Sales and Use Tax (“SUT”), or if the taxpayer has a SUT debt, subject to the conditions established by the Director of Finance of the Municipality, sign a commitment to pay in accordance with Section 6051.08 of the Puerto Rico Internal Revenue Code; and (4) if applicable, must have paid any administrative fines for operating a business without the required licenses, or have settled the fines by paying an amount not less than 50% of the indebted amount. All Taxpayers that pay under the Amnesty, regardless if a Closing Agreement is signed, renounce to any claim of overpayment for the periods under the Amnesty. If the Taxpayer does not agree with the amount owed to the Municipality, sufficient evidence should be provided, and the Municipality will determine if the claim is correct. If the Municipality determines that the Taxpayer did not prove that the amount owed was a lesser amount, and said notice is made after June 28, 2013 by the Municipality, the Taxpayer will have 30 days to pay with the benefits provided by the Amnesty. All petitions under the Amnesty must include a $50.00 non-refundable payment, per office or establishment. All payments must be made in cash, credit or debit card, certified check, or postal or bank money order. No payment plans will be authorized.

Extension of Time to Adopt Retirement Plan Amendments and to File Requests for Qualification under the Puerto Rico Internal Revenue Code of 2011

Circular Letter No. 11-10 (“CL 11-10”) issued by Puerto Rico Treasury Department on December 16, 2011, provides that a retirement plan that provides benefits or contributions to participants residents of Puerto Rico must be amended to adopt the new qualification requirements established by the Puerto Rico Internal Revenue Code of 2011, as amended (“2011 Code”), in order to maintain its qualified status CL 11-10 established that the amendments must be adopted on or before the last day of the first plan year commenced on or after January 1, 2012. Therefore, for calendar year plans, the amendments needed to be adopted on or before December 31, 2012. On November 28, 2012, the Treasury issued Circular Letter Number 12-09 (“CL 12- 09”) extending the due date to adopt the required qualification amendments to retirement plans under the Puerto Rico 2011 Code until June 30, 2013, or the last day of the first plan year commenced on or after January 1, 2012, whichever is later. CL 11-10 required that said plans submit a Request for Qualification with the Treasury including the new requirements, no later than the due date for filing the income tax return, including any extension, for the first taxable year commencing after December 31, 2011 (taxable year 2012). CL 12-09 also extended the due date to submit the Request for Qualification until September 30, 2013 or the due date for filing the employer’s income tax return, including any extension, for the first taxable year commencing after December 31, 2011, whichever is later. Now, pursuant to CL 12-09, calendar year plans have until June 30, 2013 to adopt the amendments under the 2011 Code and until September 30, 2013 to submit the Request for Qualification with Treasury. Fiscal year plans and employers must determine which due date will be the later based on the above rules according to their respective plan and taxable years. The provisions of CL 12-09 are effective immediately and apply to taxable years commenced on or after January 1, 2012.