Puerto Rico Accounting Laws in Puerto Rico

Puerto Rico

Accounting Laws in Puerto Rico

Roger Stein

The Rovira Biscuit company has been a mainstay in the Puerto Rican snack market for more than 80 years. First established in 1929, the company specializes in a wide range of cookies, crackers and other comestibles that have continue to be enjoyed by Puerto Rican consumers even to present day. Additionally, Rovira is a company which continues to push forward, striving for additions to its already extensive product line, working to improve packaging and varying its delivery to satisfy the demands of an increasingly diverse cross-section of customers. According to Rovira (2013), "our constant growth during the past seven decades attests to the success of our commitment to customer service. Presently the 4th generation of the Rovira family, together with a highly qualified professional staff, looks into taking the business to the next generation of demanding consumers with new and exciting product ideas." (Rovira Biscuits, p. 1)

In spite of its success, Rovira is currently seeking to establish a new longterm relationship with an accountancy firm. Rovira intends to forge a partnership with a third-party accounting firm from which several accounting professionals may be dispatched. The intention is to establish an internal accounting department which is overseen by this outsourced personnel. However, it has been several decades since Rovira has sought a change in its accounting strategy. In light of this, a number of laws and regulations are likely to have shifted or changed altogether in the ensuing time. Accordingly, it is critical for Rovira to acknowledge these laws and make intelligent and informed decisions moving forward with its accounting strategy.

Relevant Accounting Laws:

First at foremost, it bears noting that many of the legal specificities that define accounting in Puerto Rico extend from its relationship with the United States. As a territory of the U.S., Puerto Rico's accounting professionals are beholden to many of the same laws and regulations that are in action on the mainland continent. For instance, accountants are expected to meet the conditions put forth by the National Association of State Boards of Accountancy (NASBA) in establishing individual qualifications. According to the NASBA, the serving accountant must both be a citizen of the United States and "must be a resident, have a place of business or be employed in the Commonwealth of Puerto Rico." (NASBA, p. 1)

The NASBA grants licensed to qualified and already licensed CPAs with the aim of creating unifying standards for accountancy boards across 50 states and 5 territories. In addition to serving as an agency aimed at refining accounting rules, regulations and standards, the NASBA serves the interest of validating the legal qualifications of practicing CPAs.

According to the NASBA, one major consideration for Rovira if it does desire to adhere to the conditions put forth by the agency, is the importance of hiring domestic personnel for its accountancy positions. According to the NASBA, "Applicants who obtained their education outside the United States must have their transcripts evaluated by one of the Puerto Rico State Board approved foreign credential evaluation services listed below. Please note: Only applicants with U.S. citizenship will be considered for licensure." (NASBA, p. 1) This sets an important limitation on the personnel that may be recruited as we refine our accounting department's orientation, personnel and relationship to current territorial and federal law.

This relationship is especially important because accounting laws in Puerto Rico are often subjected to change and, with said change, a certain degree of conceptual complexity. Such is to say that many such regulatory changes are best treated by a professional with great familiarity with both the U.S. And Puerto Rico laws and tax codes. Certainly, shifting tax codes play a substantial role in the responsibility of accountants. For instance, an article by Pricewaterhouse Coopers (PWC) (2012) describes a recently legislated 'excise tax.' This would impact retail businesses, manufacturers and Puerto Rican trading affiliates such as Rovira. However, according the PWC, the exact impact on any given company is not entirely clear. Such is to say that the law will not have a uniform impact on how taxes on certain goods are reported. Instead, the impact of these new excise tax standards on a given business, such as Rovira, must be assessed by a qualified accounting professional.

According to PWC on the subject of navigating such laws, "the tax is imposed on non-resident businesses that purchase goods or services from PR affiliates having gross receipts in excess of $75 million for any of the three preceding taxable years. The PR affiliates bear the responsibility of withholding and remitting the excise tax to the Secretary of the Treasury. This new excise tax is imposed in lieu of the PR income tax that otherwise would arise from the application of the new income source rule." (PWC, p. 1)

The language on the subject denotes that there are myriad technicalities and qualifiers that are not easily sorted by one without the proper knowledge of evolving tax laws and financial reporting expectations. This is a fairly effective demonstration of the importance of highly qualified accountancy professionals. As noted here above, the onus of adhering to such newly minted regulations falls on the Puerto Rican affiliation which, in this case, would be Rovira.