Esta ley enmienda la Sección 1143 del Código de Rentas Internas de Puerto Rico de 1994 para imponer una retención en el origen del tres por ciento (3%) sobre los pagos realizados a corporaciones y sociedades por servicios prestados. Elimina la exención total de retención para estas entidades y establece una exención parcial del cuatro por ciento (4%) cuando estén al día con sus obligaciones contributivas. También otorga una exención total de retención durante los primeros tres años de actividad para la prestación de servicios.
(Substitute to H. B. 1917) (Conference) (No. 81) (Approved June 10, 2002)
To repeal paragraph (8); to amend paragraphs (1) and (10) and to redesign paragraphs (9), (10), (11), (12), (13), (14) of subsection
(b) as (8), (9), (10), (11), (12), (13), respectively; and to amend subsection
(g) of Section 1143 of Act No. 120 of October 31, 1994, as amended, in order to impose a three (3%) percent tax withholding at source on payments made to corporations and partnerships for services rendered.
Section 1143 of the Internal Revenue Code of Puerto Rico of 1994," as amended, (Code) establishes the withholding at source of seven (7) percent on payments for services rendered. The Code exempts from this withholding the payments for services rendered to corporations or partnerships whose tax payments are up-to-date, and in the case of individuals, the payments for the first three (3) years from the beginning of rendering of services. If the individual's tax liability is up to date, the withholding shall be five (5%) percent.
The purpose of this withholding is to extend the tax base of the taxpayer, reduce tax evasion by identifying the income for which taxes were not paid, and to enable the monitoring thereof.
The results of the implementation of this withholding have been positive to a certain degree. However, we consider that as a measure of tax equity, this withholding should be extended to corporations and partnerships.
Therefore, and furthermore, in order to increase the cash flow to the Treasury, it is proposed, through this Legislation, to eliminate the total relief of withholding in the case of services rendered by corporations and partnerships, and to grant a partial relief of four (4%) percent of the withholding when the same are up to date their tax liability. Nevertheless, these entities are granted total relief of the withholding during the first three (3) years go of commencing their activity to render services.
Section 1.- Paragraph (8) is repealed; paragraphs (1) and (10) are amended; paragraphs (9), (10), (11), (12), (13), (14) of subsection
(b) are redesignated as (8), (9), (10), (11), (12), (13), respectively; and subsection
(g) of Section 1143 of Act No. 120 of October 31, 1994, as amended, is amended to read as follows: "Section 1143.- Withholding of Tax at Source on Payments for Services Rendered.
(a) ...
(b) Special Rules.- The obligation to deduct and withhold provided in subsection
(a) of this Section shall not apply to: (1) The first one thousand five hundred $(1,500)$ dollars paid during the calendar year to the person who rendered the services. In the case of corporations or partnerships that operate in Puerto Rico through branches, the limit of one thousand five hundred $(1,500)$ dollars provided herein shall apply to each branch individually, at the option of the withholding agent. $(2) \ldots$
(9)Payments for services to individuals, corporations, and partnerships for the first three (3) years from the beginning of an activity to render services. This exemption may be enjoyed by the taxpayer only once.
(c) ...
(g) In the case of corporations and partnerships that are up to date with their tax liabilities, in lieu of the withholding provided in subsection
(a) , three (3) percent shall be deducted and withheld. In the case of other sectors or categories of enterprises or businesses where it is shown to the satisfaction of the Secretary, or that the Secretary determines that the obligation of this section shall cause undue inconvenience to said sectors or categories of enterprises or businesses, without leading to any practical end, since the amounts thus withheld will have to be reimbursed to the taxpayers, or because said withholding will be excessive, the Secretary may, under such rules and regulations that he/she may promulgate, release the withholding agent from making such withholding wholly or partially, from all enterprises or businesses included in the sector or category. Provided, further, that the Secretary may use the abovementioned criteria to release the withholding agent, wholly or partially, from performing the withholding provided in subsection
(a) or in this subsection, in the cases of the corporations and partnerships that carry over a substantial amount of net operating loss with regard to the annual business volume of said corporation or partnership.
(h) ..."
Section 2.- Effectiveness.- This Act shall take effect immediately after its approval, but its provisions shall apply with respect payments made after June 30, 2002.
I hereby certify to the Secretary of State that the following Act No. 81 (Substitute to H.B. 1917) (Conference) of the $3^{ ext {rd }}$ Session of the $14^{ ext {th }}$ Legislature of Puerto Rico:
AN ACT to repeal paragraph (8); to amend paragraphs (1) and (10) and to redesign paragraphs (9), (10), (11), (12), (13), (14) of subsection
(b) as (8), (9), (10), (11), (12), (13), respectively; and to amend subsection
(g) of Section 1143 of Act No. 120 of October 31, 1994, as amended, in order to impose a three (3%) percent tax withholding at source on payments made to corporations and partnerships for services rendered, has been translated from Spanish to English and that the English version is correct.
In San Juan, Puerto Rico, today $20^{ ext {th }}$ of August of 2004.
Elba Rosa Rodríguez-Fuentes Director