In order to ensure Puerto Rico’s competitiveness while achieving the goal of attracting foreign investments, the government designed several tax incentive programs, to attract new money and foreign investment. Below is a summary of the most popular tax laws in Puerto Rico:
Act 20 - Export Services Act
Companies that provide services like accounting, development, public relations and research can export their services from Puerto Rico and earn tax benefits, such as zero federal taxes, fixed 4% on corporate tax, tax exemption on export service dividends and property taxes. The decree shall have a term of at least 20 years. To be eligible, the company must not be related to any type of commercial activity in Puerto Rico.
Act 22 - Individual Investors Act
New residents of Puerto Rico receive total exemption from local income taxes, 100% exemption on dividends, interests on capital gain and exemption of federal income taxes generated within the island.
Act 60 - Puerto Rico Incentives Code
Act 60 replaces Act 20 and 22, since January, 2020. It combines the old laws and introduces significant changes related the employment, eligible businesses, tax exemptions, and municipal contributions. Exempt businesses can enjoy up to 75% exemption on municipal and state property taxes. Qualifying small businesses can enjoy up to 100% exemption on municipal and state property taxes on the first five years. For individuals it is required a charitable donation to any Puerto Rican charity organization and the purchase of their primary residence on the island. The decree is granted for 15 years, and it can be extended for an additional 15 years.
Please contact us for more specific information regarding the eligibility of your business. We are happy to help!
Opportunity Zones Act
The Opportunity Zones were designated as part of President Donald Trump’s tax reform, and offer a 37.5% to 20% reduction in the federal tax rate to funds that invest in “low income communities”. Almost 96% of Puerto Rico is within the designated Opportunity Zone areas.
Nevertheless, regulations to enforce the provisions of the law have not yet been released by the
government of Puerto Rico.
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