On 10 December 2018, Puerto Rico enacted Bill No. 1544 as Law No. 257 of 10 December 2018. The law includes numerous amendments to the Puerto Rico Internal Revenue Code of 2011 (PR Code). The changes are to generally apply for periods beginning after 31 December 2018. Some of the important changes are given below:
- The corporate income tax rate is reduced from 20% to 18.5%. Thus, including a surtax, the highest income tax rate will be 37.5%;
- The law Increases the withholding rate on payments made after 31 December 2018, on account of services rendered from 7% to 10%, with several exemptions;
- It establishes a new rule for related entities of a controlled group in order to determine if those entities are considered large taxpayers. Under the amended rule, the aggregate volume of all related entities will be considered for purposes of the $50 million volume test. The law also provides that once an entity meets one of the requirements to be considered a large taxpayer, it would be considered as such for purposes of all pertinent provisions thereunder.
- The law increased the current USD 50,000 threshold for not collecting sales and use tax (SUT) on services to USD 200,000; and
- Introduced a provision to reduce the sales and use tax on prepared foods from 11.5% to 7%.
