Puerto Rico Act 60 application of July 1, 2019 known as the Tax Incentives Code of Puerto Rico (“Incentives Code”) incorporated in a single code the tax incentives formerly granted under Act 20 of 2012 as well as many other tax incentives. The Incentives Code continues to provide the appropriate environment and opportunities to make Puerto Rico a center of international services, to encourage eligible businesses to offer their services from Puerto Rico to clients who are located outside of Puerto Rico.
Act 60-2019 Summary Incentives For Export Services
- 4% Income Tax Rate
- Eligible businesses providing services for exportation will enjoy a 4% flat income tax rate on net income related to such services
- 100% Tax-Exempt Dividends
- Distributions from earnings and profits derived from the export services income of eligible businesses are 100% tax exempt from Puerto Rico income taxes
- 50% Exemption on Municipal Taxes
- Municipalities in Puerto Rico may levy a gross receipts tax of up to 0.5% (1.5% for financial services)
- 75% Exemption on Property Taxes
- Property used in eligible export activities will enjoy a 75% exemption
2019 PR Act No 60 Tax Exemption Decree
- To enjoy the benefits granted under the Incentives Code the Eligible Business must request and obtain a tax exemption decree under Puerto Rico Act 60 Application, which will be signed by the Secretary of the Department of Economic Development and Commerce of Puerto Rico.
- Such decree will have a term of 15 years, renewable for 15 additional years, provided certain conditions are satisfied.
- The Tax Exemption Decree will constitute a contract with the Puerto Rico Government not subject to subsequent legislative changes.
- There is a minimum employment requirement of at least 1 employee if annual business volume is greater than $3,000,000.
Act 60 Puerto Rico
Act 60 Puerto Rico of July 1, 2019 known as the Tax Incentives Code of Puerto Rico (“Incentives Code”) offers the tax incentives formerly granted under Act 22 of 2012 to individual investors that relocate to Puerto Rico. Act 60 includes incentives to attract new residents to Puerto Rico by providing a total exemption from Puerto Rico income taxes on passive income accrued after such individuals become New Residents of Puerto Rico.
Act 60 Puerto Rico Incentives For Individual Investors
- 100% Tax Exemption on Dividends and Interest
- New Residents will enjoy a 100% tax exemption from Puerto Rico income taxes on all dividend and interest income
- Interest and dividends that qualify as Puerto Rico source income will not be subject to federal income taxation under Section 933 of the U.S. Tax Code
- 100% Tax Exemption on Capital Gains from Securities and Digital Assets (“Eligible Investments”)
- All capital gains accrued from Eligible Investments after becoming a New Resident will be 100% exempt from Puerto Rico Income taxes
- Capital gains and other investment income sourced to Puerto Rico will not be subject to federal income taxes
- Prior Unrealized Capital Gains: Capital gains accrued prior to becoming a New Resident and realized after moving to Puerto Rico may be subject to tax
- To qualify for the Act 60 incentives, all gains must be recognized prior to January 1, 2036
Puerto Rico tax haven Eligibility
Puerto Rico tax haven Eligibility under Act 60 an individual must have physical presence in the Island for at least 183 days of the year and must not have been a resident of Puerto Rico from 2009 to 2019 (the 10-year period preceding the effective date of the Incentives Code).
Tax Exemption Decree
Individual investors who want to enjoy the benefits granted under the Incentives Code must apply for and obtain a tax exemption decree under Act 60, which will be signed by the Secretary of the Department of Economic Development and Commerce of Puerto Rico.
The Tax Exemption Decree will constitute a contract with the Puerto Rico Government not subject to subsequent legislative changes.
Act 60 Puerto Rico Fees
- To obtain access to the approved and signed Tax Exemption Decree under Act 60, a one-time fee of $5,000 must be satisfied and deposited into the ‘Special Fund under the Act to Promote the Transfer of Individual Investors to Puerto Rico’.
- All Individual Investors that hold a Tax Exemption Decree under Act 60 must comply with an annual contribution of $10,000 to a duly organized and registered non-profit organization in Puerto Rico.
- A residential property must be purchased in Puerto Rico within the first two years after obtaining the decree.
Act 73 Puerto Rico
Known as the Economic Incentives Puerto Rico Act 73 for the Development of Puerto Rico, was established to provide the adequate environment and opportunities to continue developing a local industry, offer an attractive tax proposal, attract direct foreign investment and promote economic development and social betterment in Puerto Rico.
Puerto Rico Tax Incentives Act 20 22
Known as the act 20 22 puerto rico to promote the exportation of services, provides attractive tax incentives for companies that establish and expand their export services businesses in the island. In addition, the law promotes investments on research and development and initiatives from the academic and private sectors by granting credits and exemptions for these activities. Furthermore, it helps to decrease operational and energy spending for companies moving to the island in order to help their operations remain profitable and efficient.
Puerto Rico Act 22 and Puerto RIco Act 20 were created to ensure Puerto Rico’s competitiveness in attracting investments and they are an opportunity for companies all over the world, particularly those dedicated to state-of-the-art technologies and added value.
As a Commonwealth of the U.S., Puerto Rico enjoys fiscal autonomy, which means that it can offer very attractive tax incentives act 20 22 puerto rico not available on the mainland U.S. Yet, all federal laws apply to Puerto Rico. We share a common currency, common military defense and citizenship with the U.S. No passports are needed to travel to and from the U.S. mainland. This is a formidable combination in which the investor has access to alluring incentives, while the investments are safeguarded by: (1) the prevailing rule of law, (2) the lack of currency risk, (3) Puerto Rico’s political stability, and its (4) low country risk.
The island has been part of the U.S. since 1898 and those born in Puerto Rico have been citizens of the U.S. since 1917. Yet, because Puerto Rico is not a state, federal taxes do not apply generally to income generated by individuals or corporations within the Commonwealth. Puerto Rico corporations are treated for federal tax purposes as foreign corporations and are not generally subject to U.S. corporate taxes. Individual bona fide residents of Puerto Rico are not subject to federal taxes on income derived from Puerto Rico sources. In addition, Puerto Rico has provided incentives for manufacturing operations for over four decades. Products manufactured in Puerto Rico carry the Made in USA label.
In 2008, a new Economic Incentives Act for the Development of Puerto Rico (hereinafter, Act 73 or Economic Incentives Act) went into effect. Also during the year 2012, two additional laws where enacted: Act 20 and Act 22, promoting the export of services from Puerto Rico and the transfer of wealthy individuals to Puerto Rico. These new laws established a legal framework of incentives designed to stimulate the establishment and development of a wide array of ventures, among them manufacturing, social media, other internet-based operations, commercial businesses, and the export of services. Puerto Rico, the smallest isle of the Greater Antilles and with a population of approximately 4 million, boasts one of the most dynamic economies in the Caribbean. With a GNP of approximately $64.84 billion, the island has the highest GNP per capita of Latin America. For the past 50 years, the island has been a manufacturing powerhouse. Many of the top prescription drugs in the U.S. as well as medical devices are manufactured in Puerto Rico. In the financial sphere, Puerto Rico is home to one of the most sophisticated financial markets in the hemisphere. The island has a vibrant mutual funds market of $14 billion and financial firms on the island manage client assets that exceed $34 billion. Yet, as a place for doing business, Puerto Rico is still a well-kept secret.
As a Commonwealth of the U.S., Puerto Rico enjoys fiscal autonomy, which means that it canoffer very attractive tax incentives not available on the mainland U.S. Yet, all federal laws apply to Puerto Rico. We share a common currency, common military defense and citizenship with the U.S. No passports are needed to travel to and from the U.S. mainland. This is a formidable combination in which the investor has access to alluring incentives, while the investments are safeguarded by: The prevailing rule of law. The ack of currency risk. Puerto Rico’s political stability. Low country risk. The island has been part of the U.S. since 1898 and those born in Puerto Rico have been citizens of the U.S. since 1917. Yet, because Puerto Rico is not a state, federal taxes do not apply generally to income generated by individuals or corporations within the Commonwealth. Puerto Rico corporations are treated for federal tax purposes asforeign corporations and are not generally subject to U.S. corporate taxes. Individual bona-fide residents of Puerto Rico are not subject to federal taxes on income derived from Puerto Rico sources. In addition, Puerto Rico has provided incentives for manufacturing operations for over four decades. Products manufactured in Puerto Rico carry the Made in USA label. In 2008, a new Economic Incentives Act for the Development of Puerto Rico (hereinafter, Act 73 or Economic Incentives Act) went into effect. Also during the year 2012, two additional laws where enacted: Act 20 and Act 22, promoting the export of services from Puerto Rico and the transfer of wealthy individuals to Puerto Rico.
These new laws Act 22 and Act 20 established a legal framework of incentives designed to stimulate the establishment and development of a wide array of ventures, among them manufacturing, social media, other internet-based operations, commercial businesses, and the export of services. For purposes of seeing how versatile and ample these laws are, we have included many potential examples of how you can benefit from the ample provisions. We have created these examples based on cases we have worked with over the years to illustrate how the incentives can apply to many types of businesses.
Puerto Rico Tax Incentives Manufacturing
•4% income tax on industrial development income
•0% to 1% tax rate on income for pioneer or novel products manufactured in PR
•Up to 50% tax credit on purchases of products manufactured or recycled locally
•Up to $5,000 for each job created during 1st year of operation
•Up to 50% tax credit on Research and Development activities
•Special deductions on investments from structures, machinery and equipment
•Marketing incentives program available to qualified PRIDCO-promoted companies whose sales are greater than $100,000 per year Export Services The new Export Services Act 20 (Act 20 of 2012) looks to establish and develop in Puerto Rico an international export services center. This act seeks to encourage local service providers to expand their services to persons outside of Puerto Rico, promote the development of new businesses in Puerto Rico and stimulate the inbound transfer of foreign service providers to Puerto Rico. The tax benefits are as follows: •4% corporate tax rate, which may be reduced to 3%
•100% tax exemption on dividends or profit distributions from export services businesses
•100% exemption on property taxes for certain export service businesses services
•Decree of 20 years, renewable for an additional 10 years, guaranteeing these rates Almost all services provided for export are eligible including research and development, advertisement and public relations, consulting, investment banking, asset management and other financial services, and professional services such as legal, accounting, architectural and engineering services. Individual Investors The Individual Investors Act 22 (Act 22 of 2012) seeks to attract new residents to Puerto Rico by providing a total exemption from Puerto Rico income taxes on all passive income realized or accrued after such individuals become bona fide residents of Puerto Rico.
To qualify, the new resident must not have been a resident of Puerto Rico at any time from January 16, 1997 through January 16, 2012. The incredible benefits are as follows:100% tax exemption on interest and dividend income for New Residents of Puerto Rico100% tax exemption on all long-term capital gains accrued after becoming a New Resident. The Act is designed to primarily attract to Puerto Rico high net worth individuals, empty nesters, retirees who currently relocate to other States and investors from U.S. and other countries.
The Act provides the following benefits to new Puerto Rico bona-fide residents on qualified investments:
•100% Tax Exemption from Puerto Rico income taxes on all dividends;
•100% Tax Exemption from Puerto Rico income taxes on all interest; and
•100% Tax Exemption from Puerto Rico income taxes on all short-term and long-term capital gains accrued after the individual becomes a bona- fide resident of Puerto Rico (“Puerto Rico Gain”). Agriculture
•Bona fide farmers qualify for the following tax benefits:
•100% Exemption on taxes for agricultural equipment
•100% Exemption on property taxes (land, buildings, vehicles, etc.)
•100% Exemption on municipal Taxes
•100% Exemption on stamp payments to PR’s Treasury Department and fees to register a property
•90% Exemption on earning contribution from agricultural activity
•50% Tax credit for investment in eligible agricultural busines
•Annual bonus for agricultural workers
•Wage subsidy program to eligible farmer For more information on the Agro incentives or how to apply, Here. International Finance & Insurers International Insurers, Branches, and International Insurer Holding Companies receive attractive tax treatment: International Banking Entities (IBE) incentives: Tax & Rate
•Income Tax – 0% •Branch Profit Tax – 0% •Dividends/Other distributions of profits – 0% •Distributions in liquidation – 0%
•Municipal License Tax – 0%
•Property Tax – 0% In addition, they are not required to file tax returns, and the revenues to non-residents are also exempt from taxation. A response to a complete application presented to the Insurance Commissioner’s Office is granted within 60 days. Film & Creative Services Our amazing locations, state- of-the-art equipment, post-production and sound recording facilities, along with one of the highest tax credit programs in the world, allow you to produce your film in Puerto Rico from start to finish. Act for the
Development of the Film Industry Production Incentives:
•40% Tax Credit on all payments to Puerto Rico Residents
•20% Tax Credit on all payments to Non-Resident Talent (including stunt doubles).
•No principal photography requirements (full or partial development, pre-production and post-production may qualify)
•No per project or individual wage caps
•No cap on credits for payments to Non-Residential Talent Requirements to receive the 40% and 20% tax credit:
• Spend a minimum of $100,000 in payments per project to Puerto Rico Residents, including equipment, crew travel and accommodations ($50,000 for short films).
•20% tax credit payments made to Non-Resident Talent are subject to a 20% withholding over their PR income. Any project in the development, pre-production, production, or post-production phase that is carried out in Puerto Rico partially or fully is eligible. Qualifying media projects: feature films, short films, documentaries, television programs, series in episodes, mini-series, music videos, national and international commercials; video games; recorded live performances; and original sound track recordings and dubbing.
•25% Tax Credit on development or expansion costs of eligible infrastructure projects
•Minimum investment of $5 million per project
•Maximum aggregate annual cap of $10 million and lifetime cap of $150 million for all infrastructure credits
Preferential Tax Treatment:
Persons engaged in qualifying media and infrastructure projects as well as operators of studios and other purpose-built media facilities with a budget equal to or greater than $50 million (including their suppliers), are eligible for the following preferential tax rates or exemptions:
•Fixed income tax rate of between 4% and 10%
•100% Exemption on dividend taxes
•90% Exemption from municipal and state taxes on property
•100% Exemption from municipal license taxes, excise taxes and other municipal taxes
Film Investment Fund:
• Financing for locally produced short films, feature films and documentaries. For more information on the Film incentives or how to apply, Here. Hospitality & Hotel Development Puerto Rico’s tax incentives package offers hotel developers a competitive advantage over other destinations. The “Tourism Development Act of Puerto Rico” – (Act No. 74 of 2010) depicts the parameters of such benefits: Benefits under this law will remain valid for a period of 10 years from the starting date of the eligible tourism-related project, and the business operation will be entitled to a 10-year extension:
•Tax credit of 10% of the total project cost, or 50% of cash from investors (whichever is lowest)
•100% Tax Exemption on municipal construction excise tax
•100% Tax Exemption on taxes on imported goods and sales tax
•100% Tax Exemption on municipal licenses
•90% Tax Exemption on income tax
•90% Tax Exemption on property tax
Workforce Investment Act includes incentives such as:
Up to 50% of the salary of on-the-job training participants
•Up to 50% of the salary of participants in customized training
•100% of training costs and up to 50% of the participants salary for combined training programs
•100% of the cost of retraining employees to handle new tasks and up to 50% of the salary of the participant’s during the retraining period Foreign Trade Zones Puerto Rico has the largest noncontiguous Foreign Trade Zone (FTZ) system in the United States. The system allows companies to obtain significant financial savings, since raw material, components, and packaging can be transported tax-free throughout these zones and items shipped abroad after processing are exempt from U.S. taxes.
•Deferment of federal customs duties
•Deferment of Puerto Rico excise taxes
•100% Tax Exemption on Municipal License Taxes on exports outside the United States
•100% Tax Exemption on tangible property and equipment used
•60% Tax Exemption on the value of the property that is designated intangible
•100% TaxExemption on exports from the zone and sub-zones Housing Incentives If you’re looking for the ideal home-buyer market, look no further than Puerto Rico. With the current incentives, this type of opportunity just doesn’t happen twice.
The extension of the Housing Stimulus Program is amplified in phases until June 2013. The new Transition Law of the Housing Stimulus Program, seeks to:
•Extend an incentive program aimed at facilitating and promoting the purchase of residential property and other real-estate.
•The phases for extension are as follows:
•New Properties: Reduction of 25% in registration and notary fees
•100% property Tax Exemption for 5 years
•75% discount on registration and notary fees in sales deed and mortgage
•100% Tax Exempt in buyer’s future capital gain when it isn’t a main residence