Starting October 1st, 2019, purchases of prepared foods are subject to a reduced Sales and Use Tax rate.

Act 257-2018 amended Section 4210.01 of the Puerto Rico Internal Revenue Code of 2011, with the purpose of exempting prepared foods, carbonated beverages, pastry products, and candy (collectively, "prepared foods") sold by qualifying restaurants, from the 4.5% Sales and Use Tax (“SUT”) surcharge, starting October 1, 2019.

As a result, such sales would be subject to a reduced SUT rate of 7%,  instead of the ordinary SUT rate of 11.5%. The reduced 7% SUT rate applies only to the sale of taxable items that are considered prepared foods. Therefore, this exemption is not applicable to the sale of alcoholic beverages.

On August 2, 2019, the Puerto Rico Treasury Department (PRTD) issued Administrative Determination No. 19-03 (DA 19-03), to establish the eligibility requirements for this exemption and the process to obtain the authorization to collection the reduced SUT. Pursuant to DA 19-03, merchants who comply with the following requirements will be able to obtain the proper authorization and certification:

  1.  Must have a valid Merchant Registration Certificate with at least one of the following "NAICS" codes:
    • 72231- Food Services by Contract
    • 72232—Event Food Services
    • 72233- Mobile Food Services
    • 72241—Bars and Canteen
    • 72251- Restaurants and other eating places
  2.  Must comply with all their SUT obligations and all other tax liabilities with the PRTD, and
  3.  Must maintain a fiscal terminal at each point of sale

Merchants who comply with all the requirements mentioned above, should have an authorization certificate to display on each commercial location that qualifies with the requirements of DA 19-03. This certificate authorizes the merchant to collect the 7% reduced SUT rate and let consumers know that said merchant is qualified. 

The certificate, Model SC 2995- “Authorized Business – Reduced SUT Rate on Prepared Foods”, is available through the Internal Revenue Unified System (SURI, for its Spanish acronym). All certificates are valid until September 30, 2020, regardless of the date of issuance. However, merchants who continue to comply with all the requirements will receive an updated certificate automatically, issued through their online SURI account.

At RSM Puerto Rico, we can advise you on this matter. Please contact our tax advisors at (787) 751-6164 | [email protected] for help or more information.

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