On June 14, 2020, the Governor of Puerto Rico signed into law Act 57-2020, known as the Supplementary Act to Address the Effects on the Puerto Rican Economy caused by the COVID-19 Emergency, establishing new tax and economic stimulus programs to help the economy of Puerto Rico go back to normal and prevent a recession.

The tax and economic stimulus programs created under Act 57-2020 (previously House Bill 2468) will be effective immediately and will last for the period that is necessary to mitigate the effects of the COVID-19 in the economy but will not be extended more than December 31, 2021.

Below please find a summary of the specific tax and economic stimulus programs approved under Act 57-2020. Please note that some of the provisions introduced by Act 57-2020 are measures already included in Treasury’s publications.

Expedited Payment of Accounts Payable to Suppliers of the Government of Puerto Rico

• The obligations and accounts payable to contractors, suppliers and providers, accumulated before the enactment of Act 57-2020 and certified by the government agency/instrumentality, for which the services were rendered or the goods were delivered, shall be paid within a term of fifteen (15) calendar days after Act 57-2020 is signed.
• During the effectiveness of Act 57-2020, any new obligations and accounts payable that are certified by the government agency/instrumentality, for which the services were rendered or the goods were delivered, shall be paid within a term of thirty (30) calendar days since such certification was made.

 

Carryback of Net Operating Losses

• A two (2) year carryback of net operating losses, directly caused by the COVID-19 emergency, incurred during the taxable year 2020, will be permitted to those industries and businesses with a volume of business of $10,000,000 or less.  This carryback will not be subject to the 80% or 90% use limitation, as applicable, established under Section 1033.14(b)(1)(D) of the Puerto Rico Internal Revenue Code (“PRIRC”).
• Large Taxpayers, as defined in Section 1010.01(b)(35) of the PR, will not be permitted to carryback their net operating losses to previous years.
• Eligible industries and businesses that desire to benefit from the carryback of their net operating losses must make such election no later than the due date for filing their 2020 Puerto Rico Income Tax Return, including any extension of time to file such return.
• The maximum amount to carryback to previous years will be $200,000 and the maximum reimbursement for income taxes paid in previous years will be $50,000.

 

Carryover of Net Operating Losses

• The amount of net operating losses incurred during the taxable year 2020, that are directly caused by the COVID-19 emergency, may be carried over to subsequent taxable years without the application of the 90% use limitation established under Section 1033.014(b)(1)(D) of the PRIRC.
• The taxpayer will first claim the net operating losses incurred in taxable years before 2020 and the use of such net operating losses will be subject to the limitations provided in Section 1033.14(b)(1)(D) of the PRIRC, as applicable.
• If after applying the losses, the income tax return reflects a net income, the taxpayer may take a deduction from the net operating loss generated in the taxable year of 2020 without the limitations established in Section 1033.14(b)(1)(D) of the PRIRC.
• If after deducting the losses in this order the income tax return still reflects a net income, the taxpayer may deduct the net operating losses from the following taxable years.

 

Temporary Exemption for Business-to-Business Services and Designated Professional Services

• Business-to-Business Services and Designated Professional Services, as defined in Subtitle D of the PRIRC, will not be subject to the special 4% sales and use tax during the months of April, May and June 2020.
• The Secretary of Treasury has the authority to extend this exemption for additional periods of three (3) months while the COVID-19 emergency last, but never longer than December 31, 2021.

 

Temporary Postponement of the Alternative Minimum Tax of $500

• For taxable years beginning after December 31, 2018 and before January 1, 2020 (taxable year 2019), the alternative minimum tax (AMT) of $500 will not apply.
• Corporations who have already pay the $500 AMT for the taxable year 2019 may request the Puerto Rico Treasury Department a refund for such amount, which must be refunded within forty-five (45) days from such request.

 

Postponement of Informative Returns

• For the taxable years beginning after December 31, 2018 and before January 1, 2020, the informative returns required by Sections 1063.01 to 1063.16 of the Puerto Rico Internal Revenue Code may be filed on or before May 31, 2020.

 

Temporary Postponement of the Agreed Upon Procedures or Compliance Attestation

• For the taxable years beginning after December 31, 2018 and before January 1, 2020, the requirement to include with the PR Income Tax Return an Agreed Upon Procedures or Compliance Attestation, prepared by a CPA with license to practice in Puerto Rico, for AMT purposes, is eliminated.

 

Automatic Extension of Licenses to Conduct Commercial Activity

• All licenses and bonds required under the PRIRC and licenses or permits issued by the Permit Management Office or by any other government agency or municipality, that expired since March 1, 2020, shall be automatically extended for a six (6) month period.

 

Exclusion of Gross Income and Volume of Business- Debt Cancellation and Subsidy Receipt

• The cancellation of debt and the amounts received in connection with any subsidy or federal stimulus under the CARES Act or any other federal legislation to address the COVID-19 emergency or any subsidy or state stimulus granted as a consequence of the COVID-19, including any reimbursable tax credits and other economic help provided in Act 57-2020 will be excluded from gross income for income tax purposes, including the alternative basic tax and the alternative minimum tax, and from income subject to the payment of municipal license taxes.
• Taxpayers may claim a deduction against net income for the ordinary and necessary expenses incurred in the operation of the business, even if such expenses were paid with funds received from any subsidy or federal stimulus under the CARES Act or any other federal legislation to address the COVID-19 or under any subsidy or state stimulus granted as a consequence of the COVID-19 emergency, including the debt cancellation, reimbursable tax credits and any economic help granted under Act 57-2020.

 

Automatic Compliance with Grant Requirements under the Puerto Rico Incentive Code or Previous Incentive Laws

• For the taxable year tax 2020, all grantees of an exemption decree issued under Act 60-2019, previous incentive laws or special incentive laws in Puerto Rico, shall be considered as having complied with the following requirements under their decrees, if the possible failure to comply with such requirements is directly related to the COVID-19 emergency: (a) creation and maintenance of jobs; (b) gross income or sales volume; and (c) investment in machinery and equipment.

 

Exemptions from the use of a Notary Public for Sworn Declarations

• Starting April 1, 2020 and until the COVID-19 emergency ends, individuals or businesses will be exempt from presenting any sworn statement before a public notary of Puerto Rico, if said sworn statement is required by the PRIRC, by regulation or by administrative announcement issued by the Department of Treasury or required to request any help or subsidy to manage the COVID-19 emergency.
• The person or business will be permitted to present an affirmation under penalty of perjury that includes all the information that would have been included in the sworn statement.

 

Income Tax Return for Tax Year 2019

• The deadline to file the 2019 Income Tax Return of any taxpayer, including conduit entities, that was due during the period of March 15, 2020 to June 15, 2020, is extended until July 15, 2020.
• Any payment due with the 2019 Income Tax Return is also extended until July 15, 2010.
• All taxpayers required to file the 2019 Income Tax Return that do not have available the economic resources to make the payment of the total income tax liability due, may request the PR Treasury Department a payment plan to pay the total income tax due. To benefit from the payment plan, the taxpayer must be up to date with other tax responsibilities before the Department of Treasury and must commit to pay the income tax due in monthly payments and pay the total income tax due by March 31, 2021.

 

Extension of Due Dates to File Monthly Sales and Use Returns

• Interests, surcharges, and penalties will not be imposed if the following requirements are met:
  1. The Monthly Sales and Use Tax Returns corresponding to the months of February, March, April and May 2020 are filed on or before April 20, 2020, May 20, 2020, June 22, 2020 and July 20, 2020, respectively.
  2. The Monthly Importation Returns corresponding to the months of March, April and May 2020 are filed on or before May 10, 2020, June 10, 2020 and July 10, 2020, respectively.
  3. The failure to make the biweekly payment of the sales and use tax corresponding to the months of March, April, May and June 2020 will not be subject to penalties if the total sales and use tax is paid in its entirety with the filing of the Sales and Use Tax Monthly Returns corresponding to such periods.

 

Requirement of Payment of Sales and Use Tax on Importation and the Purchase of Taxable Items for Resale

• During the emergency period, the Secretary of Treasury is authorized to grant an exemption certificate to a reseller merchant with a current Reseller Certificate which will allow a temporary exemption period to import or to acquire taxable items for resale free of the payment of sales and use tax.
• The temporary exemption period will start on April 6, 2020 until June 30, 2020.

 

Professional Services Withholding

• From March 23, 2020 to June 30, 2020, companies, agencies, or employers will not be required to withhold ten percent (10%) of the amounts payable to persons who receive compensation for professional services.
• This waiver will not exempt the recipient from his/her obligation of taxing such amount in his/her income tax return and the withholding agent must report the payments exempt from the withholding in an informative return.
• For the taxable year 2019, a taxpayer may choose the service optional tax provided in Sections 1021.06 and 1022.07 of the PRIRC even if her/she has a pending tax balance, if it pays such tax balance no later than the deadline to file the 2019 income tax return, without considering any extensions.

 

Nutritional Assistance Program

• Orders the Secretary of the Department of Family that, within ten (10) days from the signature of Act 57-2020, he/she requests to the Federal Department of Agriculture authorization so that the beneficiaries of the Nutritional Assistance Program (PAN) can use the PAN funds to pay for prepared food in restaurants during the effectiveness of Act 57-2020 or until the COVID-19 emergency last, whichever period is shorter.

 

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