Newsletter:

New Quarterly Withholding Reporting and San Juan SUT Amnesty Program

May 22 2019

NEW QUARTERLY INCOME TAX WITHHOLDING REPORTING

On April 4, 2019, the Department of Treasury issued Circular Letter No. 19-10 to provide the filing instructions for the new Quarterly Return of Tax Withheld on Payments for Services Rendered – Form 480.6 SP-1. The form is for any person required to deduct and withhold any tax under Section 1062.03 of the Puerto Rico Internal Revenue Code of 2011, as amended, i.e., tax withholding on payments made for services rendered.

The payor or withholding agent must file Form 480.6 SP-1 electronically through Internal Revenue Integrated System (“SURI”) no later than the last day of the month following the close of each quarter ended on March 31, June 30, September 30 and December 31 of each year; there are no requests for extension of time to file available for this form.  Although the first deadline for this new requirement was due back on April 30, 2019, the due date for the quarter ended March 31, 2019 was postponed until July 31, 2019.  Thus, the first and second 2019 quarter reporting are both due by July 31, 2019.

Every person required to deduct and withhold tax on payments for services rendered shall remit to PR Treasury the tax deducted during the calendar month no later than the 15th day of the following month. Any late payment will incur in interest, surcharges and penalties. However, the Department of Treasury has established a new deposit minimum quantity rule for those withholding agents who have withheld tax of less than $2,500 during the calendar quarter. In these cases, the tax withheld may be remitted quarterly along with the filing of the Form 480.6 SP-1 without incurring in any late payment penalties.

Withholding agents should keep in mind that the total tax withheld reported at the end of the year on the Informative Returns Forms 480.6B must match the tax withheld reported on the Forms 480.6 SP-1 during the calendar year. Any difference may result in an assessment of interest and penalties.

AMNESTY PROGRAM - SAN JUAN MUNICIPAL SALES AND USE TAX DEBTS

On March 26, 2019, the Autonomous Municipality of San Juan (“Municipality”) approved Ordinance Number 23, Series 2018–2019 (“Ordinance”). The Ordinance creates an amnesty program for the municipal portion of the Sales and Use Tax (“SUT”), also known as “IVU”, not paid to the Municipality (“Amnesty”) before January 1, 2019. The Amnesty starts on May 1, 2019 and ends on September 30, 2019.

Taxpayers that did not fully pay their SUT to the Municipality before January 1, 2019 will be able to pay the principal owed, without any interest, penalties or surcharges. In contrast, taxpayers which have been sued by the Municipality for the payment of debts covered by the Amnesty can fully pay the amount owed under the Amnesty, but an additional 10% over the outstanding balance must be paid.

Moreover, Taxpayers may enter into a 12-month payment plan with the Municipality if they are willing to pay an extra 10% of the amount owed (20% must be paid upfront). Note that defaulting on a payment plan will make the balance due and recoverable in court. Although taxpayers who defaulted on a previous payment plan are ineligible for this option, they may be eligible after showing just cause to the Municipality Director of Finance’s satisfaction. If approved, such payment plan will require a 35% upfront payment, or a payment bond.

In order to be eligible for the Amnesty, a Taxpayer must not have any outstanding debt regarding the Municipal license tax (“patente municipal”), or at least show that the Municipality agreed to a payment plan and that it is being paid accordingly.

All petitions under the Amnesty must include a non-refundable processing fee equal to 5% of the amount owed, that will be no less than $100, but not greater than $1,500.

In addition, if the Taxpayer does not agree with the amount owed to the Municipality as of December 31, 2018, 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 September 30, 2019 by the Municipality, the Taxpayer will have 30 days to pay with the benefits provided by the Amnesty.