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With the end of 2018 in sight, November is as good a time to look ahead and consider some important tax planning aspects for the upcoming tax filing season.

This issue discusses the ASU issued 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. This ASU allows private companies to elect out of VIE guidance.

The U.S. Tax Reform created a new rule under the U.S. Internal Revenue Code of 1986, that allows investors to defer the recognition of capital gains by investing in a Qualified Opportunity Fund that invests in Qualified Opportunity Zones. As part of this legislation, almost 95% of Puerto Rico was designated as an Opportunity Zone. Following the federal government’s lead in this area, the Puerto Rico House of Representatives submitted Bill No. 1887 to create the “Act for the Development of Opportunity Zones and Economic Development of 2018”.

Section 1061.17 of the 2011 Puerto Rico Internal Revenue Code, as amended (the “Code”), allows individual taxpayers that are not subject to the payment of estimated taxes the option to pay their income tax liability in two (2) equal installments – with the first installment due on the fifteenth day of the fourth month after the close of the individual’s tax year, and the second installment due no later than the fifteenth day of the sixth month after the first installment. For example, if Mr. X has a December 31, 2017 year end, the first installment for his 2017 income tax liability would be due on April 15, 2018, whilst the second would be due on October 15, 2018.

On January 27, 2016, the Puerto Rico Treasury Department (“PRTD”) unveiled the Unified Internal Revenue System (“SURI”, for its acronym in Spanish) as means to modernize and improve the PRTD’s administration of tax revenue and supervisory duties. By consolidating its various processing systems into a single platform, the agency is allowed a fully integrated snapshot of every taxpayer’s accounts.

On July 25, 2018, Act No. 20 of 2012 (“Act 20-2012”) was amended by Act 157 of 2018 (“Act 157-2018”) to extend its limited exemption on property taxes to other eligible service industries within Act 20.

The US Tax Cuts and Job Act of 2017 aims to spur long-term investments in low-income urban and rural communities throughout the US and Puerto Rico by investing in a qualified opportunity fund.

This is a brief overview of recently enacted (during the last extraordinary session) tax statutes in Puerto Rico. The much-awaited Tax Reform and Incentives Code were not approved during this session, though it is expected that they will be considered in the August session.

On July 2, 2018, the Puerto Fiscal Agency and Financial Advisory Authority (“AAFAF” for its acronym in Spanish), issued Administrative Order OA-2018-10 to dissolve the Tax Credits and Disbursements Authorization Committee constituted and authorized under AAFAF’s Administrative Order OA-2017-01.

Puerto Rico Senate presented Bill No. 1016 proposing a Sales and Use Tax (SUT) exemption period of three(3) days in the mont of June covering the sale of essential articles needed to be prepared for the hurricane season There is a verdict in the case of South Dakota v. Wayfair. On June 21, 2018, The Supreme Court has decided that remote sellers have to collect the sales taxes in States where they have no physical presence.

The Puerto Rico Treasury Department released Internal Revenue Circular Letter 18-10 to establish the dates for the back to school tax free periods for the fiscal year 2018-2019 and also to establish the articles that will be exempt from Sales and Use Tax (“SUT”) during these periods.

The Puerto Rico Code establishes a 51% limitation on the amount of deductions that an entity can take for expenses paid to related entities outside Puerto Rico or on allocations of expenses made to the Puerto Rico entity.

The Disaster Tax Relief and Airport and Airway Extension Act of 2017 was amended by the Bipartisan Budget Act of 2018 to establish that Puerto Rico employers will benefit from a tax credit of the total qualified wages paid to each eligible employee during the period the business was rendered inoperable after Hurricanes Irma or María.

On May 14, 2018 the Puerto Rico Treasury Department issued Administrative Determination 18-09 establishing the procedures for opening deceased’s safety deposit boxes in Puerto Rico and clarifying the new rules to obtain the Certificate of Cancellation of Lien over estate’s assets (cancellation of lien). It also released the new Puerto Rico Estate Informative Tax Return

Digitization is allowing tax authorities in Puerto Rico to collect tax data in real time or near real time, and use the information to respond quickly and in targeted ways to perceived compliance risks.

The Disaster Tax Relief and Airport and Airway Extension Act of 2017 (the “Act”) allows relief measures for zones and areas that were affected by Hurricanes Harvey, Irma and Maria. Of particular interest was the concession of a business tax credit to employers for employee retention on disaster areas under the U.S. Internal Revenue Code of 1986, as amended (the “IRC”).