The
Puerto Rico Treasury Department (the “Department”) established a compulsory
electronic filing requirement for all individuals who must file Form 482 –
“Puerto Rico Individual Income Tax Return” (the “return”) for taxable
year 2015 and subsequent years, and issued this Circular Letter to set forth the
procedures to comply with it.
Compulsory
Electronic Filing Requirement
All
taxpayers required to file a return for taxable years beginning after December
31, 2014, (2015 onwards) will have to submit the return electronically by any of
the mechanisms included in this Circular Letter.
The
following individuals are those required to file a return with the Department:
(i) an individual
or married taxpayers who are residents of Puerto Rico and whose gross income
reduced by exemptions as provided by Section 1031.02 of the Internal Revenue
Code of 2011, as amended (“the Code”) exceeds $5,000.00 for the taxable year;
(ii) an individual
or married taxpayers who are not residents of Puerto Rico but are citizens of
the United States and whose gross income from sources within Puerto Rico
reduced by the exemptions provided by Section 1031.02 of the Code exceeds $5,000.00
for the taxable year (except where the taxes have been paid in full at the
source);
(iii) Puerto
Rico nonresident foreign individuals with taxable gross income from sources
within Puerto Rico for the taxable year (except when the taxes have been paid
in full at source); and
(iv) individuals
with net income subject to the alternate basic tax of $150,000.00 or more for
the taxable year.
The
returns that must be filed electronically, as provided in this Circular Letter,
and are filed on paper, will be deemed by the Department as not filed; unless
the taxpayer qualifies under one of the exceptions listed in this Circular
Letter that allows the filing of a paper return.
As a
general rule, the forms filed on paper, without qualifying under any of the
exceptions noted below, will not be accepted by the Department.
The
Department will not deemed as filed a paper return without qualifying under any
of the exceptions below, even when received and date-stamped by the Department.
As a
result, all taxpayers required to file a return electronically, pursuant to the
provisions of this Circular Letter, who do not file or intend to file using a
paper return, will be subject to all applicable penalties for failure to file a
return, as provided in the Code.
Exceptions
to the Compulsory Electronic Filing General Requirement
Below,
are the exceptions to the compulsory electronic filing requirement of an
individual income tax return.
Individuals
who qualify for the filing of a paper return must include Form 483.2 -
Exception to Electronic Filing of Income Tax Return of Individuals (“Form
483.2”), with the return at the time of filing. In this form, the individual
shall, under oath, state the reasons that exempt him/her from compliance with
the electronic filing requirement, and check the applicable box(es). The
Department will not accept any return filed on paper that does not include Form
483.2.
A.
Partners or Shareholders of Pass-through Entities
Individuals
who are partners or shareholders of a partnership, special partnership, or
corporation of individuals or owners of a revocable trust or trust for the
benefit of the settlor “Grantor Trusts” (collectively, "pass-through
entity") whose taxable year is the calendar year ending December 31,
2015, are required to file their return electronically. This is also true for
members of a Special Employee-owned corporation. Individuals who are partners
or shareholders of a partnership, special partnership or corporation of
individuals or member of a special employee-owned corporation whose fiscal year
ends prior to December 31, 2015, will have to file a paper return, together
with Form 483.2 and the related informative return.
As
stated in the Tax Policy Information Bulletin No. 16-04, from taxable year 2015
onwards, Forms 480.6S, 480.6SE, and 480.6CI were consolidated in the new Form
480.6 EC – “Informative Statement on Distributable Participation of Partners or
Proportional Participation of Shareholders in Revenue, Losses, and Credits”
("Form 480.6 EC"). Starting with taxable year 2015, pass-through
entities that formerly filed Forms 480.6S, 480.6SE, and 480.6CI must file Form
480.6 EC electronically. Therefore, there are currently three types of
informative returns for pass-through entities: 1.) Form 480.6 EC; 2.) Form
480.6 F - Informative Statement of Revocable Trust or Trust for the Benefit of
the Settlor “Grantor Trusts”; and 3.) Form 480.6 CPT - Informative
Statement for Special Employee-Owned Corporation.
B.
Nonresident Individuals Selling Real Property Located in Puerto Rico
Puerto
Rico nonresident individuals that only report the sale of real property located
in Puerto Rico after December 31, 2015, and request authorization for the
refund of the tax withheld at source will have to file a paper return
accompanied by Form 483.2.
C.
Deduction for Investment under Act 185-2014
Act.
No. 185 of November 12, 2014, known as the Private Equity Funds Act ("Act
185-2014"), provides for the development of private capital through
investment in private equity funds aimed at investing in companies that do not
have access to public capital markets. Act 185-2014 provides investors
residents of Puerto Rico a deduction for the initial investment in a fund that
have met the investment requirements provided by law. The individual claiming
the deduction for initial investment in a private equity fund, will have to
file a paper return, accompanied by Form 483.2, a copy of the certificate
issued by the relevant agencies, and evidence of the contribution.
D.
Pension Income - Form 1099-R
Individuals
whose pension income is reported on Form 1099-R of the Internal Revenue Service
and are subject to the $11,000.00 or $15,000.00 exemption will have to file a paper
return accompanied by Form 483.2.
E.
Exempt Income for Youth Entrepreneurship under Act 135-2014
An
individual who reports income exempt under a Special Agreement for Youth
Entrepreneurship issued by the Trade and Export Company of Puerto Rico under
Act 135-2014, as amended, will have to file a paper return, accompanied by both
Form 483.2 and copy of the Special Agreement.
F.
Tax Credits - Schedule B, Part II and IV
Individuals
claiming on their return the following tax credits will have to file a paper
return, accompanied by Form 483.2 and all required evidence:
(i) Credit
attributable to losses or investment in Capital Investment Fund (see Section
III-C, above);
(ii) Credit
for investment in housing infrastructure, according to Act 98-2001, as amended
(attach copy of Administrative Determination);
(iii) Credit
for investment in the construction or rehabilitation of rental housing for
families with low or moderate family income, pursuant to the provisions of Act
140-2001 (attach copy of Administrative Determination);
(iv) Credit
for investment in construction in urban centers, according to the provisions of
Act 212-2002, as amended (attach copy of Administrative Determination);
(v) Credit
for merchants affected by the revitalization of urban areas, according to Act
212-2002, as amended (attach certification from the Trade and Export Company);
(vi) Credit
for purchases of products manufactured in Puerto Rico and Puerto Rican Agro
under Sections 1051.07 and 1051.09 of the Code (submit certification from the
Department of Agriculture, detail of average purchases or credits from prior
years);
(vii) Credit
for constitution of an eligible conservation easement or donation of eligible
land, under Act 183-2001, as amended (attach a certification from the
Department);
(viii) Credit
for investment in Tourism Development under Act 78-1993 or Agriculture under
Act 225-1995 (attach copy of certificate issued by the relevant agencies);
(ix) Credit
for investment in the development of Film Industry engaged in a Film Project
and/or Infrastructure Project according to Act 27-2011 (accompanied by
certification of the Film Corporation);
(x) Credit
for purchase or transmission of television programming made in Puerto Rico
under Section 1051.14 of the Code (accompanied by certification of the Film
Corporation);
(xi) Credit
for payments of membership certificates by ordinary and extraordinary members
of a Special Employee-owned Corporation under the provisions of Section 1113.14
of the Code;
(xii) Credit
for investors who acquire an exempt business that is closing its operations in
Puerto Rico under Act 109-2001 (include copy of Administrative Determination);
(xiii) Credit
for donations to the Board of the Palacio de Santa Catalina or credit for
donation to foundations of former Governors (present a certification issued by
the Board);
(xiv) Credit
for industrial investment under Section 6 of Act 73-2008, known as the Economic
Incentives Act for the Development of Puerto Rico (include copy of
Administrative Determination);
(xv) Credit
for investment in research and development of green energy sources under Act
83-2010, known as the Act of Green Energy Incentives of Puerto Rico (accompany
by certification from the Industrial Development Company);
(xvi) Credit
for the purchase of tax credits (enclose a sworn statement); and
(xvii) One
of the credits listed above carry forwarded from prior years.
Those
individuals claiming a credit for the tax withheld on dividends from Industrial
Development income under Act No. 8 of January 24, 1987, or the 30% of its
proportionate share of the fixed tax rate on Industrial Development income paid
by the exempt business under Act 135-1997, or both credits, are required to
electronically file their return, unless they qualify under any of the
exceptions to the rule of compulsory electronic filing.
G.
American Opportunity Credit
Individuals
who claim on Schedule B2 the American Opportunity Credit, granted by the reimbursement
of part of the incurred and paid expenses for college education for the
taxpayer, spouse or dependent, are required to file a paper return, accompanied
by Form 483.2 and all required evidence.
H.
Jobs Now Act
Individuals
with income subject to a reduced tax rate, pursuant to a Special Agreement for
Job Creation issued by the Trade and Export Company of Puerto Rico under Act
1-2013, as amended, known as the Jobs Now Act, have to file a paper return.
They will include Form 483.2 with their return and copy of the Special
Agreement.
I.
Compensation for Military Service
A
taxpayer who was an active soldier and moved out of Puerto Rico during a war
and who during the taxable year started after December 31, 2014, received
compensation for active military service rendered in a "combat zone”,
shall file a paper return, together with Form 483.2, the military order
certifying the date of transfer to the war, and federal Form W-2.
J.
Additional Contributions to Pension or Retirement Government Plans
An individual that, because of differences in individual contributions, payments
for services not credited, purchase of years of service or age, or by unlisted
retirement, claims a deduction for contributions to governmental pension or
retirement systems in excess of the contribution reported on Form 499R-2 /
W-2PR "Withholding Statement" or on Form 499R-2c/W-2cPR
"Corrected Withholding Statement" will have to file a paper return
accompanied by Form 483.2 and a certification from the governmental employer of
such additional contribution.
K.
Calculation of Excess Contribution for Overdue Pay
An
individual with overdue pay will file Form SC 2668 to calculate the
corresponding income tax. These individuals will have to file a paper return,
accompanied by Form 483.2, Form SC 2668, and a certification from the employer
of the origin, date, and amount of the late pay.
L.
Individuals Required to Submit Audited Financial Statements
Individuals
with a gross aggregate income on Schedules K, L, M, and N in excess of $3,000,000.00 during the taxable year must include with their return, financial statements
certified by a Certified Public Accountant (CPA) with valid license to practice
in Puerto Rico. These individuals will have to file a paper return, accompanied
by Form 483.2.
M.
Puerto Rico Nonresident Foreign Individuals with Income Related to a Trade or Business
Puerto
Rico nonresident foreign individuals who during the taxable year earned income
related to the conduct of a trade or business in Puerto Rico must file a paper
return, accompanied by Form 483.2. In addition, these individuals must submit
with the return and Form 483.2, a copy of the Income Tax Return of the foreign
jurisdiction in which the individual resides.
N.
Error in Social Security Number or First Time Filers
For
individuals who file their return for the first time, try to transmit their
return electronically using their correct social security number, and receive a
system notification indicating that their social security number does not match
the Department records will have to file a paper return accompanied by Form
483.2 and copy of the error notification generated by the system.
O.
Credit for Taxes Paid Abroad (Schedule C Individual)
Individuals
who claim a credit for taxes paid to foreign countries, the USA, its
territories, and possessions shall file a paper return with Form 483.2 and
evidence of the tax paid abroad.
P.
Option 94
Individuals
who file their return under Option 94 will file a paper return accompanied by
Form 483.2.
Q.
individuals Who Died During Taxable Year 2015
Taxpayers
who died during taxable year 2015 will have to file a return reporting income
from January 1st to the date of death. If the deceased taxpayer was
married and living with his/her spouse, the surviving spouse must file another
return for the same taxable year, with the income she/he earned since the date
of his/her spouse’s death until the close of the taxable year. Both returns
have to be filed on paper and each must be accompanied by a corresponding Form
483.2.
Automatic Extension
A. The Department shall accept the Request
for Extension to File the Income Tax Return, Form SC 2644 (the "Automatic
Extension") only in electronic format. The Department shall only accept
paper Automatic Extensions of taxpayers who qualify for the exception of
"Error in Social Security Number or First Time Filers", in whose case
they must accompany the automatic extension request with Form 483.2.
B. Payment with the electronic filing of
the automatic extension request may be made by direct debit or credit card.
Amended Returns
For
taxable years beginning after December 31, 2014, the amended return of an
individual who has filed the original return electronically will also file the
amendment in electronic format. If the original return was validly filed on
paper, the amended return shall be filed on paper accompanied by Form 483.2.
At
Carbonell & Co., LLP, we are prepared to assist our clients in complying
with the requirements of this Circular Letter. If you have any questions or
need additional information, please do not hesitate to contact us.
