Virgin Islands landlords receving $600 or more annually in rent from real estate will be required to file Form VI-1099 with the Virgin Islands Bureau of Internal Revenue (BIR) and with their tenants. They will also have to send Form VI-1099's to the BIR for all service providers such as plumbers, electricians, handymen, accountants, etc. for rental property services provided to the landlord for payments of $600 or more. To ensure compliance, the BIR may levy penalties of $50 for each failed to file Form VI-1099 or with the tenant or service provider. These penalties are capped at $100,000 or $250,000 depending on the delinquency.
Designed to close the tax gap, this new legislation was passed to ensure that income paid to contractors gets reported accurately and deductions for work and improvements or rental properties can be verified by the VI-1099 form. While this new reporting requirement will not impact rental properties held out as a trade or business (owning multiple properties and a full-time business) since they are already covered, it will affect smaller, “mom and pop” landlords, who typically are not armed with accountants to track contractors, verify deductions and report taxes. This will also create a new burden for small real estate operations.
