Puerto Rico Treasury Dept. outlines post-hurricane tax relief measures

In response to the damage caused by Hurricane Fiona and the challenges faced by taxpayers, the Treasury Department Secretary Francisco Parés announced a package of tax administration measures to benefit of people and businesses post-storm.

“Given the state of emergency declaration issued by Gov. Pedro Pierluisi and the major disaster declaration authorized by President Joe Biden, we activated our emergency plan by postponing certain tax form filing and payment dates, in addition to other measures that will benefit businesses,” he said.

The agency’s Administrative Decision 22-08 postpones the deadline to Dec. 15 to file any income tax return or its extension request, of individuals, corporations, conduit entities, Senior Credit return and Compensatory Credit for low-income pensioners, in addition of other legal entities, whose filing expiration date is between Sept. 30 and Dec. 15.

In turn, the deadline of any return for which an Extension Request is filed was extended for a period of six months, starting from Dec. 15, 2022, to June 15, 2023.

The Dec. 15 deadline also applies to any amount pending payment that, according to Internal Revenue Code provisions, must be completed by the due date of the return or form, whose original due date is between Sept. 30 and Dec. 15.

So, the payment of the second installment of the individual income tax return for taxable year 2021, whose due date is Oct. 18, 2022, is automatically extended to Dec. 15, 2022.

There are exemptions to the filing extension, including: excise taxes; taxes on alcoholic beverages; the special tax on foreign corporations; taxes withheld on salaries and services rendered; and other withholdings at source, and estimated tax payments.

As for payment plans, the agency announced that all taxpayers that were affected financially by the hurricane and will be unable to meet their payment obligations may enter a new payment plan on or before Dec. 31 and make the first payment no later than 45 days after applying for the extension.

“The Department is working on the appropriate adjustments in the tax information systems so that interest, surcharges and applicable penalties are not automatically imposed, in those cases where the taxpayer demonstrates that they have carried out all the pertinent diligence to comply with the provisions of the Code and submit said forms and payments no later than Dec. 15, 2022,” said Parés.

As for collections and embargoes, the agency has halted procedures until Nov. 18.

“All scheduled embargoes and all those that have not expired 30 days from their notification, were cancelled,” Parés said.

Meanwhile, the agency extended to Oct. 20 the deadline for businesses to submit their monthly Sales and Use Tax returns and payments, and over imports in August to Sept. 20.

The agency will also grant a Temporary Exemption Certificate, which will allow 16,180 Reseller Merchants to import or acquire taxable items for resale, free of SUT. These businesses must have a valid Reseller Certificate. The exemption term will for one month, beginning Oct. 1 and ending Oct. 31.

“The Temporary Exemption Certificate will allow the Reseller Merchant to import or buy through purchase in Puerto Rico, taxable items that are acquired exclusively for resale. In other words, this Temporary Exemption Certificate will allow them to acquire inventory for resale without having to pay the SUT on importation or on the local purchase of the inventory,” Parés said.

Retirement plans and IRAs
In related news, Parés also announced new tax rules for the distribution of retirement plans and IRA Accounts.

“The Internal Revenue Code provides that, in the case of disasters declared by the Governor, distributions from qualified retirement plans and Individual Retirement Accounts, which are made to cover expenses for losses or damages, will be subject to a special tax and given the situation we are experiencing, we decided to relax the rules during the period from Oct. 6 to Dec. 31, 2022,” he announced.

The first $10,000 distributed within the established term will be excluded from the definition of gross income and will not be subject to any type of withholding at source. Any amount more than that will be subject to a special 10% tax.

Eligible individuals are people who during calendar year 2022 have been “bona fide” residents of Puerto Rico, while eligible expenses are all those incurred to repair losses or damages caused by Hurricane Fiona.

They include, among others, repairs to residences, commercial establishments, vehicles, expenses to acquire new residences and payments of medical expenses. These expenses may have been incurred by the eligible individual, spouse, descendants, or ascendants, he said.