Puerto Rico: Puerto Rico Enacts Tax Amnesty Program To Begin May 13, 2013

Puerto Rico has enacted legislation that creates a tax amnesty program that will be in effect from May 13, 2013 through June 30, 2013.¹ The legislation, known as the Law for the Incentive Plan for the Payment of Tax Debts, provides for a full waiver of interest, surcharges and penalties on certain tax debts assessed, or to be assessed, as of December 31, 2012. Also, the legislation provides for the settlement of tax debts through payment plans.

Incentive Plan Overview

For income tax (Subtitle A), the incentive plan applies to outstanding debts (assessed or to be assessed) as of December 31, 2012 for tax years ended on or before December 31, 2011. Taxpayers that have not previously filed income tax returns may qualify for the incentive plan. However, they must pay the income tax debt in full without a payment plan. For purposes of estate and gift tax (Subtitle B), excise taxes (Subtitle C) and sales and use tax (Subtitle D), the incentive plan applies to outstanding debts (assessed or to be assessed) as of December 31, 2012. For withholding at the source of income tax debts (Subtitle A), the incentive plan applies to taxable periods ending on or before December 31, 2012.

The incentive plan also applies to unpaid taxes under certain special laws, including Act 7- 2009 (Special Act to Declare a State of Fiscal Emergency and to Establish a Comprehensive Fiscal Stabilization Plan to Salvage the Credit of Puerto Rico), Act 73- 2008 (Economic Incentives for the Development of Puerto Rico Act), Act 74-2010 (Puerto Rico Tourism Development Act of 2010), Act 83-2010 (Puerto Rico Green Energy Incentives Act), Act 27-2011 (Puerto Rico Film Industry Economic Incentives Act) and Act 20-2012 (Export Services Act). For all of these special laws, the incentive plan applies to outstanding debts (assessed or to be assessed) as of December 31, 2012.

Installment Payment Plans

Taxpayers have the option of paying the principal of the debt in full or in installments under a payment plan. The payment plan may not exceed four years. Under a payment plan, taxpayers must make an initial payment of 10 percent of the principal of the debt. If the taxpayer has a payment plan that does not exceed 12 months, no interest is charged. However, if the taxpayer has a payment plan that is longer than 12 months, interest is charged at the following rates: payment plan longer than 12 months but not exceeding 24 months, 5 percent annual interest; payment plan longer than 24 months but not exceeding 36 months, 7 percent annual interest; and payment plan longer than 36 months but not exceeding 48 months, 10 percent annual interest. Note that installment payment plans are available for income tax debts, except for those debts arising from filing late tax returns.

Footnote

1 Act No. 12-2013.

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