The "Puerto Rico Small Business Development Incentives Act" amended provisions in various tax laws dealing with the requirement to accompany audited financial statements with their income tax return, personal property tax return, municipal license tax return or annual corporation report. Puerto Rico Treasury has issued a pronouncement clarifying the entities affected by the PRIRC amendment and its effective date.
The amendment applies to taxable years commencing on and after August 1, 2008. It only affects domestic (organized in Puerto Rico) for profit corporations and partnerships which no longer will be required to accompany audited financial statements with their income tax return if their gorss income do not exceed $3 million.
The provisions dealing with other entities were not amended as well, therefore, they will continue to be subject to the existing requirements, as follows:
The amendment applies to taxable years commencing on and after August 1, 2008. It only affects domestic (organized in Puerto Rico) for profit corporations and partnerships which no longer will be required to accompany audited financial statements with their income tax return if their gorss income do not exceed $3 million.
The provisions dealing with other entities were not amended as well, therefore, they will continue to be subject to the existing requirements, as follows:
- Corporations and partnerships that have elected to be taxed either as a special partnership or as a corporation of individuals, continue to be required to file audited financial statements with their income tax return once their volume of business for the year reaches $500,000.
- Employees-owned special corporations continue to be required to file audited financial statements with their income tax return once their volume of business for the year reaches $1 million.
- Foreing corporations and partnerships continue to be required to file audited financial statements with their income tax return once their volume of business for the year which is effectively connected with a trade or business in Puerto Rico reaches $1 million.
OBSERVATION: The pronouncement did not address the issue that some corporations and partnerships that heretofore had been relying on the total waiver from the 7% withholding on service payments that applied to corporations and partnerships that, in addition to being current in their tax responsibilities, were required to attach to their income tax return audited financial statements under PRIRC 1018(c), could now find themselves outside of the exception because of the increase to $3 million in business volume requirement. Unless a similar business volume revision is made to CL 02-13, what was thought to reduce costs of operations of small and medium size businesses may in fact result in an additional cash flow burden to some of these businesses.
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José J. Estrada
Tax Manager
Tax Manager
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Information taken from the RIA-Puerto Rico Taxes-Volume 20, No.10.
Please refer to the P.R. Code for complete information or contact us.
Please refer to the P.R. Code for complete information or contact us.
