Act 257 of December 10, 2018 (Act 257) amended the Puerto Rico Internal Revenue Code to require any person or entity required to withhold income tax on payments for services rendered to submit a reconciliation quarterly tax return.  Accordingly, the Puerto Rico Department of the Treasury (the “PR Treasury”) recently issued Internal Revenue Circular Letter No. 19-10 (“CL 19-10”) to: (i) announce the issuance the new form 480.6 SP-1 (the “Quarterly Return”) and the procedures related to the electronic filing of the Quarterly Return; and (ii) establish a minimum tax withholding amount requirement that may be deposited quarterly with the Quarterly Return.

Filing of the Quarterly Return

The Quarterly Return must be submitted electronically through SURI (the PR Treasury’s tax unified system) no later than the last day of the month following the close of each quarter ending on March 31, June 30, September 30 and December 31.  To facilitate compliance with this new tax reporting requirement and to provide enough time for withholding agents to gather the data to electronically file the Quarterly Return for the first quarter of 2019, the PR Treasury has postponed the April 30, 2019 deadline to July 31, 2019.  Thus, the Quarterly Returns corresponding to the first and second quarters of 2019 must be filed no later than July 31, 2019.  

Withholding agents must be aware that the processing of the Quarterly Returns will be made once a day. Once this process is completed the PR Treasury will issue a notice through the correspondence section in SURI, confirming that the filed return has been processed.  Withholding agents will be allowed to make any modification to the Quarterly Return as long as the modification is made prior to the time in which the PR Treasury processes the returns.  Once the form has been processed by the PR Treasury, any modification made by the withholding agent to the return will be considered an amended form. 

It is important to keep in mind that the total amount reported on all the Quarterly Returns filed in a year must match the total amount reported on the Reconciliation Statement of the Informative Returns filed for that year.  Any difference will be considered an amount withheld and not deposited and will be subject to interest, surcharges and penalties until it is properly reported in the corresponding forms.

Depositing Rules

Any payor required to make a tax withholding on payments for services rendered must deposit the amount withheld no later than the fifteenth day of the month following the close of the month in which the tax withholding was made.  Such deposits may be made only electronically, through SURI.  Withholding agents who fail to follow this deposit rule will be subject to interest, surcharges and penalties on the amount withheld and not deposited on time.  

Notwithstanding the above, to simplify the deposit rules, the PR Treasury will allow withholding agents whose tax withholdings during a quarter is less than $2,500.00 to deposit the total amount withheld for that quarter in the Quarterly Return so long as the payment is deposited no later than the due date to file the Quarterly Return (known as the Minimum Tax Withholding Amount Rule). 

Those withholding agents who comply with the Minimum Tax Withholding Amount Rule but do not deposit the total amount of the tax in the required timeframe will be subject to interest, surcharges and penalties on the amount withheld and not submitted on time. Tax withholding agents who comply with the Minimum Tax Withholding Amount Rule may opt to deposit the amounts withheld monthly. 

Withholding agents must take the necessary steps to comply with these new requirements.