In Administrative Determination (AD) 16-05, Puerto Rico's Treasury Department (PRTD) has eliminated the annual filing requirement of Form 480.7(OE), Informative Return of Organization Exempt from Income Tax, for employee trusts that are part of a qualified retirement plan (Retirement Plans) in Puerto Rico under Code Section 1081.01(a) or 1101.01(a)(4)(D) of Puerto Rico's Internal Revenue Code (PR Code).

The PRTD also repealed the provisions of Circular Letter 12-02, which allowed Retirement Plans to comply with their filing requirements in Puerto Rico through the filing of Form 5500 or 5500-SF.

Under AD 16-05, Retirement Plans with tax years beginning January 1, 2015, will no longer have to file Form 480.7 (OE). Retirement Plans established or adopted by an employer subject to income tax return filing in Puerto Rico, however, will satisfy the annual filing requirement in Section 1061.10(a) of the PR Code when the employer completes and files Form SC 6042, Deduction for Contributions to Qualified Retirement Plans and Taxes on Certain Contributions, with Puerto Rico's income tax return.

Retirement Plans established or adopted by employers that are not required to file an income tax return in Puerto Rico must file Form SC 6042 to comply with the annual filing requirement in Section 1061.10(a) of the PR Code. A Retirement Plan should file Form SC 6042 no later than the last day of the seventh month following the close of the Retirement Plan's tax year. A Retirement Plan also may request an automatic extension of time for filing Form SC 6042 no later than the return's due date. Under the automatic extension, a Retirement Plan will have until the 15th day of the third month following the original due date of the return to file Form SC 6042.

A Retirement Plan with commercial net income or losses that are not related to its exempt activity must file Form 480.2, Income Tax Return for Corporations, and pay the corresponding income tax.

Implications

Plan sponsors and administrators should assess their plans' filing requirements for tax year 2015 and subsequent years based on the current reporting obligation of the sponsor of the plan in order to ensure compliance with AD 16-05.

Also those Retirement Plans that are required to file Form SC 6042 and would like to request an extension to file the same, should be aware that starting, with the year 2015, the request for extension (Form SC 2644) needs to be filed electronically.

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