Puerto Rico to implement VAT 2016

Sat 17th Jan 2015

Puerto Rico is planning to replace its existing Sales & Use Tax with a full Value Added Tax regime. The aim is to rebuild tax revenues as the current tax system is viewed as too complex and too heavy an administrative burden for companies and retailers – and places too much focus on the consumer monitoring payments. VAT would elevate over 80% of citizens from having to complete income tax returns that currently require full Use Tax disclosures.

The government believes that introducing VAT could double the state receipts from consumption tax. Currently, Puerto Rico’s Sales & Use Tax is levied at 7%. This comprises over 6% State Commonwealth Tax and 1% Municipal Tax.

The government will increase personal tax allowances for the poorest to help reduce the impact. It will also use some of the additional revenues to cut corporation tax rates to help attract and retain foreign job-creating companies.

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