On June 14, Governor Wanda Vázquez signed into law the Supplementary Act to Address the Effects on the Puerto Rican Economy caused by the COVID-19 Emergency, creating new tax and economic stimulus measures to enhance the Puerto Rico economy by strengthening small and mid-size businesses.
The new law’s provisions will remain in effect as long as necessary to mitigate the effects of the COVID-19 in the economy but no later than December 31, 2021.
The original bill included tax credits to reimburse companies for payroll costs. These credits could cover 50% to 100% of payroll costs, depending on the type of business, the degree of loss experienced because of the pandemic, and the additional costs caused by the pandemic. These measures were opposed by the PROMESA Fiscal Oversight and Management Board, and do not appear to be included the final version.
The Board’s objection was said to be based on its concern that the payroll tax credit could duplicate federal benefits under the CARES Act.
The stimulus bill calls for “carryback” provisions allowing businesses to apply up to $200,000 in COVID-19 losses to taxes from previous years. Companies earning $10 million or more will not be eligible for this benefit. Smaller companies may apply losses from the beginning of the official state of emergency to the end of 2021 to business tax bills from the past three years.
The new Puerto Rico law excludes any federal payments under COVID-19 stimulus bills from business income but still allows businesses to deduct any normal expenses paid for with those funds. It also extends deadlines for tax filing and payments.
The new law also suspends most sales and use taxes on business to business services for three months. Some paperwork requirements are also temporarily suspended under the bill. The $500 Alternative Minimum Tax for businesses has also been suspended.
Payments to businesses
The governor reported earlier this month that more than $115 million has already been distributed to small and medium sized businesses in Puerto Rico.
Companies employing 50 to 500 people received grants of $10,000 and those with fewer than 50 employees received $5,000. Self-employed individuals have also received grants from $500 to $1,000.