April 5, 2016

On March 11, 2016, the Puerto Rico Treasury Department issued Administrative Determination No. 16-05, which provides employers who sponsor a Puerto Rico retirement plan a new way to comply with the reporting requirement previously done on Treasury Form 480.70(OE) starting with taxable years after Dec. 31, 2014.

As background, Section 1061.10(a) of the Puerto Rico Internal Revenue Code (the “Code”) requires that all retirement plans claiming exemption from the payment of income tax under Sections 1081.01(a) or 1101.01(a)(4)(D) of the Code, file an annual return. Pursuant to Section 1061.10(b) of the Code, the filing deadline is the last day of the seventh month following the end of the plan year.

The letter establishes new requirements for complying with the annual return filing. Employer sponsored retirement plans that are required to file Puerto Rico income tax returns must complete and file Form AS 6042.1, Deduction for Contributions to Qualified Retirement Plans and Tax on Certain Contributions, together with their Puerto Rico income tax returns. This would mean that the deadline to file is the fifteenth day of the fourth month following the end of the plan year. This deadline appears to be inconsistent with the deadline provided under Section 1061.10(b) of the Code mentioned above. Further guidance from the Puerto Rico Treasury Department may be needed for clarification and will be reported on in Compliance Corner if released.

In the case of retirement plans that are not required to file a Puerto Rico income tax return, those plans will only be required to complete and file Part V, General Information Regarding the Plan, of Form AS 6042.1. The filing deadline is the same as provided in Section 1061.10(b) of the Code.

Finally, the letter states that retirement plans that generated net income (or loss) not related to their exempt activity, must complete Treasury Form 480.20, Corporation Income Tax Return, to report net income (or loss) and pay the income tax, if any.

Sponsors of Puerto Rico retirement plans must be aware of these new filing requirements. Employers should contact their advisor for more information about compliance with the new filing requirements.

Administrative Determination No. 16-05 is available only in Spanish.

Administrative Determination No. 16-05 »