Exemption on services rendered by small merchants
Starting from March 1, 2019, merchants who render designated professional services and/or services to other merchants (business-to-business) whose annual volume of business does not exceed $200,000 will be exempt from collecting the Sales and Use Tax (hereinafter “SUT”). The Puerto Rico Treasury Department (hereinafter the “Department”) published the following requirements that an eligible merchant must meet to be considered a non-withholding agent of the SUT; the procedures for the evaluation of the annual volume of business to validate the requirement of the $200,000; and, the due date to meet the requirements.
As a reminder, the designated professional services are:
- Architects and landscape architects
- Certified Public Accountants
- Brokers, Sellers and real estate companies
- Professional draftsman
- Professional real estate appraisers
- Engineers and surveyors
- Services rendered by a “tax returns, statements or refund claims specialist”
- Designated professional services described above if rendered by a nonresident person to a person located in Puerto Rico, regardless of the place where the service was rendered, provided that said services is directly or indirectly related with the operations or activities carried out by such person in Puerto Rico.
In order to determine if the volume of business of the eligible merchant does not exceed $200,000, the volume of business generated on the immediately previous calendar year shall be taken into consideration. If the merchant is part of a controlled group, the volume of business will be determined by taking into consideration the volume of business of all the members of said group.
Starting on March 1, 2019, the Department will issue, its Unified Internal Revenue System (known as “SURI” for its Spanish acronym), a Merchant Registry Certificate – Non-Withholding Agent, to those who meet the following requirements:
- All of the income reported on the SUT Monthly Return comes from providing designated services or other services to other merchants;
- The merchant must be in compliance with the filing and payment of all their tax obligations related to SUT.
- The sum of all income from designated professional services, services provided to other merchants, and exempt services reported in the SUT Monthly Return filed for the twelve months of 2018 calendar year may not exceed $200,000.
- In the event that the merchant did not operate during all of 2018, the sum of all income from designated professional services, services rendered to other merchants and exempt services that has been reported in the SUT Monthly Return filed from the start of operations until December 31, 2018 shall be considered.
- In the event of merchants that have begun operations during the year 2019, the volume of business included as part of its registration in the Merchants Registry will be used.
To obtain and print the Certificate of Non-Withholding Agent, the taxpayer must access its SURI account, and in the “Correspondence” tab will select the option “See Correspondence”. Then it must look for the message “Merchant’s Registry Certificate”. The certificate will be valid for transactions carried out until January 31 of each year.
Any merchant that does not qualify who nevertheless receives a Certificate of Non-Withholding Agent, must make the arrangements with the Department to correct the certificate. On the contrary, those merchants who meet all the requirements and do not receive the Certificate of Non-Withholding Agent by March 31, 2019, may, as of April 1, 2019, make a request through SURI using the link that will be available for these purposes.
At the beginning of each calendar year, the Department will evaluate the compliance with the volume of business requirement to determine if the merchant is entitled to the SUT exemption. This evaluation will be carried out automatically and the aggregate volume of business informed in the SUT Monthly Return corresponding to the immediately preceding year will be used as a base. The Department may also use the Income Tax Return filed by the merchant.
Any merchant who, for non-compliance of its tax obligations related to SUT, as of March 1, 2019 has not received its Certificate of Non-Withholding Agent and is interested in receiving it, must file all of the SUT Monthly Returns that are pending and make the payment of the SUT due through its SURI account. The Certificate of Non-Withholding Agent will be valid from the moment they are issued, so merchants will have to continue charging the SUT even if they are eligible to receive the exemption.
Moreover, those merchants whose volume of business does not exceed $200,000, who provide services to other merchants, and also sell taxable items or services, will continue with their Certificate of Withholding Agent. Therefore, these merchants will have the requirement to collect the SUT in the sale of taxable items and services. However, as of March 1, 2019, these will not be required to collect the SUT in the services rendered to other merchants.
Internal Revenue Licenses
The Department announced a moratorium, until June 30, 2019, which allows merchants with tax debts to renew their internal revenue licenses (e.g., alcohol retailer and cigarettes retailer). Therefore, the Department will not prevent a merchant from completing the renewal process and from obtaining a license, even if it has some tax debt at the time of renewal in the period that correspond to the merchant. The Department clarifies that the established moratorium will not apply to merchants who have licenses pending renewal for periods prior to the current period.
Automatic extension to file informative returns
The Department has given an automatic extension to the period for the electronic filing of the Informative Declarations of the year 2018. The new filing date will be March 15, 2019 and covers the following Declarations:
|Form Number||Form Name|
|480.5||Summary of the Informative Returns|
|480.6A||Informative Return – Income Not Subject to Withholding|
|480.6B||Informative Return – Income Subject to Withholding|
|480.6B.1||Annual Reconciliation Statement of Income Subject to Withholding|
|480.6D||Informative Return – Exempt and Excluded Income and Exempt Income Subject to Alternate Basic Tax|
|480.7||Informative Return – Individual Retirement Account|
|480.7B||Informative Return – Educational Contribution Account|
|480.7B.1||Annual Reconciliation Statement of Tax Withheld from Individual Retirement Accounts and Educational Contribution Accounts|
|480.7C||Informative Return – Retirement Plans and Annuities|
|480.7C.1||Annual Reconciliation Statement of Tax Withheld from Retirement Plans and Annuities|
The Department clarifies that the extension does not affect the responsibility of payment of the withheld taxes informed in the above forms. Therefore, any balance must be deposited as required by the Internal Revenue Code.