Tax Benefits in Puerto Rico
Promote Exportation of Services
Act 60 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.
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
Tax Exemption Decree
- To enjoy the benefits granted under the Incentives Code the Eligible Business must request 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.
- 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.
Why Is Puerto Rico The Perfect Destination For Business?
Promote Relocation of Investors
Act 60 of 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.
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
To qualify 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.
- 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.