Winter 2006-01Summary of business laws approved in 2005

newsletter header


Number 62
Winter 2006

Summary of business laws approved in 2005

Motor vehicle warranties

Law Number 6 of May 1, 2005, amended the Motor Vehicles Warranties Act in order to remove what it calls a double standard. Prior to the amendment a manufacturer could offer in Puerto Rico an automobile warranty that matched either that offered for its vehicles sold in United States, or that available in the country where the vehicle was manufactured. This law provides that the warranty to be offered locally must be equal or better than that offered by the manufacturer anywhere in the world.

Either the manufacturer, the distributor or a dealer must file a copy of the warranty with the Department of Consumer Affairs.

Tax exemption to hospitals

Law Number 29 of July 29, 2005, extends the tax exemption benefits granted to hospitals for another ten years. Said exemption had expired on December 31, 2004. The effects of the new law are retroactive to January 1, 2005.

In addition, the law grants a tax credit of up to 15% of a hospital's payroll expenses. The credit is available to defray up to 50% of income tax payable in a given year.

Registrars of Property

Law Number 33 of July 2, 2005, commands that all Registrars of Property be notaries with not less than seven years experience.

Gambling

Law Number 36 of July 29, 2005, amended the distribution of net proceeds from licensed gambling operations to endow 15.15% thereof to the general fund of the government of Puerto Rico, and 45.45% to the general fund of the University of Puerto Rico.

Insurance

Law Number 38 of August 1, 2005, amended the Insurance Code to increase to 6% the tax imposed on premiums charged by insurance companies that do not have their principal offices located in Puerto Rico. In the case of annuities the tax is 3%.

Capital gains tax

Law Number 40 of August 1, 2005, amended the Internal Revenue Code to increase the capital gains tax to 12.5% for natural persons and 20% for corporations, partnership and other entities. Prior rates were 10% in the case of natural persons and 12.5% for corporations and other entities. The 10% and 12.5% rates had been lowered to 5% and 6.25%, respectively, for transactions conducted between July 1, 2004, and June 30, 2005.

Additional income tax

Law Number 41 of August 1, 2005, imposes an additional tax of 2.5% to corporations, partnerships and other entities whose net taxable income exceeds $20,000.

Bond issue

Law Number 43 of August 1, 2005, authorized the Commonwealth to issue $575 million in bonds, and borrow said amount until the bonds are issued. The proceeds of the issue were to be allocated as follows:

to assist transportation and communications: $78,950,000

to assist hospitals, schools, social benefit, health and employment programs: $71,273,000

to assist agriculture, industry and tourism promotion: $25,884,000

to improve parks, and other cultural facilities: $3,800,000

to develop flood control and solid waste projects: $55,750,000

to pay the cost of the bond issue: $3,500,000

for the construction of municipal projects: $73,369,000

for the construction of public projects: $79,379,000

for the construction and improvement of housing: $68,950,000

to develop law enforcement projects: $35,395,000

to channel rivers: $28,750,000.

Medical malpractice

Law Number 62 of August 23, 2005, added the Corporation of the Puerto Rico and Caribbean Cardiovascular Center to the Insurance Code medical malpractice liability limit. This limit otherwise benefited only the Commonwealth government.

Breastfeeding

Law Number 65 of August 24, 2005, extended to the Senate and the House of Representatives the obligation to make available a location for breastfeeding.

Government assistance to religious organizations

Law 73 of August 25, 2005, orders all government agencies to promote the availability of government funds and contracts to religious entities.

Payroll subsidy

Law Number 81 of August 26, 2005, provides a subsidy to private employers who hire 16 to 24 year olds and other persons who seek work for the first time.

Insurance of title to personal property

Law Number 82 of August 26, 2005, amended the Insurance Code to authorize the insurance of title to personal property. Prior to the amendment title insurance was available only for real estate.

Employment of minors

Law Number 87 of August 26, 2005, prohibits that an employer discriminate against a job applicant younger than 18 because privacy regulations prevented access to his or her police record.

Refrigerants

Law Number 95 of August 26, 2005, defines "refrigerant" as any chemical compound used in refrigeration systems as a medium of thermal transfer. Expressly included in the definition are compounds that contain chlorofluorocarbons, hydrofluorocarbons, halogens, tetrachlorocarbon, dichlorodifluoromethane, trichlorofluoromethane or monochloropentafluoromethane. Legal authority to sell, install or discharge refrigerants is limited to refrigeration technicians.

Used oil

Law Number 109 of September 1, 2005, stayed application of most provisions of the "Law to Handle Properly Used Oil in Puerto Rico" until December 31, 2005.

Social Security

Law Number 114 of September 1, 2005, harmonized the "Puerto Rico Employment Security Act" with the federal "SUTA Dumping Prevention Act of 2004," Public Law Number 108-295. Subject to certain exceptions, an employer that transfers his or her business to another employer under common control must also convey the employees' unemployment risk experience history.

Real estate brokers

Law Number 118 of September 26, 2005, substantially amended the "Law to Regulate the Real Estate Business and the Profession of Broker, Seller or Real Estate Enterprise in Puerto Rico."

Christmas bonus

Law Number 124 of September 29, 2005, increased the minimum compulsory Christmas bonus that private employers must pay to their employees, thus:

for year 2006: 3% of the total salary, up to a maximum of $10,000,

for year 2007: 4.5% of the total salary, up to a maximum of $10,000,

for year 2008 onward: 6% of the total salary, up to a maximum of $10,000.

Municipal license tax

Law Number 126 of October 6, 2005, removed the municipal license tax exemption previously afforded to companies engaged in the purchase and sale of crude oil and its derivatives, whose operations are conducted pursuant to the provisions of the "Law on Exterior Commerce Zones." The exemption was also made inapplicable to income derived from the sale of crude oil and its derivatives to the Electric Power Authority for power generation.

Unjust dismissal

Law Number 128 of October 7, 2005, increases the penalty for the dismissal of employee without just cause. If dismissal takes place within the first five years of employment, the penalty is now:

two months' salary plus

one week's salary for each year of service.

If dismissal takes place after five to 15 years of service, the penalty is:

three months' salary plus

two weeks' salary for each year of service.

If dismissal takes place after 15 years of service, the penalty is:

six months' salary plus

three weeks' salary of each year of service.

Collection agencies

Law Number 134 of October 26, 2005, requires that debt collection agencies notify to the Department of Consumer Affairs changes in the address of their offices.

Tax revenue anticipation notes

Law Number 139 of November 9, 2005, increased the maximum principal amount of tax revenue anticipation notes to $1,500,000,000 or 18% of the net income of the General Fund's previous year, whichever sum is lower.

Adult entertainment machines

Law Number 142 of November 22, 2005, removed the limit on the number of adult entertainment machines that a person may own and operate.


© 2006 Goldman Antonetti