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Puerto Rico provides withholding guidance concerning government contracts, waivers for new businesses

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Puerto Rico’s reconstruction in the wake of Hurricane Maria’s devastation has created a series of logistical and fiscal challenges, which require the government to respond in an efficient and agile manner. To facilitate the recovery, the Puerto Rico government has entered (and will enter) into various contracts with service providers within and outside Puerto Rico. These government contracts are subject to provisions in the 2011 Puerto Rico Internal Revenue Code (PRIRC) relating to dispositions on withholding at source and filing requirements. On November 10, 2017, the Puerto Rico Treasury Department (PRTD) issued Administrative Determination No. 17-28 (AD 17-28) to provide guidance on withholding requirements related to government contracts. In addition, the PRTD issued separate withholding guidance in Administrative Determination No. 17-30 (AD 17-30) on November 15, 2017 to clarify what constitutes a new business for purposes of requesting a waiver from withholding on payments made for services performed in Puerto Rico.