On 26 May 2016, Puerto Rico's Senate voted to override Governor Alejandro Garcia Padilla's veto of legislation to repeal the change from sales and use tax (SUT) to value added tax (VAT). The veto was overridden by the House of Representatives on 23 May. The legislation to repeal the change to VAT was passed on 5 May 2016, and vetoed by the Governor shortly thereafter.
With the veto overridden in both houses, the change to VAT will no longer apply from 1 June 2016 as planned (originally to apply 1 April). However, certain aspects of the transition to VAT will remain, which include the increase in the Central SUT rate to 10.5% that was effective 1 July 2015 and the 4% SUT rate for certain B2B professional services that was introduced 1 October 2015 (previous coverage).
Additional details of the effects of the repeal will be published once the expected guidance from the tax authorities is issued.
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