2023 Laws of Puerto Rico › TITLE THIRTEEN - Taxation and Finance (§§ 1 — 33423) › Subtitle 17 - Internal Revenue Code of 2011 (§§ 30001 — 33423) › PART II - Income Taxes (§§ 30041 — 30622) › Chapter 1006 - Accounting Periods and Methods of Accounting (§§ 30171 — 30182) › § 30172 - General rule for methods of accounting

(a) General rule.— Taxable income shall be computed under the method of accounting on the basis of which the taxpayer regularly computes his/her income in keeping his/her books.
(b) Exceptions.— If no method of accounting has been regularly used by the taxpayer, or if the method used does not clearly reflect taxable income, the computation of taxable income shall be made under such method as, in the opinion of the Secretary, does clearly reflect taxable income.
(c) Permissible methods.— Subject to the provisions of subsections (a) and (b), a taxpayer may compute taxable income under any of the following methods of accounting:
(1) The cash receipts and disbursements method;
(2) an accrual method;
(3) any other method permitted by this part, or
(4) any combination of the foregoing methods permitted under regulations prescribed by the Secretary.
(d) Limitation on use of cash method of accounting.—
(1) Notwithstanding the provisions of subsection (c), the use of the cash receipts and disbursements method of accounting shall only be allowable if it meets the following two (2) conditions:
(A) The business does not require the use of inventory, and
(B) the business has a gross income annual average (determined on the basis of the last three (3) years of business operations) of one million dollars ($1,000,000) or less.
(2) When the business has regularly used other methods of accounting to compute its income, gains or losses for purposes of reports or statements to its shareholders, partners or other owners, or beneficiaries, or for purposes of obtaining credit, the use of the cash receipts and disbursements method shall not be allowable.
(e) Taxpayers engaged in more than one business.— A taxpayer engaged in more than one (1) trade or business may use a different method of accounting to compute the taxable income of each trade or business, subject to the provisions of subsection (d).
(f) Requirements respecting change of accounting method.— Except as otherwise expressly provided in this part, a taxpayer who changes the method of accounting on the basis of which he/she regularly computes his/her income in keeping his/her books shall, before computing his/her taxable income under the new method, secure the consent of the Secretary.
(1) In computing the taxable income for the taxable year in which the change in the method of accounting shall be effective, it shall be taken into consideration such adjustments as necessary to prevent that items from income or expenses be duplicated or omitted as a result of the change in the method of accounting; Provided, That
(A) Fifty percent (50%) of the amount resulting from such adjustments shall be included in the computation to determine the taxable income subject to taxation in the return for the taxable year in which the change of the method of accounting is effective, and
(B) the remaining fifty percent (50%) shall be included in the computation to determine the taxable income subject to taxation in the return for the following taxable year.
(2) However, where the change in the method of accounting is by reason of the provisions of subsection (d) of this section, the adjustment, whether negative or positive, shall be included in the computation to determine the taxable income subject to taxation at a ratio of one-fifth (⅕) every year, for a period of five (5) taxable years, beginning on the taxable year in which the change of the method of accounting, under subsection (d), becomes effective.
(3) The Secretary shall establish through regulations, circular letter, informational bulletin or general administrative determination the procedure to be followed in order to request a change of the method of accounting.
History —Jan. 31, 2011, No. 1, § 1040.02, retroactive to Jan. 1, 2011; Dec. 10, 2011, No. 232, § 45.