On Oct. 1, the sales and use tax (IVU by its Spanish acronym) for prepared foods will be reduced from 11.5 percent to 7 percent, as determined in Act 257 of 2018, signed by former Gov. Ricardo Rosselló on the new tax model.
The reduction will be implemented at eligible restaurants with an Authorized Business Certificate issued by the Puerto Rico Treasury Department. Businesses wishing to obtain this certificate should be up to date in their tax filings, including IVU filings, and not have outstanding tax debt or be registered in a tax debt payment plan. The Authorized Business Certificate, which states that the business charges only 7 percent, must be placed on a visible place in the establishment.
Although the Treasury Department has a list of about 22,000 restaurants on the island, the Puerto Rico Restaurant Association (ASORE by its Spanish acronym) says that according to Labor Department statistics on companies that pay unemployment, in Puerto Rico there are about 4,000 open restaurants and those will be the ones eligible to charge the new decreased percentage tax, as long as they obtain their certificate before the beginning of October.
José Salvatella, president of ASORE, said that the disparity in the number of restaurants is due to the fact that Treasury Department records list many restaurants that have gone out of business and others who operate within another business, such as small restaurants inside gas stations.
“If you do not want to pay 11.5 percent do not sponsor that restaurant, there will be a visible certificate stating whether or not that restaurant charges the 7 percent. If you enter a restaurant that is not subject to the newer tax rate, you are required to pay 11.5 percent,” Salvatella explained.
“We have always believed in the complete elimination of the tax on prepared foods, and we recognize that this reduction will be beneficial for consumers and the industry. We urge the owners of food establishments to be observant of the Treasury guidelines so that they can implement this change effectively at their points of sale,” ASORE’s president added.
Puerto Rico Treasury Secretary Francisco Parés Alicea said notifications have been sent to businesses that prepare food, as these need to comply with certain requirements in order to be able to offer their products at the reduced IVU rate.
For businesses to receive the Authorized Business Certificate, they must also be registered under the North American Classification System (NAICS), according to Parés.
Parés added that businesses must also have a duly connected IVU terminal at each of the establishment’s point of sale systems.
For more information or guidance, log on to the Treasury Department’s website at www.hacienda.pr.gov or call (787) 622-0123, option 8.
List of eligible restaurants: