Puerto Rico Allows Cash-Based Sales Tax Compliance for Construction Businesses

Ramón Frias
August 5, 2020

The Puerto Rico Treasury (Hacienda) released Administrative Determination 20-19 allowing certain businesses to report and pay sales tax, using the cash method. Specifically, those taxpayers with 80% or more of annual revenue stemming from construction activities (as measured over the last 3 years) will now be able to report and remit sales tax based on when payments are received as opposed to when invoices were issued. Under this option, tax on sales made on credit are not paid until customers make payment. Cash-method sales tax compliance can, for certain taxpayers, provide significant cash flow advantages.

To qualify, taxpayers must hold a state registration certificate carrying a NAICS Code classifying them as a construction business. They should also notify the Hacienda of their election via the SURI portal. Once elected, the option applies only to transactions carried out after June 30 2020. For additional details, please review the complete regulation here.

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Ramón Frias

Ramon is a Tax Counsel on the Regulatory Analysis team at Sovos. He is licensed to practice law in the Dominican Republic and is a member of the Dominican Bar Association. He has a Certificate Degree from Harvard University as well as a J.D. from the Universidad Autonoma de Santo Domingo. Ramon has written a number of essays about tax administration and has won the first prize in the international essays contest sponsored by the Inter American Center of Tax Administrations (CIAT). Prior to joining Sovos, Ramon worked for more than 10 years in the Department of Revenue of the Dominican Republic where he served as Deputy Director. He is proficient in French and Spanish.
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