Excise Taxes

Subtitle B of the Internal Revenue Code of 1994 covers the provisions of  excise taxes of taxable events occurring after June 30, 1995. It imposes a tax on certain articles imported into or sold, consumed, used, transferred or acquired in Puerto Rico.  The tax is paid once and the rates depend on  the article involved.  The articles on which the excise tax is imposed are sugar, carbonated beverages, cement, cigarettes, gasoline, aviation fuel, gas oil, diesel oil, crude oil, unfinished oils and end products derived from  oil, hydrocarbon mixtures, motor vehicles, and on any other article of use and consumption introduced from abroad or manufactured locally not otherwise taxed. 

CLICK HERE to view the tax rates for the different articles.

For articles in which the five (5) percent tax applies the taxable price in Puerto Rico means the cost in Puerto Rico plus twenty (20) percent of said cost.  In  the case of importers cost in Puerto Rico shall be the sum of all the costs, excluding those for freight and insurance, which make possible the arrival of an article to the ports, regardless of its name or its origin, including  every kind of royalties or commission, plus 10% of the sum of the related costs by reason of freight and insurance.  The cost in Puerto Rico shall not be reduced in any case for discounts for prompt payment, or for discounts  granted by reason of volume of purchase, by reason of sales volume or considerations of a speculative nature, but it may be reduced for commercial discounts which are granted to reduce the prices stipulated in lists, catalogs,  advertisements or other publications to the prevailing market prices of for converting the consumer price into a wholesale or retail price, as long as the Secretary of the Treasury of Puerto Rico determines that such reduction is  properly warranted.  For these importers the effective tax rate is 6.6% of the cost determined as follows:

The Act provides exclusions of the five percent (5%) tax of every article of use or consumption.  CLICK HERE to view a list of the different articles exempted from tax.  The Act also provides exemptions on certain transactions.

 Importers of merchandise are required to declare and pay the excise tax at the time of introduction.  Additionally, they must file monthly declarations and pay the applicable Excise Tax for imports of goods via  the U.S. Postal Service.

An importer may elect to participate in a System for Bonded Importers.  Under this system all importers must  continue with the declaration requirements.  Excise Tax agents will release shipments consigned to bonded importers automatically.

All Bonded Importers must comply with the following requirements:

• Import 200 or more shipments on an annual basis,
• Post a bond equal to three months worth of excise tax based on last year's total purchases and taxes paid,
• A minimum bond of $50,000 must be posted,
• The bond should be posted with a local Insurance Company,
• The Bond should be in effect at all times,
• A continuous bond is required in order to renew the identification number or otherwise the number will be inactivated,
• Import under bond only merchandise for which the importer will be responsible for the excise tax payment,
• Establish an accounting system which will permit the segregation of purchasing data into the following purchasing categories:
   
• Total imported purchases subject to tax payment,
• Imported purchases of non-taxable items,
• Imported purchases re-exported,
• Imported purchases sold to the Federal Government,
• Local purchases,
• All transfers of merchandise from house office to subsidiaries in Puerto Rico must  include margin of profits regardless corporation relationship,
• Other imported purchases subject to excise tax.

Importers who satisfy the above requirements and elect to participate in the program will be assigned an excise tax identification number and will be required to do the following:

• Ensure that waybills for their shipments are identified with their assigned excise tax identification number,
• Bonded importers will be responsible for those shipments identified with their identification number,
• The identification number is an exclusive one and is non-transferable,
• File a monthly excise tax return form for bonded importer by the 10th day of the following month,
• File an annual excise tax return on or before April 15 of every year,
• Maintain accounting records physically in Puerto Rico.

The identification number is renewable every year.  If it is not renewed, the number will be inactivated and the privilege of getting an automatic release of the merchandise in the port will be suspended.

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