Puerto Rico’s sales and use tax goes up to 11 percent

On Oct. 1, Puerto Rico’s Sales and Use Tax (SUT) increased from 7 percent to 11.5 percent. The change also incorporates a special 4 percent SUT on certain business-to-business services that were previously exempt.

While the revised law continues to allow some companies an SUT exemption on certain services, companies located within Puerto Rico but performing services outside of the territory may be subject to that special SUT. The Puerto Rican company receiving services will be responsible for withholding and remitting the SUT due.

Although Puerto Rico is a United States territory, the island nation operates its own federal tax system, causing companies operating in Puerto Rico to have foreign operations when it comes to tax matters. In addition to the Puerto Rico Federal tax system, which is actually very similar to the U.S. tax system, the territory has various municipal taxes, including SUT, personal property, and gross receipts.

Companies considering operations in Puerto Rico should have a thorough understanding of the local business and tax compliance environment before entering the market. For help, contact Plante Moran’s International Concierge Desk at internationaloffice@plantemoran.com >>