On 12 August 2015, the Consumption Tax Transformation Alternatives Commission issued its report on the implementation of a value added tax (VAT) regime in Puerto Rico. The law for the implementation of VAT in Puerto Rico was signed 29 May 2015, but included the condition that its final implementation would depend on the findings of the Commission, which looked at alternatives to VAT.
In its report, the Commission states that implementing a VAT system would be the most efficient way to tax consumption, and therefore the transition from sales and use tax (SUT) to VAT in Puerto Rico will continue. The transition from SUT to VAT has already begun with an increase in the total SUT rate from 7% to 11.5% effective 1 July 2015. The transition will continue with the introduction of a 4% SUT on business-to-business and professional services on 1 October 2015, and a final transition to VAT at the rate of 10.5% effective 1 April 2016, while maintaining a 1% Municipal SUT.
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