Sales Tax (“IVU”) for Professional Services – October 1, 2015 is the deadline
If you are in business in Puerto Rico, or if your business is located outside of Puerto Rico but delivers services in Puerto Rico, you most likely know about what I am going to cover here. Nerverthelss, I decided to publish this brief note since this tax also affects legal services, including notary services.
Throughout my publications I communicate that I am a lawyer and a notary. I also repeadtedly state that only a lawyer admitted to practice law in Puerto Rico can become a notary, and that only a notary can perform a real estate closing in Puerto Rico.
Begining October 1, 2015, professional services has been added to the category of products or services which pay what it is normally known as “sales tax” including lawyers and notaries. The tax rate will be 4% trhough February 29, 2016, and it will jump to 10% begining March 1, 2016. Some categories of services may immediately qualify for a higher tax bracket, but you need to check with your tax expert on this.
There are very few exceptions to the general rule.
Overall, contracts executed before October 1st would not be charged the taxes even if the execution of the contract will be happening after October 1st. For example, if the parties to a closing hire a notary before October 1st for a closing scheduled for sometime after October 1st, no taxes would be levied on the services. If the notary is engaged after October 1st for a closing happening sometime thereafter, the tax would be 4%. if the notary is engaged after February 29, 2016, the tax would be 10%.
Please consult with your accountant, CPA or tax lawyer if you have any issues with professional services rendered in Puerto Rico, including professionals who do not reside in Puerto Rico but who deliver services to individuals or businesses in Puerto Rico.
Santiago F. Lampón