Act 72 which amends the Internal Revenue Code for a New Puerto Rico introduces a value added tax system in Puerto Rico that will replace the Sales and Use tax system (“SUT”) effective April 1, 2016, for state tax purposes. The SUT will continue to be in place for municipal tax purposes after
March3 1, 2016.
This guidance from Kevane Grant Thornton LLP specifically relates to the wholesale and retail industries.
5. Impact of proposed value added tax
Wholesale and Retail Industries
- Retailer/Wholesaler sells products to consumers in
the amount of $12,200,000
Collects VAT of $1,281,000
- Retailer/Wholesaler may take a credit for the VAT
paid on imported products, local products and
services bought in the amount of $1,060,500
Deposits $220,500 = ($1,281,000-1,060,500) at the
PRTD after taking the credits for VAT paid.
Total VAT paid:
Imported products 367,500$
Clothes & other products 577,500
Services and other 115,500
Total VAT paid: 1,060,500$
*Only 10.5% VAT at the state level. Municipal remains at a 1% under SUT.
Audit · Tax · Advisory
Member firm of Grant Thornton International Ltd
Retailer/Wholesaler Imports Purchases:
- Clothes - $3,000,000
- Office Equipment - $500,000.
Pays 10.5%* VAT on the clothes & office
equipment= $367,500
- Retailer/wholesaler acquires
locally clothes and other
taxable items for $5,500,000
- Pays VAT of $577,500 to the
seller.
- Customer pays the tax on the
purchase of the final product
- If merchant may be able to credit.
- Retailer/wholesaler buys services in the
amount of $1,100,000 and pays 10.5% * VAT
in the amount of $115,500.