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Act 20, Act 22, Act 273

Individual Investors Act (Act 22)
  • 100% tax exemption from Puerto Rico income taxes on all dividends for new Puerto Rico residents
  • 100% tax exemption from Puerto Rico income taxes on all interest for new Puerto Rico residents
  • 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.
  • 0% federal taxes on Puerto Rico sourced income
  • Decree benefits secured until December 31, 2035.
Export Services (Act 20)
  • 4% corporate tax rate, which may be reduced to 3%
  • 100% tax exemption on dividends from export services businesses
  • Decree of 20 years, renewable for an additional 10 years
International Financial Entities (IFE – ACT 273)
  • 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

Puerto Rico offers a highly attractive incentives package that includes a fixed corporate income tax rate – one of the lowest in comparison with any U.S. jurisdiction – various tax exemptions and special deductions, training expenses reimbursement and special tax treatment for pioneer activities.

The recently enacted Act 273 of May 28, 2008, known as “Economic Incentives for the Development of Puerto Rico Act,” makes industry operations in Puerto Rico highly profitable while stimulating additional economic development.  Key provisions include:

 

  • 4% or 8% fixed income tax rate
  • 2% or 12% withholding tax on royalty payments
  • Pioneer” industries are subject to an income tax rate of 1% or 0% in cases where the intangible property was created or developed in Puerto Rico
  • Minimum combined tax rate of 3% if at least 50% of the exempt business shareholders are residents of Puerto Rico
  • Minimum combined tax rate of 1% if a small or medium-size business (average gross income of $10 million or less during the previous three years)

 

The Tax Incentives – Act 273 also allows companies to take a tax credit on their corporate income tax return.  Tax credits allow for:

 

  • Job creation tax credit of $1,000, $2,500 or $5,000 depending on the physical location of the business operations
  • 50% income tax credit of qualified R&D expenses
  • 50% income tax credit for investment in machinery and equipment for the production of energy using renewable resources
  • 25% income tax credit for the purchase of locally manufactured products
  • Up to 10% credit to reduce the electric energy cost of the industrial exempt business

Municipal and Property Tax Incentives

  • 90% exemption from personal and real property taxes
  • 60% exemption from municipal license taxes (75% for small and medium-size businesses)
  • 100% exemption from state and local sales and use tax on raw materia

Additional Potent Incentives for Business

Puerto Rico offers a powerful combination of infrastructure, job creation and training incentives to augment its aggressive tax incentives.

 

Job Creation Incentives

Cash grants are available from the Puerto Rico Industrial Development Company (PRIDCO) in exchange for hiring full-time workers within an 18-month period and retaining that level of employment for at least five years.

 

Infrastructure Incentives

PRIDCO’s Infrastructure Incentive Program provides grants to help companies with numerous permanent leasehold improvements, such as installation of:

  • Electric lines, electrical substations, back-up generators
  • Telephone lines, data and voice networks
  • Air conditioning equipment when required for the operation
  • Fire sprinkler systems
  • Parking facilities

 

Training Incentives

The Puerto Rico Department of Labor and Human Resources will consider reimbursement of up to 50% of the customized training costs and up to 50% of the employee’s salary for on-the-job training upon approval of the company’s training proposal.

 

For more Information: 305-428-2435