Rep. Méndez Núñez: Transition to new corporate tax law on track
By John McPhaul
The New Progressive Party minority leader in the island House of Representatives, Carlos “Johnny” Méndez Núñez, said Tuesday that the transition from Law 154-2010 to Law 52-2022, which represents over $1.7 billion of the annual operational budget of the government of Puerto Rico, is on track to avoid any disruption in the flow of cash to the Treasury Department.
“We have been clear since last year, the replacement of Law 154-2010 is one of the most important government actions during the past two decades,” Méndez Núñez said. “Today, Treasury Secretary Francisco Parés Alicea confirmed that three of the multinational companies covered by Law 154 have moved to the contributory parameters of Law 52, thus beginning the much-needed transition, which was ordered by the federal Treasury Department, and will culminate in a transparent change and without raising taxes on our people.”
On Sept. 16, the Internal Revenue Service (IRS) endorsed the statutes of Law 52-2022, which establishes a new tax platform for controlled foreign corporations (CFCs) with operations on the island, and under a tax exemption decree through Law 135-1998, Law 73-2008 and Law 60-2017.
“The advantage of this new law (52-2022) is that it retains that part of the government’s budget without affecting other businesses, just as it assists foreign corporations in their dealings with the federal Treasury,” the lawmaker added. “The fact that three of the largest companies have already migrated to the new contributory parameter is a sign that it will have great success guaranteeing the fiscal health of the government of Puerto Rico.”
In essence, corporations that take advantage of the new parameter would have to pay the Treasury Department a fixed contribution of 10.5 percent on the industrial income associated with development, as well as a similar one for royalties linked to the sale of products.
Méndez Núñez echoed the statements of the Treasury secretary in ensuring that the 13 CFCs that apply the parameters of Law 52 will enter it in a very short time.
Law 154 established a special contribution of four percent to foreign corporations in the acquisition of tangible movable property manufactured, in whole or in part, in Puerto Rico and services provided in connection with such property by a related entity on the island whose gross sales exceed $75 million annually.
About 38 entities were subject to the statutes of Law 154. Of those, 10 contributed 75% of the contributions, while 40 companies contributed the remainder.
Since the entry into force of Law 154 in January 2010, until June 2021, some $19.5 billion has entered the treasury for that purpose.