Puerto Rico tax law has undergone a paradigm shift in the resent past when the government official enacted a new law on taxation. The modification took effect in June when the Governor appended his signature as required by law in effecting its application.
Tax may be defined as a compulsory contribution made by citizens involuntarily to the state. The state uses the tax to provide basic services to the citizens. The changes which took place are in regard to the new gross income tax and exceptions, other income corporate income tax, alternative income tax and exceptions, sales and use tax, other taxable and other sales and use tax provision.
In regard to new gross income, the new change creates a tax on gross income as part of the alternative minimum tax. These new tax will only apply to the financial institutions, insurance company contractors and other big institutions and companies. The exception to this new tax is companies operating under tax insensitive legislation and also businesses operating on agricultural products. The tax payers are also exempted for the change as it is only meant to target companies and financial institutions.
In regard to other corporate income tax measures, there is an introduction of 1% for insurance premium tax for insurance companies.
Thirdly, is on AMT. Under the new regime, there is introduction of several similar computations which is used in identifying the validity of AMT. There are also other situations which warrant an exclusion to the AMT as provided in the new regime. For instance, a tax payer has a right to apply for the exclusion through the secretary. However the tax payer or the business which is seeking for the said exclusion must prove to the secretary that they stand to suffer incur losses if they are not exempted. This therefore is a good provision which ensures that businesses which incur losses are protected and prevented from incurring further loses by paying tax to the government.
The other alteration is on alternative minimum tax commonly known as AMT. The new change has brought about a new various parallel computations which must be made in determining the existence of AMT. Tax payers have a lie way of seeking redress from the secretary for exemption to this alteration.
Fifthly, there is also a modification in the tax on other sales and use. The new law requires that only school uniforms, books and other relevant materials are excluded from taxation as opposed to the previous law which exempted institutions of learning as a whole. Hospitals and organizations providing health services are also affected by the modification. The current position is that all of them must be taxed.
The above discussion demonstrates the changes in Puerto Rico tax law which has brought a paradigm shift in their taxation.
Tax may be defined as a compulsory contribution made by citizens involuntarily to the state. The state uses the tax to provide basic services to the citizens. The changes which took place are in regard to the new gross income tax and exceptions, other income corporate income tax, alternative income tax and exceptions, sales and use tax, other taxable and other sales and use tax provision.
In regard to new gross income, the new change creates a tax on gross income as part of the alternative minimum tax. These new tax will only apply to the financial institutions, insurance company contractors and other big institutions and companies. The exception to this new tax is companies operating under tax insensitive legislation and also businesses operating on agricultural products. The tax payers are also exempted for the change as it is only meant to target companies and financial institutions.
In regard to other corporate income tax measures, there is an introduction of 1% for insurance premium tax for insurance companies.
Thirdly, is on AMT. Under the new regime, there is introduction of several similar computations which is used in identifying the validity of AMT. There are also other situations which warrant an exclusion to the AMT as provided in the new regime. For instance, a tax payer has a right to apply for the exclusion through the secretary. However the tax payer or the business which is seeking for the said exclusion must prove to the secretary that they stand to suffer incur losses if they are not exempted. This therefore is a good provision which ensures that businesses which incur losses are protected and prevented from incurring further loses by paying tax to the government.
The other alteration is on alternative minimum tax commonly known as AMT. The new change has brought about a new various parallel computations which must be made in determining the existence of AMT. Tax payers have a lie way of seeking redress from the secretary for exemption to this alteration.
Fifthly, there is also a modification in the tax on other sales and use. The new law requires that only school uniforms, books and other relevant materials are excluded from taxation as opposed to the previous law which exempted institutions of learning as a whole. Hospitals and organizations providing health services are also affected by the modification. The current position is that all of them must be taxed.
The above discussion demonstrates the changes in Puerto Rico tax law which has brought a paradigm shift in their taxation.
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