Temporary Procedures for Tax Incentive Matters with the Office of Industrial Tax Exemption

October 10 2017

On October 5th, 2017, the Office of Industrial Tax Exemption (“OITE”) issued various publications providing guidelines about the temporary operating procedures that OITE will implement in the recovery of their operations after the passing of Hurricanes Irma and María. The publications seek to clarify the temporary procedures that OITE will enact for the filing of new tax exemption applications, the filling of other documents, including: the filing fees to cover the tax exemption applications, amendments to tax exempt applications or grants and, other pertinent matters. Herein we include a summary of such publications. 

Informative Bulletin No. 2017-01 (“IB 2017-01”)

IB 2017-01 explains Internal Revenue Service Notice 2017-56 (“IRS N-2017-56”). 

IRS N-2017-56, provides a relief to the residents of Puerto Rico and the US Virgin Island that were asked to evacuate affected areas or who were not able to return as a result of Hurricane Maria and Hurricane Irma. Such relief, extends the 14-day period (to meet the “presence test”) to 117 days, effective beginning September 6, 2017, and ending December 31, 2017. Moreover, an individual who is outside of an impacted US territory on any day during this 117-day period will be treated as leaving or being unable to return to the relevant US territory because of Hurricane Irma and Hurricane Maria on such day. 

In practice, the presence test principles established under the Internal Revenue Code of the Unites States have been adopted by the local tax authorities. See also Tax Alert No. 54, issued by BDO Puerto Rico on October 4, 2017, for further explanations of IRS N-2017-56.

Informative Bulletin No. 2017-02 (“IB 2017-02”)

IB 2017-02 notifies the postponement of filing of applications for tax exemption and provides an extension of the terms granted for requirements made by OITE, as follows:

  • OITE will not process any procedure that is normally carried out through their online platform. This includes new tax exemption applications and, the filing of the annual reports under Act 73-2008 Act 83-2010, Act 20-2012, Act 22-2012 and Act 273-2012, as amended. This is effective immediately and will last until further notice from OITE.
  • During this time, if the period provided to file a renegotiation for an application or a successor case under Act 73-2008 comes due, OITE will allow to file said case once the online platform is up and running. Accordingly, the case will be considered timely filed as of the last day of their respective due date to the extent that when filed they include all the required documents and information.
  • An automatic extension is granted until October 31, 2017, to reply to any requirement of additional information or documents made by OITE, as long as the due date to answer said request came due during the Hurricane period.
    • The filing of these documents should be made in printed and digital form using a storage device (USB).
  • OITE will continue to receive and process as usual, all other applications and procedures, including amendments of tax decrees, as they are not processed through the online platform.

Administrative Order No. 2017-01 (“AO 2017-01”)

To accelerate the recovery of Puerto Rico, AO 2017-01 establishes a temporary procedure to allow the filing of tax exemption application for Qualified Doctors under Act 14-2017, known as the “Incentives Act for the Retention and Return of Medical Professionals” (“Act 14-2017”).

  • AO 2017-01 states that only such tax exempt applications can be filed, in printed and digital form using a storage device (USB). This temporary procedure will begin October 10, 2017, until further notice. 
  • OITE further expands that all the applications that were started but not finished through the online platform under Act 14- 2017, should use this temporary procedure to complete the filing of the application.

We will keep you informed of any new information published by OITE.

Our BDO team can help you understand and minimize the risks associated with the temporary relocation. We are here to help you analyze your particular situation and to help you plan accordingly during these extraordinary times.

Please contact any of the members of the BDO team to continue the conversation.