I hope you are having a great week start! I hope this video can be of big help and give you more understanding on Puerto Rico sales tax.
Keep having an amazing week!
Revisions to Puerto Rico Sales Tax “IVU”
Hello, my name is Santiago Lampón; I am a lawyer and notary in Puerto Rico and welcome to Puerto Rico Legal Video Blog. I am going to cover in this episode an issue, which is of upmost importance for individuals who own real estate property in Puerto Rico, and they rent it out who have some business use for the property. Not only is it your second home but you have a business activity that you hold, you perform these set of things to this property.
Now what I want you to get out of this video is an area of concern, this is an alert and you should after you listen to what I am going to say speak to your accountant, you CPA or your tax lawyer to go over the concerns or the barriers that I am alerting you about, in this video.
Recently new taxes have been lead across the board for doing business in Puerto Rico. The one that I am going to discuss is the sales tax. In Spanish, it’s IVU, we call it the IVU, but I’m just going to use the translation sales name. Up to now you go into a store, you purchase a hundred-dollar item and you would be taxed 7% sales tax, so you will pay 107 dollars. And up to now business to business B to B have been exempted mostly from paying the sale tax. I say mostly because when I purchase my office materials from a store I didn’t pay a sales tax. Now there is a category of items that are now covered, which you say it is covered so I’m going to pay 7% more, that’s fine. the way the payment is made to the Puerto Rico treasury department is what concerns me and I want to communicate to you so that you can check.
As a matter of fact, today I discussed it with an accountant and he told me that he didn’t know that. Please look it up because this is new. It was approved 11 days ago, at the time of the release of this video and a lot of people are still going over it and I have been going over it. I still have a more to read. You have a house, you rent a house as a business and you have a pool maintenance guy, you have a painter, you have the guy who mows the lawn and there is a category called repairs. Now it is interesting because repair may be maintenance but maintenance is not necessarily repair so here comes the first concern that I have to specifically use the word repair.
Let’s say you are going to repair the leaking roof. (You rent the property, you need to repair.) That comes under repairs and that transaction happens to be taxable under the amendments to the quote that were performed 11 days ago, which is June 30 of 2015. Let’s says there is a 7% tax on that, if my reading is correct. So, you would say I pay the guy for the repairs; the guy is responsible for sending that money to the Puerto Rico treasury department. That sounds logical but that’s not the way it is. It is a self-imposed tax for business-to-business obligations. So, if somebody comes to your property to repair something, you are to number one self-impose the tax (yeah, you, yourself) and number two you are the one liable to make that payment to the Puerto Rico treasury.
At the end of the year there is a monthly payment that you must make. If you fail to file the form and make a payment you are subject to interest, penalties and you can even be fined. At the end of the year you have this profit and loss and expense, any kind of barrier that may fall under repair that you did not you, yourself, self-impose, you, yourself, the sales tax – the IVU on it – then you are liable to pay that money.
I have never seen that before, I discuss it with an accountant today and he was like: Really? I was like: really, that’s how it reads. I want to make sure that you who are watching this video and listening to me, if you have a real estate and you use it for business purposes, make sure that you consult this little issue with your CPA or tax lawyer. As a matter of fact, have them watch this video; my email is on the screen, they can write to me. If someone out there believes I am misreading this, I want to know. I was going to say so far so good but no, so far so bad. Make sure you understand this and you become fully knowledgeable on this as I obtain more information I will release it to therefore who subscribe to my blogs. Again, my name is Santiago Lampón, a lawyer and a notary in Puerto Rico. Send me any questions you may have in my email address or you can post them on this page. Have a good day.