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New Procedures to Establish Qualified Plan Distributions in the U.S. and Puerto Rico

The Puerto Rico Treasury Department recently issued Internal Revenue Circular Letter 21-20, which establishes procedures for a former resident of Puerto Rico to demonstrate that distributions received from a U.S. retirement plan qualified under the Code and whose trust was created in a U.S. state are not subject to tax under the Puerto Rico Internal Revenue Code of 2011, as amended (the “Puerto Rico Code”). In order to establish that distributions received from a U.S. retirement plan are not taxable under the Puerto Rico Code, an individual is required to submit IRS Form 8898 (Statement for Individuals Who Begin or End Bona Fide Residence in a U.S. Possession) to the employer who maintains the plan from which the distributions are made. If the individual does not submit a Form 8898, such individual must instead submit the following information to such employer to demonstrate the individual’s change of residence: An affidavit… Continue Reading

COVID-19 Puerto Rico Tax Exemptions for Employer Payments and Changes to Puerto Rico Qualified Plans

The Puerto Rico Treasury Department (?Ç£Puerto Rico Treasury?Ç¥) issued Internal Revenue Circular Letter (?Ç£CC RI?Ç¥) 20-22 to offer tax exemptions for certain employer-provided payments for COVID-19. Specifically: CC RI 20-22 extends the provisions of CC RI 20-08, which provides income tax exemptions for ?Ç£Qualified Payments Made for Disaster Assistance?Ç¥ (?Ç£Qualified Payments?Ç¥) made by employers to employees and independent contractors, to include certain payments made as a result of the COVID-19 emergency. Qualified Payments must: (i) be made be during the period from February 1, 2020 to April 30, 2020; (ii) be in addition to the compensation that the employee or contractor ordinarily receives; (iii) not discriminate in favor of highly compensated employees; (iv) not be attributable to or related to the position or salary of the employee or independent contractor; and (v) be limited to maximum payments of $2,000 per month and $4,000 in total (including both Qualified Payments made… Continue Reading

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