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TREASURY DEPARTMENT ADOPTS NEW PAYMENT PLANS FOR CERTAIN OUTSTANDING TAX DEBTS

The Secretary of the Puerto Rico Treasury Department (hereinafter “PRTD”) has just released Internal Revenue Circular Letter No. 17-05 (hereinafter “the Circular Letter”) to provide Rehabilitation Payment Plans (hereinafter “the Plans”) for certain taxpayers. Pursuant to

Sections 1001.01 and 6051.08 of the Internal Revenue Code of Puerto Rico of 2011, as amended (hereinafter, “the Code”), the Circular Letter sets forth the terms and conditions of the Plans under this new Taxpayer Rehabilitation Program. The benefits granted by the Plans are additional time to pay, and the possible waiver of penalties. The Circular Letter also explains the

application process and their respective approval procedures. Additionally, the Circular Letter derogates Internal Revenue Circular Letter No. 16-10 and Internal Revenue Informative Bulletin

No. 09-14, which state the terms and procedures for payment plans under prior rules.

The Plans are summarized by type and category as follows:

Automatic Plans:

• Does not require an evaluation of the economic capacity of the Taxpayer.

• The Taxpayer must commit to make monthly payments within a prescribed period until the

tax liability is paid entirely, including interest and surcharges. The prescribed period will

begin on the date of the Plan approval.

• All payments must be made by direct deposit.

• A down payment may be required.

• No guarantee of payment is required.

• The taxpayer must submit the following documentation by email to:

plandepago@hacienda.pr.gov:

Application and Agreement for an Automatic Payment Plan (Form 3509 or 3510)

If an Authorized Representative is appointed: Power of Attorney (Form 2745) – signed

and with photo ID attached

• Once the application has been processed, the PRTD will contact the Taxpayer for the Plan

signature and to provide the down payment, if applicable.

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Regular Plans:

• Taxpayers must demonstrate, upon satisfaction of the PRTD, that there is no economic capacity to pay the total balance due.

• The Taxpayer must commit to make prescribed monthly payments within a prescribed period, until the tax debt is paid entirely, including interest and surcharges. Both monthly payments and installment periods will be determined by the Secretary and will depend of the Taxpayer’s economic capacity. The prescribed period will begin on the date of the Plan approval.

• All payments must be made by direct deposit. • A mandatory down payment will be established. • A guarantee of payment may be required, which includes mortgage bond, insurance bond or a pledge. • Applications will be evaluated by Collections District Officials who will authorize Plans in cases where

it is warranted. • The Taxpayer must submit the following documentation: (1) Application letter including the

taxpayer’s personal information, Tax Debt Category and bank account information (2) Statement of Financial Situation (Form 3325 or Form 3326 as applicable), with supporting documentation; (3) Last two bank statements of all bank or investment accounts in or outside of Puerto Rico; (4) Tax Debt Certifications evidencing the type and amount of tax debt that will be included in the Plan; If an authorized representative is appointed: (5) Power of Attorney (Form 2745) – signed and with photo ID attached.

• Only plan available for Taxpayers, for which the aggregate principal of all tax debts is greater than $50,000. This applies even when, any debt if considered individually, would be eligible for an Automatic Plan.

Debts to be included Please note that the Taxpayer cannot be selective as to the debts to include in the Plans and must include all assessed tax debts that are due to the PRTD. In certain cases, the PRTD could condone partially or entirely, any fine or penalty applicable to the tax debt included in the Plans, if the Taxpayer complies in a commendable manner with its dispositions. Providers of the Government A Taxpayer who provides goods and services to the Government of Puerto Rico, and who has outstanding invoices, may request to offset the amount due against tax debts. Similarly, the PRTD can detain payments to its suppliers in order to cover, partially or completely, any balance of tax due by the Taxpayer.

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PRINCIPAL BALANCE DUE

CATEGORY UP TO $10,000 GREATER THAN $10,000 BUT

DOES NOT EXCEED $25,000

GREATER THAN $25,000 BUT

DOES NOT EXCEED $50,000 GREATER THAN $50,000

I – Income Tax Automatic Plan

Installment period of 24 months

No down payment

Automatic Plan

Installment period of 36 months

Down payment – 10% of principal

Automatic Plan

Installment period of 36 months

Down payment – 20% of principal

Regular Plan

Down payment to be determined

– 10% minimum

II – Special Tax on Real

Property (Act 7-2009).

Does not include regular

property taxes.

Automatic Plan

Installment period of 24 months

No down payment

Automatic Plan

Installment period of 24 months

No down payment

Automatic Plan

Installment period of 24 months

No down payment

Automatic Plan, but it could be

argued that in certain

circumstances a Regular Plan

might apply (i.e., $50,000

threshold).

III – Sales and Use Tax Automatic Plan

Installment period of 12 months

Down payment – 10 % of principal

Weekly SUT electronic deposits 1

Penalty acceptance by officers and

responsible parties2

Automatic Plan

Installment period of 24 months

Down payment – 20 % of principal

Weekly SUT electronic deposits 1

Penalty acceptance by officers and

responsible parties2

Automatic Plan

Installment period of 36 months

Down payment – 20 % of principal

Weekly SUT electronic deposits 1

Penalty acceptance by officers and

responsible parties2

Regular Plan

Down payment to be determined

– 10% minimum

Weekly SUT electronic deposits 1

Penalty acceptance by officers

and responsible parties2

IV – Tax Withholding by

Employers and

Withholding Agents

Automatic Plan

Installment period of 12 months

Down payment – 10 % of principal

Weekly SUT electronic deposits 1

Penalty acceptance by officers and

responsible parties2

Automatic Plan

Installment period of 24 months

Down payment – 20 % of principal

Weekly SUT electronic deposits 1

Penalty acceptance by officers and

responsible parties2

Automatic Plan

Installment period of 36 months

Down payment – 20 % of principal

Weekly SUT electronic deposits1

Penalty acceptance by officers and

responsible parties2

Regular Plan

Down payment to be determined

– 10% minimum

Weekly SUT electronic deposits 1

Penalty acceptance by officers

and responsible parties2

V – Excise Tax Regular Plan Regular Plan Regular Plan Regular Plan

Notes: 1 Weekly SUT electronic deposits must be made. Such deposits must account for at least 90% of the total monthly liability. If the Volume of Business exceeds $125,000, the taxpayer

must maintain a fiscal terminal per location at all times. For Automatic Plans with a Principal Balance of $10,000 or less, this will only apply if the monthly SUT liability exceeds $2,000.

2 Officers and responsible parties of the collection/submission of the tax should accept, as part of the Plans, the penalty imposed under Section 6080.02 in case of noncompliance with

the Plans. Note that such penalty already exists and can be waived under the Plans.

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Noncompliance with Plan

Once a Plan is granted, the Taxpayer must commit to be in compliance with the Code dispositions, prospectively. However, in the case there is any breach with the dispositions of the Plan or any subsequent tax debt, the PRTD is allowed to take the following measures:

• Impose all fines and penalties established in the Code, without making any additional notice to theTaxpayer.

• Terminate the Plan and collect any balance due, plus any penalties or fines that had been condoned asresult of the Plan.

• Use levy mechanisms established by the Code without any additional notice to the Taxpayer.• Report the tax debt to credit agencies and the U.S. Treasury Offset Program of the federal government.• In certain cases, the PRTD will begin the assessment and collection of personal penalties for failure to

collect and pay taxes or tax evasion pursuant to Section 6080.02 of the Code. Penalties under thissection, may be waived, upon discretion of the PRTD. Under such Section, a responsible party, whichwill be personally liable, consists of:

Any chief operating officer, president, chief financial officer, chief accounting officer, controller,and any officer with a similar position, of an entity or with the obligation to collect, withhold,account for, and pay over any tax or levy established by the Code;

Any person whose responsibility, duty, function or obligation in an entity or person is to collect,withhold, deposit, account for or pay over any tax or levy established by the Code, whoknowingly fails to collect or truthfully account for and pay over such tax; and

Any person who knowingly attempts in any manner to evade or defeat any tax imposed by anysubtitle of this Code or the payment thereof.

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Kenneth Rivera, Tax Partner Axel Ramírez, Tax Partner

Leví Villegas, Tax Partner Iris N. Otero, Tax Director

Yelitza Net, Senior Tax Manager Yelitza R. López, Senior Tax Manager

Edgardo Rosa, Tax Manager Sylvia Reyes, Tax Manager

Jazmarie Rivera, Tax Manager Sheila Quiñones, Senior Tax Consultant

Samira Yassin, Senior Tax Consultant Madeleine Tubéns, Tax Consultant

Ashly Lasanta, Tax Consultant Carlos Castro, Tax Consultant

Juan Gotay, Tax Consultant Coralys Rodríguez, Tax Consultant

Gabriel Otero, Tax Consultant Eric Gotay, Tax Intern

Jessica Rivera, Admin. Assistant Yesenia Pitre, Admin. Assistant

“Interested in Other Services? - Audit / Assurance / Consulting / Information Technology" Contact Julio A. Galíndez, Managing Partner, at (787) 725-4545.

This communication may constitute an advertisement or solicitation under the law. You may choose not to receive ad-vertising and promotional messages from FPV & GALINDEZ, LLC at this e-mail address by forwarding this message with the title “UNSUBSCRIBE” to mail@fpvgalindez.com. If you do so, the sender of this message will be notified promptly. The content of this Tax Letter has been prepared by us for information purposes only. This communication is not in-tended as, and does not constitute tax, accounting, consulting, or legal advice.

PLEASE CONTACT OUR TAX DEPARTMENT AT (787) 725-4545 OR AT

kenneth@fpvgalindez.com , axel@fpvgalindez.com or levi@fpvgalindez.com

IF FURTHER ASSISTANCE OR INFORMATION IS REQUIRED ABOUT THESE MATTERS.

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