What could be better than a tropical business life? One where your business has great tax benefits to help it grow and achieve better revenue goals.
Puerto Rico has a fast booming service-oriented economy that entrepreneurs, digital nomads, and small to large businesses can take advantage of. This great economic opportunity together with its new tax incentive laws, create the perfect environment for unique business deals and opportunities.
In 2019 the new Economic Incentive Law, called Act 73, was established to provide adequate environment and opportunities for businesses that qualify under various clauses. From 100% exemption on property taxes, 4% corporate tax rates, to 50% tax credits on R&D costs, the opportunities are just to good to pass up. And these are just some of the many generous and attractive incentives that you and your business can benefit from.
Here are the top Incentive Acts you should pay attention to:
Act 20: Export Service act
Promotes the export of services with unique tax benefits for companies established on the island.
Primary Benefits:
- 100% tax exemption on dividends or profit distributions
- 100% exemption on property taxes
- 4% corporate tax rate
Act 22: Individual Investor Act
Promotes the establishment of individuals to Puerto Rico and became a bonafide resident in paradise.
Primary Benefits:
- 100% tax exemption on all dividends and interest income.
- 100% tax exemption on all capital gains.
- 4% corporate tax rate.
Act 73: Economic Incentive Law
Was established to provide an adequate environment and opportunities to continue developing a local industry, offer an attractive tax proposal, attract direct foreign investment and promote economic development in Puerto Rico.
Primary benefits:
- 100% tax exemption on dividend distributions and on municipal
- construction taxes
- 100% tax exemption on excise taxes and sales and use tax on
- raw material and certain equipment used in the production process
- 100% first-year bonus depreciation
- 90% tax exemption from personal and real property taxes.
- A 50% tax credit on eligible research and development activity costs
- 35% tax credit on purchases of products manufactured in Puerto Rico
- that are made from recycled materials.
- A 25% tax credit on purchases of products that are manufactured
- in Puerto Rico
- 12% tax credit for royalties paid to foreign entities
Act 273: International Financial Entities Act
Provides tax exemptions to businesses engaged in eligible activities in Puerto Rico. To avail from such benefits, a business needs to become an International Financial Entity (“IFE”) by applying for a permit and license and obtaining a tax exemption decree.
Primary Benefits:
- IFEs will enjoy a 4% flat income tax rate on their income
- Distributions from earnings and profits derived from IFEs:
- Taxed at 6% for shareholders that are Puerto Rico residents
- 100% exemption from Puerto Rico taxes on such dividends
- Municipalities in Puerto Rico may levy a gross receipts tax of up to 1.5% for financial services
- IFEs will be 100% exempt from all property taxes
- A 15-year tax decree, renewable for two (2) additional 15-year periods
EB-5: Immigrant Investor Program
The U.S. Congress created the fifth-employment based (EB-5) immigrant visa category in 1990 for the qualified foreigner willing to invest in a business that will benefit the U.S. economy and create or save at least 10 full-time jobs. The investment requirement is typically US $1,000,000 per foreign investor. A minimum investment of US $500,000 is accepted if the investment is made in a designated Target Employment Area, such as a rural or high unemployment area, and through a designated EB-5 Regional Center. Puerto Rico is a Target Employment Area and therefore all projects offered by Caribbean USA Economic Development Regional Center require only a minimum of $500,000 in investment by the foreign investor.
