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Puerto Rico

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Puerto Rico Fiscal Plan includes Corporate Tax Reform

The Puerto Rican government has issued its fiscal plan to address the U.S. territory's deficit issues. The plan includes revenue enhancement measures estimated to reduce its spending gap by USD 12.9 billion over 10 years. The measures are broken down into three main areas, summarized as follows:

  • Corporate tax reform measures, including a substitute for the excise tax under ACT 154 that will include the following alternatives or a combination thereof:
    • A modified version of the effectively connected income source rule;
    • An increased income tax rate on exempted income;
    • An income tax withholding on imputed royalty or cost allocation payments;
    • A withholding income tax on profit distributions;
  • Tax compliance improvements, including:
    • Creation of an award-based whistleblower office to improve compliance and reduce "Lack of Fear";
    • Deployment of internet sales tax collections through economic and affiliate nexus instead of consumer self reporting;
    • Implementation of point of sale (POS) Sales and Use Tax (SUT) collections;
    • Detection of non-compliance at scale using advanced analytics;
    • Development of capabilities to significantly expand capacity to address identified non-compliance through correspondence audits, targeted notices, and other methods;
    • Deployment of a lean operations toolkit to increase auditor and institutional capacity;
  • Fee adjustments, including:
    • An increase in motor vehicle license fees by 10%;
    • An increase in insurance fees by 5%;
    • An increase in traffic fines fees by 10%;
    • An increase in other miscellaneous permits, charges and royalties by 10%.

Click the following link for a copy of the Fiscal Plan.

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