Puerto Rico tax law has undergone a paradigm shift in the resent past when the government official enacted a new law on taxation. The modification took effect in June when the Governor appended his signature as required by law in effecting its application.
Tax may be described as a contribution made by the people of a give country to the government. The government gets its revenue from the taxes collected and uses it in providing services to the citizens. Some of the essential services rendered by the government include construction of roads, improving education and health services. It is compulsory that all citizens are taxed and the amount is determined by the state. These alterations have brought a paradigm shift to the taxation regime.
In Puerto Rico, there has been a change from the previous regime of taxation to a new regime. The modification may be demonstrated as follows. Firstly there is a change in the tax for gross income. The new tax is similar in structure to the formerly municipal tax. The change however is targeting bigger institution especially financial institutions which operate within Puerto Rico. These institutions includes banks, big companies, industries, cooperate institutions, to mention but a few. The modification has brought about a special rate of one percent for financial institutions in gross income to be paid as tax. This provision however excludes some companies from being subjected to the change. This includes companies which are being operated under legislation on tax incentives as well as other companies operated for agricultural purposes.
Since law does not operate in a vacuum, there are exceptions to the new alterations. The new alteration in relation to tax on gross income includes the following. The first one is that it exempts organizations and companies operating under tax incentives legislation. The second exception is meant to carter for agricultural businesses. The other exemption also allows tax payer to apply to the secretary for exemption. However, the tax payer must show that the new tax burden will bring an undue economic burden or it will be injurious to the tax payer. However, this exemption does not apply to financial institutions. This is a good move which focus in promoting young businesses which are growing and are prone to making losses. The move also encourages agriculture as it is the back bone of the economy.
Thirdly, is on AMT. Under the new regime, there is introduction of several similar computations which is used in identifying the validity of AMT. There are also other situations which warrant an exclusion to the AMT as provided in the new regime. For instance, a tax payer has a right to apply for the exclusion through the secretary. However the tax payer or the business which is seeking for the said exclusion must prove to the secretary that they stand to suffer incur losses if they are not exempted. This therefore is a good provision which ensures that businesses which incur losses are protected and prevented from incurring further loses by paying tax to the government.
In regard to sales and use tax, the changes are placed on business to business services as well as reseller exemption. The following are taxable business to business service. The first one is storage of tangible personal property. The second one is on motor vehicle leasing. The third one is installation and repairs of personal property. The fourth one is on bank charges. The fifth one is on collection services. The sixth one is collection services. The seventh one is on security. The eighth one is on cleaning and laundry services while the last one is on telecommunication services.On reseller, the exemptions have been changed all together. All resellers now are subjected to the payment of sales and use tax on their purchases.
Fifthly, there is also a modification in the tax on other sales and use. The new law requires that only school uniforms, books and other relevant materials are excluded from taxation as opposed to the previous law which exempted institutions of learning as a whole. Hospitals and organizations providing health services are also affected by the modification. The current position is that all of them must be taxed.
The last alteration in Puerto Rico tax law considered in this article is in regard to the other sales and use tax provision. Initially, the institutions of higher learning were exempted from being taxed. However the new alteration only exempt text books, uniforms and other learning materials. Also, equipment acquired by the hospitals and health organizations for the purpose of unit maintenance are also subjected to taxation. Before effecting the changes, these items were not subjected to taxation in the older regime.
Tax may be described as a contribution made by the people of a give country to the government. The government gets its revenue from the taxes collected and uses it in providing services to the citizens. Some of the essential services rendered by the government include construction of roads, improving education and health services. It is compulsory that all citizens are taxed and the amount is determined by the state. These alterations have brought a paradigm shift to the taxation regime.
In Puerto Rico, there has been a change from the previous regime of taxation to a new regime. The modification may be demonstrated as follows. Firstly there is a change in the tax for gross income. The new tax is similar in structure to the formerly municipal tax. The change however is targeting bigger institution especially financial institutions which operate within Puerto Rico. These institutions includes banks, big companies, industries, cooperate institutions, to mention but a few. The modification has brought about a special rate of one percent for financial institutions in gross income to be paid as tax. This provision however excludes some companies from being subjected to the change. This includes companies which are being operated under legislation on tax incentives as well as other companies operated for agricultural purposes.
Since law does not operate in a vacuum, there are exceptions to the new alterations. The new alteration in relation to tax on gross income includes the following. The first one is that it exempts organizations and companies operating under tax incentives legislation. The second exception is meant to carter for agricultural businesses. The other exemption also allows tax payer to apply to the secretary for exemption. However, the tax payer must show that the new tax burden will bring an undue economic burden or it will be injurious to the tax payer. However, this exemption does not apply to financial institutions. This is a good move which focus in promoting young businesses which are growing and are prone to making losses. The move also encourages agriculture as it is the back bone of the economy.
Thirdly, is on AMT. Under the new regime, there is introduction of several similar computations which is used in identifying the validity of AMT. There are also other situations which warrant an exclusion to the AMT as provided in the new regime. For instance, a tax payer has a right to apply for the exclusion through the secretary. However the tax payer or the business which is seeking for the said exclusion must prove to the secretary that they stand to suffer incur losses if they are not exempted. This therefore is a good provision which ensures that businesses which incur losses are protected and prevented from incurring further loses by paying tax to the government.
In regard to sales and use tax, the changes are placed on business to business services as well as reseller exemption. The following are taxable business to business service. The first one is storage of tangible personal property. The second one is on motor vehicle leasing. The third one is installation and repairs of personal property. The fourth one is on bank charges. The fifth one is on collection services. The sixth one is collection services. The seventh one is on security. The eighth one is on cleaning and laundry services while the last one is on telecommunication services.On reseller, the exemptions have been changed all together. All resellers now are subjected to the payment of sales and use tax on their purchases.
Fifthly, there is also a modification in the tax on other sales and use. The new law requires that only school uniforms, books and other relevant materials are excluded from taxation as opposed to the previous law which exempted institutions of learning as a whole. Hospitals and organizations providing health services are also affected by the modification. The current position is that all of them must be taxed.
The last alteration in Puerto Rico tax law considered in this article is in regard to the other sales and use tax provision. Initially, the institutions of higher learning were exempted from being taxed. However the new alteration only exempt text books, uniforms and other learning materials. Also, equipment acquired by the hospitals and health organizations for the purpose of unit maintenance are also subjected to taxation. Before effecting the changes, these items were not subjected to taxation in the older regime.
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