The Puerto Rico Department of the Treasury (The Hacienda) provided 6 months automatic extension and waived penalties for late payment of taxes
Modification of the term of the Automatic Extension and Application Procedure for the Condoning of the Applicable Surcharges and of the Penalty for lack of payment of the Estimated Contribution for the Taxable Year 2017
To all taxpayers
Administrative Determination DA No. 18-07 04/11/2018 Internal Revenue
I. Statement of Motives
Hurricane Maria has been the most devastating atmospheric phenomenon in the past eighty (80) years, both for the local infrastructure and for the property and property of the citizens. The economic situation of individuals and businesses in Puerto Rico has changed significantly after the passage of said hurricane. Many taxpayers, particularly businesses, are still in recovery processes, which can lead to delays in the accounting of their operations and therefore not having all the necessary information to comply with the filing of the Tax Return on Income corresponding to the taxable year 2017 ("2017 Return").
In agreement with the above and in solidarity with the citizens and all taxpayers, the Department of the Treasury ("Department") issues this Administrative Determination with the purpose of modifying the term of the extension request for the filing of the 2017 Return and establishing the procedure for requesting remission, subject to the conditions set forth below, of: (i) the applicable surcharges for late payment of the balance owed with the 2017 Return, and (ii) the penalty for lack of payment of the contribution estimated corresponding to the 2017 tax year.
II. Statutory Basis
Sections 1061.03 (c), 1061.04 (c), 1061.06 (c), 1061.07 (c), 1061.09 (b) (4), 1061.10 (b) (2) and 1061.16 of the Internal Revenue Code of Puerto Rico of 2011, as amended ("Code") provide for an automatic extension ("Automatic Extension") for the filing of the income tax return ("Return"), upon request filed by the taxpayer no later than the deadline established by the Code to file said return and subject to the rules established by the Secretary of the Treasury ("Secretary"). The request for the Automatic Extension ("Request for Automatic Extension") is made by filing Form Model SC 2644, Request for Extension to Render the Income Tax Return ("Form SC 2644").
As a general rule, and in accordance with the provisions of Section 1061.16 (a) (2) of the Code, said Automatic Extension is granted for a period of three (3) months counted from the date established for the filing of the Return. However, in the case of taxpayers who are partners in companies subject to taxation under the Federal Internal Revenue Code of 1986, as amended, Section 1061.16 (a) (2) (B) of the Code establishes that it is granted by a period of six (6) months counted from the date established for the filing of the Return.
On the other hand, as established in Section 1061.16 (a) (3) of the Code, those individuals who requested an Automatic Extension to file their Return, and who, because they are outside Puerto Rico, need additional time to file the same, may request an additional extension to file your Return ("Additional Extension"). Said Additional Extension shall not exceed three (3) months.
It should be noted that the Request for Automatic Extension provided in the Code only extends the filing date of the Return. Therefore, the same does not extend the date of payment of the contribution, so that the taxpayer must make the payment of the tax owed or any term thereof together with the Request for Automatic Extension to avoid the imposition of interest, surcharges and penalties.
A. Request for Automatic Extension to submit the 2017 Return
The Department determines to grant all taxpayers who file a Request for Automatic Extension to file the 2017 Return, a total term of six (6) months, instead of the term of three (3) months established in the Code, to file said return . The extension of the term of six (6) months of the Automatic Extension provided by this Administrative Determination ("6 Month Term") is applicable for the taxable year 2017 (that is, taxable years started during the year 2017), so that the same will apply to taxpayers with closing of the taxable year that is a calendar year or economic year. Said Term of 6 Months will be applied automatically, as long as the taxpayer files the Request for Automatic Extension no later than the deadline established for the filing of the 2017 Return.
As an example, in the case of taxpayers whose tax year end is December 31, they will have until Wednesday, October 17, 2018 to submit the 2017 Return, as long as they file a Request for Automatic Extension no later than the Tuesday, April 17, 2018
In the case of individuals and successions, the Automatic Extension of six (6) months will apply independently that the taxpayer has filed an application for Additional Extension. Therefore, for the 2017 taxable year no requests for Additional Extensions will be admitted or processed to any individual or estate.
In the case of corporations and limited liability companies required to complete a Corporation Income Tax Return (Form 480.2) under Section 1061.02 of the Code ("Regular Corporations"), the 6 Month Term of the Automatic Extension shall apply only in the extent to which the taxpayer files his 2017 Return by electronic means in accordance with the provisions of Circular Letter of Internal Revenue No. 18-03 ("CC RI 18-03"). Therefore, the only Regulatory Corporations that file their 2017 Return on paper to which the 6 Month Term will apply, subject to their filing an Automatic Extension Request, are those corporations that qualify under any of the four (4) restrictions on electronic filing established in CC RI 18-03.
On the other hand, in the case of conduit entities whose closing of the taxable year is December 31 and have submitted a Request for Automatic Extension for the 2017 Return to March 15, 2018, they will automatically have until Monday, September 17, 2018 to file the Income Information Sheet for Conducted Entities (Form 480.2 (EC) and the Conduct Entity Informative Return (Form 480.6 EC) of the taxable year 2017.
It is important to mention that as established in Circular Letter of Internal Revenues No. 18-04 ("CC RI 18-04"), for the 2017 taxable year it is required that the individuals and the Regular Corporations file the Request for Automatic Extension only for electronic means, in accordance with the procedure established in said Circular Letter. For information on the parameters of the electronic filing of the Model SC 2644, you can refer to CC RI 18-04.
In addition, as indicated above, the Request for Automatic Extension does not extend the date of payment of any tax owed with the 2017 Return or any term thereof. Therefore, taxpayers are encouraged to make the payment of the tax due or any term thereof together with the Request for Automatic Extension to avoid the imposition of interest, surcharges and penalties.
B. Balance of contribution owed in the 2017 Return - Request for cancellation of surcharges
Any taxpayer who is obliged to file a return and who, at the original date of filing, does not submit the total payment of the tax due and owed, will be subject to the payment of interest and surcharges for late payment.
However, in the case of the 2017 Return, that taxpayer who has filed an Automatic Extension Request to file their return and that at the time of filing their 2017 Return has a balance of contribution pending payment, may request the cancellation of surcharges Applicable for late payment subject to compliance with all of the following requirements:
- Submit the request for Automatic Extension as provided in CC RI 18-04 no later than the expiration date of the 2017 Return.
- To return the 2017 Return not later than six (6) months counted from the date established for the filing of said return (that is, the extended date as provided in Part III-A of this Administrative Determination).
- Submit the total payment of the tax owed, including the amount of the accrued interest, together with the filing of the 2017 Return.
In order to request the cancellation of the applicable surcharges for late payment, the taxpayer who complies with all the requirements established in this Part III-B, must include along with the 2017 Return an annex in which he expresses the reasons why he could not comply with the total payment of the contribution on the date established by the Code for it. In the case of Individuals who are obliged to file their 2017 Return by electronic means, in accordance with the procedure established in Internal Revenue Circular Letter No. 18-02, said attachment must be submitted electronically together with the electronic filing of their 2017 Return Also, in the case of Regulated Corporations that file their return electronically, according to the procedure established in CC RI 18-03,
In the case of taxpayers filing their 2017 Return no later than Tuesday, April 17, 2018, or the fifteenth (15th) day of the fourth (4th) month following the close of the taxable year, and unable to comply with the entire of the payment owed with said return, they will be able to take advantage of the procedure of cancellation of surcharges. For this, it will be a requirement that the total owed with the 2017 Return be paid no later than six (6) months from the date established for the filing of said return, including the accrued interest. The Department will make the appropriate adjustments in its information systems to grant the cancellation of surcharges automatically in those cases where the taxpayer complies with the provisions of this paragraph. However, the taxpayers who,
For its part, in the case of taxpayers who accept payment in installments of the contribution, in accordance with the provisions of Section 1061.17 (b) of the Code, the second installment will expire on Wednesday, October 17, 2018, so that it has a uniform expiration date with the dates previously provided.
C. Withdrawal of the penalty for non-payment of the estimated tax
Sections 6041.09 and 6041.10 of the Code establish a penalty of 10% for individuals and corporations, respectively, for failing to pay any term of the estimated tax within the prescribed term or making an incomplete payment of any estimated contribution term.
Notwithstanding the foregoing, for taxable year 2017, the Secretary determines that in those cases in which the taxpayer complies with all the following requirements, the latter may request the cancellation of the penalty of 10% of the unpaid amount of any term of the Estimated contribution for the taxable year:
- To have complied with the first two terms of the estimated tax of the taxable year.
- Pay the total amount owed for the taxable year 2017 no later than the expiration date of the 2017 Return, without including extensions.
In addition, the taxpayer must include and calculate the penalty imposed by Section 6041.09 or 6041.10 of the Code on Schedule T Individual or Schedule T Corporation, as applicable. Notwithstanding the foregoing, if the taxpayer understands that it complies with all the terms and conditions set forth herein, and therefore qualifies for the remission of the penalty provided in this Administrative Determination, the balance of the tax attributable to the penalty for non-payment of The estimated contribution will not have to be remitted to the Department.
To request the cancellation of the penalty for non-payment of the estimated tax established in Sections 6041.09 and 6041.10 of the Code, the taxpayer must send an email to: firstname.lastname@example.org or go to any of the Service Centers to the Department Taxpayer, with the following documents:
- Copy of the 2017 Form filed.
- Letter in which you request the remission of the penalty imposed by Section 6041.09 or 6041.10 of the Code, in accordance with the provisions of this Administrative Determination. In said letter, the taxpayer must also establish that it complies with all the requirements established above for the cancellation of the penalty.
The provisions of this Administrative Determination have immediate effect.
For additional information regarding the provisions of this Administrative Determination, please call (787) 622-0123, option 8.
Francisco Parés Alicea
Internal Revenue Area