Tax Benefits in Puerto Rico

Since January 2012, newly established residents have enjoyed all of the benefits of Act 20 and Act 22. These incentives were designed to encourage wealthy investors, entrepreneurs and new businesses from the U.S. and other countries to relocate and grow in Puerto Rico. The main goal was to boost the local economy and it is doing just that. Wealthy hedge fund manager, John Paulson, predicted the island will become the “Singapore of the Caribbean.”

Act 20 – Export Services Act

The exportation of services is a great financial coup for Puerto Rico. With Act 20, the Commonwealth establishes itself as an international export services center. Local service providers can expand their reach outside of Puerto Rico and earn tax benefits. This promotes the development of new businesses and the relocation of foreign services companies. Business owners in fields like public relations, advertising, research and development, accounting and professional services can reap financial rewards. The benefits include:

  • 4% tariff rate on corporate tax
  • 100% exemption on export service dividends
  • 100% exemption on property tax (90% after 5 years)
  • 20-year decree to insure these rates
  • Zero federal tax

Act 22 – Individual Investors Act

Puerto Rico loves new residents, and Act 22 seeks to encourage wealthy individuals to become bona fide residents of the Commonwealth. The Individual Investors Act provides new residents (after January 12, 2012) total tax exemption from Puerto Rico Income taxes on all passive income realized or accrued after they become residents. The benefits include:

  • 0% tax on dividend and interest income for new Puerto Rico residents
  • 0% tax on short-and-long term capital gains for new Puerto Rico residents
  • 0% federal taxes on Puerto Rico source income
  • Incredible tax savings on your investment portfolio returns

Act 27 – Film and Media Tax Incentives

The 2011 Film Industry Economic Incentives Act put Puerto Rico on the map of filmmakers across the globe. This Act provides tax exemptions and credits to businesses that produce films, television and other media projects in the Commonwealth. Puerto Rico’s credits include Disney’s “Pirates of the Caribbean 4,” Warner Brothers’ “The Losers,” ABC’s “The River” and many more. Puerto Rico now touts many experts in the film industry as well as job growth in the field. Act 27 provides:

  • 40% production tax credit on all payments to Puerto Rico resident companies and individuals
  • 20% production credit tax credit on all non-resident qualified spending, including above- and below-the-line
  • 25% infrastructure tax credit on development or expansion costs of studios, laboratories, post-production, animation and special effects facilities, transmission facilities and related infrastructure
  • Preferential tax treatment for companies or individuals engaged in qualifying film and infrastructure projects or operators of studios and other purpose-built media facilities
  • All tax credits are transferable and can be used to offset income tax liability in Puerto Rico or brokered on the open market
  • 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.

Parallel18

Parallel18 is an economic development initiative that attracts early stage, high-impact startups that can scale from Puerto Rico to global communities, beyond the island, including Mainland US, Latin America, and Europe. The goal of the program is to position Puerto Rico’s as a unique gateway to scale globally. We have the support of the Puerto Rico Science and Technology Trust, the Department of Economic Development and Commerce and the Puerto Rico Industrial Development Company.

Other Incentives

The financial incentives don’t end there. Puerto Rico is also known for its tax incentives for manufacturing, agriculture, creative services, education, hospitality and more. Contact us for more information about how you can win financially in Puerto Rico.