The U.S. Department of Treasury has yet to issue a decision on whether foreign companies doing business in Puerto Rico will be allowed to take a credit for the excise tax imposed through Law 154, which goes into effect this month.
In a brief response issued Monday, U.S. Treasury Department spokeswoman Sandra Salstrom said, “No decisions have been announced and we don’t have any comment on the process right now.”
Law 154 was passed in late October and is an amendment to Puerto Rico’s Internal Revenue Code that places an excise tax on sales generated by local subsidiaries to their international parent companies. The tax — which applies to companies whose sales revenue reaches $75 million — starts at 4 percent during the first year and is reduced every year until fully eliminated in 2016. The government passed the levy to finance its Tax Reform, and expects to collect between $1.4 billion and $2 billion during the first year.
Immediately after Law 154 was approved, affected companies — mostly pharmaceuticals — scrambled to convince Gov. Fortuño to delay the implementation of the tax, which they said could negatively affect local operations. Stateside and local trade organizations representing the pharmaceutical sector blasted the move, saying, among other things, that it would deteriorate Puerto Rico’s good standing as a place to do business.
While the Fortuño administration has not backed down from imposing the tax, after its approval, officials admitted to having asked the U.S. Department of Treasury if the 30 or so affected companies would be able to write off the payment as a credit on their tax returns. Fortuño himself has met with high-ranking pharmaceutical executives to find ways to soften the impact of the tax, including reducing costs in other areas.
However, there are a number of companies that have already pushed the pause button on their local expansion plans, at least until the U.S. Treasury issues an opinion.