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Act 273 - Economic Incentives for the Development of Puerto Rico Act

Overview

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  • 4% income tax
  • 0% on dividends or other distributions of profits to non-Puerto Rico residents
  • 100% exemption on municipal taxes
  • 100% exemption on property taxes

 

Business operations eligible under Act 273 divide by category. The first eligible business is industrial units dedicated to the manufacturing on a commercial scale. Second category of eligible business is services units for services markets outside of Puerto Rico, including the United States. These designated services include: trading companies, medical and hospital services; marketing centers; commercial art and graphic services; mercantile distributions; consulting (economic, human resources, etc); corporate headquarters; assembling, packaging and bottling services; electronic processing; among others.

 

Act 273 also includes businesses providing services in Puerto Rico to manufacturing units that belong to “Designated Clusters”. These are sectors or industries designated to the Executive Director as a high economic impact cluster. Among the key supplier services are: logistics, programming, validation, quality control, and inventory management, amongst others.

Act 273 provides for a 4% flat income tax rate imposed on net taxable income from eligible activities.  Additionally, a 12% royalty tax rate is imposed on amounts paid by eligible businesses to other entities.  However, the eligible business is allowed to make a non-revocable election that would subject the eligible business to an 8% flat income tax rate in exchange for a reduction of the royalty tax rate to 2%.  This irrevocable election must be made before commencement of the exemption period and approval must be secured.

Economic Incentives Law,

Some of the provisions include:


• 4% fixed income tax rate on net taxable income

• Pioneer industries’ tax rate of 0% or 1%

• Combined floor of 3% for local business

• Credit of up to $5,000 per job created during the first year of operation, if the operation is located in the    municipalities of Vieques and Culebra

•  Up to 50% credit of qualified R&D expenses

• Credit for purchase of locally manufactured products
• Up to 10% credit of industrial energy consumption
• Special deductions for investment in structures, machinery and equipment
• Infrastructure incentives
• 90% exemption for personal and real property tax and 60% exemption for municipal taxes
• Training incentives
• Competitive financing options

For more Information: 305-428-2435