Executive Summary
On August 2, 2017, the Department of Economic Development and Commerce (the “DDEC”) issued the Regulation (the “Regulation”) required under Act No. 14 of February 21, 2017, known as the “Incentives Act for the Retention and Return of Medical Professionals” (“Act 14”), through which the DDEC provides guidance on procedures to be followed and documents that to submitted for a Qualified Physician to obtain a Tax Exemption Grant (the “Grant”) under Act 14. The Regulation provides that the issuance of a Grant requires: (i) obtaining and submitting a Certificate of Qualified Physician (the “Certificate”) from the Puerto Rico Department of Health (the “PRDH”); (ii) filing of a Tax Incentives Application (the “Application”) with the Office of Industrial Tax Exemption (the “OITE”); and (iii) accepting the terms and conditions established in the Grant with OITE.
Filing of the Application with OITE
Pursuant to the Regulation, all Applications must include the following documents for the Qualified Physician:
- Application signed and sworn before public notary;
- Certificate issued by the PRDH;
- Criminal background check (“Certificado de Antecedentes Penales” in Spanish);
- Copy of the social security number card or national identification card;
- Income tax return filing certificate, issued by the Puerto Rico Treasury Department (the “Treasury”) for the last five (5) years;
- Debt Certificate issued by the Treasury;
- All Concepts Debt Certificate issued by the Municipal Revenues Collection Center (“CRIM” by its Spanish
acronym); - Certificate of compliance issued by the Administration for the Support of Minors (“ASUME” by its Spanish
acronym); - Chauffeur’s Social Security Debt Certificate issued by the Puerto Rico Department of Labor and Human
Resources (“DTRH” by its Spanish acronym); - Debt Certificate issued by the Puerto Rico State Insurance Fund Corporation (“CFSE”, by its Spanish acronym); and
- Any additional documents requested by OITE.
In addition, should the requesting Qualified Physician have a Medical Services Business that may issue Eligible Dividends, the petitioner must also provide the following documents for the Medical Service Business:
- Certificate of Registry or Authorization to Do Business in Puerto Rico, issued by the Puerto Rico Department
of State (“PRDS”); - Certificate of Good Standing issued by the PRDS;
- Income tax return filing certificate, issued by the Treasury for the last five (5) years;
- Debt Certificate issued by the Treasury;
- All Concepts Debt Certificate issued by the CRIM;
- Chauffeur’s Social Security Debt Certificate issued by the DTRH;
- Unemployment and Disability Insurance Debt Certificate issued by the DTRH;
- Debt Certificate issued by the PRSIFC;
- Organizational Chart, including intermediary or related entities of the requesting Qualified Physician;
- Copy of the employer identification number issued by the Internal Revenue Service; and
- Any additional documents requested by OITE.
The Application shall be filed using the form established by OITE. The Application has a filing fee of $2,500.00 payable to the Secretary of the Treasury. The payment can be remitted through certified check, money order or manager’s check.
Annual Reports
Each Qualified Physicians that obtains a Tax Exemption Grant (hereinafter “Exempt Physician”) must file an Annual
Report with the OITE (the “Annual Report”), which must include:
- Annual Report form provided by the OITE, signed and notarized;
- Community Service Certification;
- Copy of the filed Income Tax Return of the Exempt Physician for the tax year reported in the Annual Report;
- Copy of the filed Income Tax Return of the Medical Services Businesses for the tax year reported in the Annual
Report; - Copy of the financial statements (audited, if applicable) of the Medical Services Businesses issuing the Eligible
Dividends to the Exempt Physician; and - Any additional documents requested by OITE.
The Annual Report must be filed no later than 30 days after the corresponding income tax return (including extensions), along with a filing fee of $300.00.
Non-Compliance with the Filing of the Annual Report
Any Exempt Physician that fails to comply with the Annual Report filing requirement risks that the Director of OITE
revokes the issued Grant. The revocation process entails:
- Notice from the Director of OITE of the non-compliance. The notice will grant 30 days to the Exempt
Physician to file the Annual Report or to reasonably justify the delayed filing. - If upon the expiration of 30 day grace period, the Exempt Physician does not comply, the revocation process shall commence.
If the Grant is revoked, the Exempt Physician will be required to pay the Treasury all taxes not paid for any Eligible Income of Qualified Dividends received during the last three (3) years or the duration of the Grant, whichever is less. Said tax payment must be remitted within 60 days after the effective date of the revocation of the Grant.
However, if the Exempt Physician satisfactorily demonstrates that the non-compliance was due to his/her sickness or disability, that of his/her spouse, children or parents, the Grant may still be revoked but the taxes that must be paid will only correspond to the tax year in which the Grant was revoked.
Filing of Application for Annual Certificate of Compliance
All Exempt Physicians must file before OITE an annual a request for a Certificate of Compliance no later than fifteen (15) days after their taxable year. The request must be done through the approved form provided by OITE, along with a filing fee of $250.00 that must be paid by certified check, money order or manager’s check payable to the Secretary of the Treasury.
Filing Fees under Act 14
The following table summarizes the applicable filing fees required for a Qualified Physician to obtain and maintain a Grant:
All fees, except the Single Payment for the Grant shall be paid by certified check, money order or manager’s check in favor of the Secretary of the Treasury. The Single Payment for the Grant of $1,000.00 must be paid to the Secretary of the DDEC through a voucher issued by the Treasury.
By Boris Jaskille, Esq. Ferraiuoli LLC
This article has been prepared for information purposes only and is not intended as, and should not be relied upon as legal advice. If you have any questions or comments about the matters discussed in this notice, wish to obtain more information related thereto, or about its possible effect(s) on policy or operational matters, please contact Ferraiuoli LLC.