P.R. Laws tit. 21, § 4057
Pursuant to this section, procedures for the construction excise taxes shall proceed according to the following:
(a) Filing the declaration.— The natural or juridical person who is responsible for carrying out the work as its owner or his/her representative shall submit, before the Finance Office of the municipality in question, a detailed itemized declaration of activity, describing the costs of the work to be performed.
(b) Excise tax determination.— The Finance Director or his/her authorized representative shall review the work’s estimated value declared by the taxpayer in the declaration of activity, and shall inform his/her decision to the applicant by certified mail with acknowledgment of receipt or by registered delivery with acknowledgment of receipt, within fifteen (15) days after the declaration was filed. The Finance Director may:
(1) Accept the work’s estimated worth declared by the taxpayer, in which case, he/she shall apply the corresponding tax rate and determine the amount of the authorized excise tax.
(2) Reject the work’s estimated value declared by the taxpayer, in which case, he/she shall proceed to make a preliminary estimate of the work’s worth for taxing purposes, within the not extendible term of fifteen (15) days, from the date the declaration was filed by the taxpayer. After this preliminary determination is made, it shall be served on the taxpayer by certified mail with acknowledgment of receipt, or personally with acknowledgement of receipt.
(c) Payment of excise tax.— When the Finance Director or his/her representative accepts the work’s estimated worth declared by the taxpayer pursuant to the provisions of the above subsection (b)(1), the taxpayer shall make the corresponding excise tax payment within the fifteen (15) working days, following the date of the final determination, by money order or certified check payable to the municipality. The official of the Revenue Collection Office of the Finance Division shall issue a receipt for the construction activity’s excise tax payment. When the Finance Director or his/her representative, rejects the work’s estimated worth and imposes an excise tax pursuant to subsection (b)(2), the taxpayer may:
(1) Proceed, within the fifteen (15) working days, following the date of the acknowledgment of receipt, with the payment of the excise tax, accepting the determination of the Finance Director as a final determination.
(2) Proceed to pay the imposed excise tax under protest within the fifteen (15) working days following the date of notice of the preliminary determination; and, within the same term, apply in writing for the reconsideration of the Finance Director’s preliminary determination, and filing the application before the Revenue Collection Office’s Official before whom the payment is made.
(3) Refuse to make the payment, stop his/her construction plan, change the work’s starting date and apply for a judicial review, as provided in § 4702 of this title, within the not extendible term of twenty (20) days from the Finance Director’s preliminary determination notice.
Any taxpayer who voluntarily or under protest pays the corresponding excise tax, shall receive receipt of payment, so that upon its presentation before the Regulations and Permits Administration, it can issue the corresponding construction permit.
(d) Payment under protest and reconsideration.— When the taxpayer has paid under protest, he/she shall file a writ of reconsideration with a copy of the receipt of payment in the Finance Office. The Finance Director shall have a term of ten (10) days to issue a final determination on the work’s worth. The taxpayer shall be served the final determination by certified mail with acknowledgment of receipt, or personally, with acknowledgment of receipt, as well as of the recomputed excise tax and the deficiency or credit, whichever results from the final determination.
(e) Reimbursement or deficiency payment.— If the taxpayer has paid in excess, the municipality shall reimburse the excise tax paid in excess, within thirty (30) days, following the service to the taxpayer.
When the taxpayer is bound to pay a deficiency, he/she shall make such payment within a term of thirty (30) days, from the date of service. When the taxpayer proves to the satisfaction of the Finance Director, that the payment of the deficiency on the prescribed date is an undue inconvenience to the taxpayer, the Finance Director shall grant an extension, up to thirty (30) additional days.
When the taxpayer has made the excise tax payment herein provided, and after this date, the owner of the construction work, without, having in fact, started the construction activity, the taxpayer shall fill out a reimbursement application for the excise tax, and this shall proceed in its totality. If the work has been started and any construction activity has occurred, the reimbursement shall be limited to fifty percent (50%). The reimbursement shall be made within thirty (30) days following the date the reimbursement application is filed before the Finance Director. No application for the reimbursement of any sum shall be acceptable after six (6) months have elapsed from the date the excise tax payment receipt was issued for a specific work.
None of the provisions herein stated shall impede the taxpayer from resorting to the judicial review proceeding of the Finance Director’s final determination, pursuant to the provisions of § 4702 of this title. The judicial review must be filed within twenty (20) days following the date the Finance Director’s final determination was served. Except for any contrary provision by the court, the filing of a judicial review by the taxpayer shall not stay the effectiveness nor the obligation to pay the imposed excise tax. If the court determines to order the reimbursement of the excise tax, and at the same time, authorizes the construction to commence the posting of a bond shall be provided, which shall be sufficient in his/her judgment to ensure the recovery of the final excise tax determined by the court on behalf of the municipality, once the worth of the work is adjudicated in the review proceeding initiated by the taxpayer.
The municipality may request [of the] developer or contractor, whether public or private, evidence attesting to the final cost of the project to verify increases in the final value of the construction for purposes of imposing the payment of excise taxes for the increase in value of the works.
(f) Exemptions.— Through an ordinance approved to said effect, the Municipal Legislature may totally or partially exempt the following from the payment of construction excise taxes:
(1) Nonprofit associations that provide affordable housing to be rented to moderate or low-income families, who qualify as such under §§ 221 (d)(3) or 236 of the National Affordable Housing Act, (Pub. L. 73-479, 48 Stat. 476, 498), when thus certified by the Department of Housing of Puerto Rico.
(2) Nonprofit associations that provide affordable housing to be rented to persons who are sixty-two (62) years of age or older, provided such corporations qualify under § 202 of the National Affordable Housing Act, as amended (Pub. L. 86-372, 73 Stat. 654), when thus certified by the Department of Housing of Puerto Rico.
(3) Developers of construction projects or affordable housing rehabilitation, as provided in §§ 891 et seq. of Title 17, known as the “New Housing Operation Public and Private Copartnership Program”.
(4) The construction of real property constructed and destined to be rented to moderate-income families, as provided in § 5003 of this title.
(5) The development of projects for the expansion of buildings or plants that foster the generation of more jobs under the industrial incentives laws, and whose exemption granted under the signed agreement still is in effect.
(6) Civic or religious institutions operating on a non-profit basis, engaged in the development and welfare of the general citizenry, registered in the Department of State of the Government of Puerto Rico, and that are operating as such at the time of their application for exemption. Said institutions shall have a federal certification, pursuant to Section 501(c)(3) of the Internal Revenue Code of the United States. The municipal ordinance to be approved by the Municipal Legislature, pursuant to this subsection, shall be approved by two-thirds (⅔) of the members which constitute the Municipal Legislature.
Through the approval of the corresponding ordinance, the exemption benefit set forth in the preceding clauses (1) and (2) of this subsection may be retroactively granted to those projects that were in process of determining the payment of construction excise taxes and that, at the time of approval of §§ 4001(bb) et seq. and 4001(cc) & 4052(d) of this title, had not made the payment in question.
Works carried out under the management of an agency of the central government, or its instrumentalities, a public corporation, a municipality or an agency of the federal government, are exempted from the payment of the excise tax on construction. This exemption, however, shall not be applicable to construction works carried out by a private natural or juridical person acting in behalf or in representation of, or by contract or subcontract executed with an agency or instrumentality of the central or municipal government. Said exemption is not applicable when the construction works are carried out by a private natural or juridical person acting in behalf or in representation of, or by contract or subcontract executed with an agency of the federal government, when the applicable federal statutes or regulations thus allow it.
(7) The construction, improvement, or extension of the following: (a) pharmacies, (b) hospitals and healthcare centers, (c) clinical laboratories, (d) manufacturing plants, (e) shopping centers (including retail businesses and other business services that are part of a shopping center), (f) distribution centers, (g) call centers, (h) corporate office centers, (i) hotels, (j) “paradores,” and (k) educational centers.
(g) Failure to comply.— Failure to comply with the presentation of any of the declarations and/or documents required to corroborate the information provided on behalf of the taxpayer, or the provision of false information, being aware of its falseness, in the Construction Activity Declaration as well as the failure to comply with the excise tax payment, accompanied by the performance of the taxable construction activity, shall lead to the application of several sanctions, to wit:
(1) Administrative sanction.— When the Finance Director determines that the taxpayer has incurred any of the acts mentioned in the first paragraph of this clause, after granting an administrative hearing to such effects and pursuant to the procedure established in the Uniform Administrative Procedures Act §§ 2101 et seq. of Title 3, if the imputed conduct is established, the Finance Director shall proceed to collect the corresponding excise tax, and shall impose an administrative penalty to the taxpayer, equal to twice the amount of the imposed excise tax with the corresponding interests. A right for revision is hereby granted to the taxpayer, with regard to the penalty and the imposed interest, apart from the revision of the excise tax imposed; thus, the taxpayer shall pay the excise tax imposed before proceeding to impugn the penalty and/or interest imposed. In this case, the payment of the penalty shall be made, once its correction is ratified by the Court of First Instance under the procedure established in § 4702 of this title.
(2) Penal sanction.— Any person who voluntarily, deliberately and maliciously provides false information, being aware of its falsehood, with regard to the worth of the work that generates a taxable construction activity in any of the declarations that must be submitted before the Finance Director pursuant to this subtitle; or who deliberately, voluntarily and maliciously fails to file the declaration and begins the construction activity, or fails to pay the excise tax and begins the activity, in addition and regardless of any applicable administrative or penal provision, upon conviction, he/she shall be sanctioned with a fine not greater than five hundred dollars ($500), or with imprisonment of not more than six (6) months or both penalties, at the discretion of the court. In the event, that in a judicial review the ordinance with the penal sanction is set aside, it shall be understood that only the penal sanction shall be ineffective.
(h) Final agreements.— The Finance Director is hereby empowered to execute a written agreement with any person with regard to said persons liability or that of the person or succession, on behalf of whom he/she acts, regarding any excise tax levied under § 4052 of this title. Once the agreement is determined, the same shall have to be signed by the mayor, the Finance Director and the person or persons who are liable.
History —Aug. 30, 1991, No. 81, added as § 2.007 on Sept. 6, 1996, No. 199, § 3; Sept. 6, 1997, No. 116, § 1; Dec. 24, 1998, No. 323, § 2; Sept. 7, 2004, No. 258, § 12; Aug. 6, 2008, No. 161, § 1; July 13, 2012, No. 139, § 1.