There have been recent changes in the Puerto Rico tax law. The resent changes took effect on the 20th of June 2013 when the Governor signed into law a package of tax measures which created the changes. Before indulging on the changes, it if prudent enough to start by having an understanding on the meaning of taxation.
Tax may be defined as a compulsory contribution made by citizens involuntarily to the state. The state uses the tax to provide basic services to the citizens. The changes which took place are in regard to the new gross income tax and exceptions, other income corporate income tax, alternative income tax and exceptions, sales and use tax, other taxable and other sales and use tax provision.
The changes include the following. The initial one is tax on the gross income. There is an alteration on the tax on these which forms part of the AMT. The new change affects the big companies and financial institutions. Some of these big companies include the following, commission agents, advertising companies, banks, to mention but a few.
Secondly, there is also another modification on the measures on other corporate income tax. For instance, insurance companies under the modification are now required to pay tax on their premiums at the rate of one percent. The income tax rate has also been reinstated with the highest being set at 39%.
In regard to alternative minimum tax, the rate has been increased. There are now several various computations which are made in determining the alternative minimum tax. Expenses incurred outside Puerto Rico are exempted from this new change upon determination by the secretary. The exemptions are also granted to businesses operating under tax insensitive legislation.
The other alteration is on alternative minimum tax commonly known as AMT. The new change has brought about a new various parallel computations which must be made in determining the existence of AMT. Tax payers have a lie way of seeking redress from the secretary for exemption to this alteration.
In regard to other sales and use tax provision, the new law makes change to the sales and use tax treatment which includes the following exemptions. On matter of education, only school uniforms, text books and other leaning related materials. Initially, all the institutions of higher learning were exempted. The second one is that all equipment acquired by the health organization is now subjected to taxation. Initially health organizations and hospitals were exempted from taxation. The new law makes provision for the reduction of sales and use tax rate from seven percent to 6.5%.
The above discussion demonstrates the changes in Puerto Rico tax law which has brought a paradigm shift in their taxation.
Tax may be defined as a compulsory contribution made by citizens involuntarily to the state. The state uses the tax to provide basic services to the citizens. The changes which took place are in regard to the new gross income tax and exceptions, other income corporate income tax, alternative income tax and exceptions, sales and use tax, other taxable and other sales and use tax provision.
The changes include the following. The initial one is tax on the gross income. There is an alteration on the tax on these which forms part of the AMT. The new change affects the big companies and financial institutions. Some of these big companies include the following, commission agents, advertising companies, banks, to mention but a few.
Secondly, there is also another modification on the measures on other corporate income tax. For instance, insurance companies under the modification are now required to pay tax on their premiums at the rate of one percent. The income tax rate has also been reinstated with the highest being set at 39%.
In regard to alternative minimum tax, the rate has been increased. There are now several various computations which are made in determining the alternative minimum tax. Expenses incurred outside Puerto Rico are exempted from this new change upon determination by the secretary. The exemptions are also granted to businesses operating under tax insensitive legislation.
The other alteration is on alternative minimum tax commonly known as AMT. The new change has brought about a new various parallel computations which must be made in determining the existence of AMT. Tax payers have a lie way of seeking redress from the secretary for exemption to this alteration.
In regard to other sales and use tax provision, the new law makes change to the sales and use tax treatment which includes the following exemptions. On matter of education, only school uniforms, text books and other leaning related materials. Initially, all the institutions of higher learning were exempted. The second one is that all equipment acquired by the health organization is now subjected to taxation. Initially health organizations and hospitals were exempted from taxation. The new law makes provision for the reduction of sales and use tax rate from seven percent to 6.5%.
The above discussion demonstrates the changes in Puerto Rico tax law which has brought a paradigm shift in their taxation.
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