On 7 March 2016, Puerto Rico's Treasury Department issued a press release announcing that the change from sales and use tax (SUT) to value added tax (VAT) will be made effective 1 June 2016 instead of 1 April 2016 as originally planned. The delay is meant to provide businesses more time to prepare and ensure that the change goes as smoothly as possible. Additional guidance was issued the following day.
The final change to VAT at the rate of 10.5% will end an 11-month transition that began with an increase in the standard Central SUT rate to 10.5% in July 2015 and the introduction of a 4% Central SUT rate for previously exempt B2B services in October 2015 (previous coverage). These SUT rates, including a 1% Municipal SUT, will apply through 31 May 2016. Once the final change to VAT is made on 1 June, the Municipal SUT will continue to apply, resulting in an effective rate of 11.5%.
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