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Form 480.70 (OE) Filing Requirement is Eliminated for Certain PR Retirement Plans

Taxes & Employee Benefits Department

On March 11, 2016, the Puerto Rico Treasury Department (the “PRTD”) published Administrative Determination No. 16-05 (“AD 16-05”) in order to (1) eliminate the requirement to file the annual Informative Return for Income Tax Exempt Organizations (Form 480.70 (OE) and its Spanish equivalent Form 480.7 (OE), hereinafter collectively “Form 480.70 (OE)”) to trusts forming part of Puerto Rico qualified retirement plans subject to Sections 1081.01(a) or 1101.01(a)(4)(D) (“PR Plans”) of the Puerto Rico Internal Revenue Code of 2011, as amended (the “PR Code”); and (2) repeal the Internal Revenue Circular Letter No.12-02 (“CC-02”) published by PRTD on February 13, 2012 that provided the rules to allow certain retirement plans qualified under the PR Code to file a copy of the United States Department of Labor Form 5500 or Form 5500-SF as the plan’s annual Puerto Rico return in lieu of filing Form 480.70 (OE). AD 16-05 applies to PR Plans with taxable years commencing after December 31, 2014.

Background: The PR Code establishes in Section 1061.10(a)(1) the requirement of filing annual returns for every employees’ trust claiming exemption from the payment of income taxes under PR Code Sections 1081.01(a) or 1101.01(a)(4)(D)(the “Filing Requirement”). The form determined by the PRTD to fulfill such PR Code requirement before the issuance of AD 16-05 was Form 480.70 (OE).

Change under AD 16-05: For tax years beginning after December 31, 2014, Form 480.70 (OE) will no longer be required for PR Plans.

Note however, that under AD 16-05, the Filing Requirement is not eliminated in its entirety as PR Plan’s participating employers are still required to complete and file the Form AS 6042.1, Deduction for Contributions to Qualified Retirement Plans and Tax on Certain Contributions (“Form AS 6042.1”), together with their income tax returns.

In addition, PR Plans that have participating employers that are not required to file a Puerto Rico income tax return must still complete and file the Form AS 6042.1 as a standalone filing. In such cases, Form AS 6042.1 shall be filed on or before the last day of the seventh (7) month following the close of the tax year of the PR Plan (July 31st for calendar year plans).

Request for Extension to File: An automatic extension will be available to be requested which shall provide until the fifteenth (15) day of the third (3) month following the due date to file the applicable return to file Form AS 6042.1 (July 15 for calendar year employers subject to the income tax return filing, and October 15 for calendar year plans where the employer is not required to file an income tax return).

Although AD 16-05 is silent as to electronic filing requirements for Form AS 6042.1, we note that under separate guidance, the PRTD does now requires that the Form AS 2644 be filed electronically (see PRTD Circular Letter of Internal Revenue No. 16-03).

This document 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 us.