IVU (Puerto Rico)

IVU is an acronym for the Sales and Use Tax of the Commonwealth of Puerto Rico: Impuesto a las Ventas y Uso. The tax originated in some municipalities (Caguas, Yauco and Villalba) in 2005. Seeing the economic success of these municipalities, many other municipalities enacted sales tax ordinances, usually by copying the ordinance of Caguas. By the middle of 2006, more than 30 municipalities had enacted sales and uses taxes on the island.

During the second and third quarters of 2006, the Commonwealth of Puerto Rico suffered several political struggles in its Legislative Assembly. These were largely caused of the budget deficit of the government and the refusal of the Legislative Assembly to approve the taxes proposed by the Governor of the Island. Government offices were shut down until the Assembly approved the law 117 which included the first sales tax of that possession of the United States.

On July 1, 2006, the first Commonwealth-wide sales tax was approved with a 5.5% rate at state level and an optional 1.5% rate at municipal level. The adoption of the municipal tax was mixed. The tax went into effect on November 15, 2006.

Since the tax reform of July 2007, the tax is applied in all 78 municipalities of the island and at Commonwealth level. The tax rates are 6% at the state level and 1% at the municipal level.

On February 6, 2008 the governor of the island proposed to remove the state part of the IVU.