Client Alert – DDEC Incentives Act for the Retention and Return of Medical Professionals
August 24, 2017
On February 21, 2017 the Puerto Rico Legislature approved Act 14, 2017, the Incentives Act for the Retention and Return of Medical Professionals (“Act No. 14-2017” or “Act”). The purpose of the Act is to retain and attract medical professionals to the island by providing them with a fixed income tax rate of 4%. Recently, the Department of Health issued Circular Letter No. 1-2017 (1) and the Department of Economic Development and Commerce approved the Regulation under Act 14-2017 which provides guidance on the process and documentation required to obtain a Tax Exemption Grant under such Act.
The medical professionals who qualify for the tax benefits are those admitted to the practice of medicine, podiatry, or dentistry (“Qualified Medical Professionals” or “QMP”). Qualified Medical Professionals also include those that are coursing their residency programs in Puerto Rico. QMPs must render services full-time (at least 100 hours a month) and must offer either voluntary services or under contract with the Puerto Rico Government Health Plan for a minimum of 180 hours a year to continue to receive such benefits.
Decisive criteria to be considered in a QMP’s application shall include any recognized specialization or sub-specialization held and their geographic practice area. As such, the tax exemption shall be granted if it is determined that there is scarcity of a particular specialization within a geographic region as delineated by the Health Insurance Administration (‘ASES’, for its Spanish acronym), these are: San Juan, Northeast, North Metropolitan, North, West, Southwest, Southeast, and East.
Qualified Medical Professionals interested in the tax benefits must present an application at the Department of Health in order to obtain a Qualified Physician Certificate, which states that the requirements to be considered a QMP are met, by filing Form DS-14-2017. The following documents must be attached to the filing form upon filing of the application: (1) Active License Registration by the appropriate board; (2) Good Standing Certificate issued by the Office of Regulation and Certification of Health Professionals; (3) Sworn Statement 14-2017 for self-employed or QMPs associated with or members of medical services corporations attesting 100 monthly service hours; (4) for employed QMPs – an Employer Certification attesting to the medical services provided with a minimum of 100 hour minimum monthly service hours; (5) evidence of professional association with the College of Surgeons and/or the College of Dental Surgeons; (6) for residency QMPs – Medical School Certification and Hospital Certification attesting to the 100 monthly service hours.
After the Qualified Physician Certificate is obtained from the Department of Health, the QMP must apply for the tax benefits at the Office of Industrial Tax Exemption (“OITE”). The QMP must then present the following documents with their application to OITE: (1) Department of Health Qualified Physician Certificate; (2) Criminal Background Certificate; (3) copy of Social Security Number; (4) Certificate of Income Tax Return Filing for the previous five years issued by the Department of Treasury; (5) Debt Certificate issued by the Department of Treasury; (6) All Concepts Debt Certificate issued by the Municipal Revenue Collection Center (“CRIM”, by its Spanish acronym); (7) Certificate of Compliance issued by the Puerto Rico Child Support Administration (“ASUME”, by its Spanish acronym); (8) Chauffer’s Insurance Debt Certificate issued by the Department of Labor and Human Resources; (9) Debt Certificate issued by the Puerto Rico State Insurance Fund Corporation; and (10) filing fee of $2,500.
If a business dedicated to the provision of medical services will payout eligible dividends to the QMPs, the QMPs must submit additional documents in order to receive a tax exemption for those dividend distributions.
Once the application is approved by OITE, it is then submitted to the Department of Treasury and the Department of Health for final consideration and final approval. Once granted, the favored QMP must make a single payment accepting the grant in the amount of $1,000 paid to the Secretary of the Treasury using a voucher issued by the Department of the Treasury for such purposes.
The QMPs granted tax exemption certificates under Act 14-2017 must render annual reports to OITE with information relating to their previous tax year, such as: compliance with the 180 hours of volunteer work; the individual’s tax return; certain documents of the entity that will payout eligible dividends to the QMP, if applicable; and a filing fee of $300. QMPs must also apply for a yearly Certificate of Compliance from OITE within 15 days of the closing of the QMP’s tax year. This application should include: information about the location where the services are provided, merchant name and/or registration number; Employer Identification Number of QMP’s employer, if applicable; and a filing fee of $250, among others.
Goldman Antonetti & Cordóva, LLC stands ready to assist you and your business to adjust to changes in the law. If you need further assistance in this area, please feel free to contact the following members of our firm:
Rebecca Cuevas-Fontán, Esq., CPA
Fernando J. Bruno Ramírez de Arellano, Esq.
Roberto Montalvo-Carbia, Esq.
Although the information included in this document may concern legal issues, it is not a legal opinion or professional advice and clients shall not use it as such. We assume no responsibility or liability of any kind for any information contained herein, and we expressly disclaim all liability for any claim for damages arising from the use, reference to, or reliance on, such information. If legal or other expert assistance is required, the services of a competent professional should be sought.
IRS Circular 230 Disclosure:
o ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this communication was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code; or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.
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