10 Surprises of the House of Representatives' version of Bill 2329

While we are in the process of reviewing the 2,172 pages of the version of the House of Representatives for Bill 2329 and preparing a summary of all the proposed amendments to the original 2329, I want to share with you 10 surprises included therein.

1.  We will not have a VAT, but a GST: goods and services tax.
2. There are at least 15 new definitions included in this version. Some of these relate to different types of beverages, snacks, electric solar equipment, employment agencies services, advertising and communication services, health services and others. In addition, the definition of food and prepared foods is changed. The term "foods" will exclude frozen foods that are totally or partially pre-cooked, among others.
3.  The Bill includes a definition for eligible consumer. In general, the gross income (before exclusions and exemptions) should be more that $7,500 and less than $30,000 to qualify. There are special rules for individuals 65 and older and pensioners.
4. Admission rights will include air and maritime tickets for passenger transportation.
5. Retail sales of electric solar equipment and text books, legal services in cases of medical "mal practice", health and hospital services, educational services and child care services are added to the exemptions list. Also, commercial rent paid by merchants except those engaged in providing financial services (except coops), hospital units and tourist business, is added to this list.
6. The Small Merchant is defined as one with gross sales of less than $125,000. It will be required from a small merchant to file an annual informative return and remit with the same (due within 60 days of the filing of the income tax return, including extensions) a minimum amount of tax. The tax will be computed on the gross sales of good or services and ranges from $0 to $400.
7. The GST applicable to goods and services is computed upon the value of the goods. Value is defined  in different manners for different transactions. In the case of imported goods into Puerto Rico,  the value will be the purchase price before freight, delivery charges and insurance, plus 10% upon that purchase price for freight, delivery charges and insurance. In the case of manufactured products in Puerto Rico, value will be sales price plus 10% for freight, insurance and delivery charges. SURPRISE! Beware: the GST rate on these goods will then be 15.4% and not 14%. Flashback!
8. The rates proposed are not really a surprise: general rate of 14%, special rate of 10% and 0% rate. Only designated services, communication and advertising services, employment agencies services and information technology services when rendered B2B will be subject to the 10% as well as the sale of prepared foods.
9. Imports by manufacturing plants will be exempt and not subject to 0%. It seems that manufacturing plants will only be exempt in raw material that is introduced into Puerto Rico.
10.  If you thought fiscal terminals were gone, this is a surprise for you. They were brought back into the picture. Receipts and fiscal invoices need to be printed in a fiscal terminal.

BONUS: The income tax reductions for individuals will become effective on July 1, 2015 and not January 1, 2015, as originally proposed. This version of Bill 2329 includes a method to compute the tax for the whole year, which will make next year's filing season very interesting, to say the least.

There you have it! I am sure, we will find more surprises as we "digest and assimilate" the 2,172 pages of the Bill. But, I kept the best surprise for last: it seems this is not over yet. I am not referring to the legislative process ahead (where the Senate seems to be in a different road) but to the fact that the House of Representatives is considering other tax collection measures that are not included in their version of Bill 2329, but are evaluating whether they will include them. WHAT!

According to this morning's papers, these are:

1. Increasing income tax rates for those individuals with taxable income over $40,000 ($80,000).
2. Increasing the income tax to corporations.
3. A new excise tax to unhealthy products (i.e. sodas, candy, chocolate, snacks and others). This tax will be in addition to the GST.
4. An additional tax of 1%  to businesses with sales over $600 millions.
5. Increase from 2% to 6% the tax on related entities purchases.