On 1 October 2015, Puerto Rico's Governor Alejandro García Padilla signed into law Bill 1433, which amends Act 72-2015 approved in May 2015. That Act includes a number of changes regarding sales and use tax (SUT), including the introduction of a 4% SUT on previously exempt business-to-business and professional services effective 1 October 2015 as part of a transition to a value added tax (VAT), which replaces SUT effective 1 April 2016 (previous coverage).
Bill 1433 amendments include an annual sales threshold of USD 50,000, below which SUT will not apply. From 1 April 2016, the threshold will be increased to USD 125,000. In addition, exemptions are provided for:
Bill 1433 also clarifies that, except for the exemptions above, services provided by a non-resident to a Puerto Rican resident, regardless of where the services are rendered, are subject to SUT provided the services are directly or indirectly related to the operations or activities conducted in Puerto Rico by the recipient of the services. In such cases, the Puerto Rican recipient is responsible for the payment of the tax.
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