Puerto Rico’s new tax law affecting multinationals: implications of new regulations and accounting considerations

On October 25, 2010, Governor Luis G. Fortuño signed a new tax law (Act 154) effective for transactions occurring after December 31, 2010. The tax provisions modified Puerto Rican tax law by adopting a new sourcing rule and imposing a temporary excise tax on inter-company purchases made through 2016.

On December 10, Puerto Rico issued proposed regulations (section 2101) authorized under Act 154. The proposed regulations provided for significant tax credits that could offset some of the burden of the new tax for certain non-resident taxpayers.

The are also some accounting question surrounding these new taxes to determine whether they are within the scope of ASC 740, Taxes, or other accounting guidance.