Educators and Trainers Can See Big Tax Breaks in Puerto Rico Under Act 60
- Posted: August 8, 2022
- Posted by: Travis Lynk
- Last Reviewed: August 8, 2022
Attention online education and training companies: professional growth, tax cuts, and tropical beauty are waiting for you in Puerto Rico. Keep reading to learn more about how moving from the United States to this Caribbean island will be rewarding in more ways than you’ve imagined.
As you’re no doubt aware, interest and enrollment in online education and training have surged since the beginning of the COVID-19 pandemic. Education experts believe online learning will continue to grow.
Many others on the island share your interest in education and training as well. Hurricanes Irma and Maria devastated many of Puerto Rico’s schools in 2017, and the island is now in the midst of a multibillion-dollar effort to rebuild its educational infrastructure. In the wake of these tragedies, the island has seen the growth of a number of private online educational institutions, aided by the presence of lightning-fast internet speeds.
Act 60 has made Puerto Rico especially appealing to those on the mainland in recent years. This incentive, aimed at boosting economic development on the island, can provide tremendous tax benefits to qualified businesses and individual investors.
As long as your educational or training services are conducting their work inside Puerto Rico, they should be eligible for substantial benefits that apply to the income you receive from clients outside of Puerto Rico. One of these is a low 4% corporate tax rate (in contrast to the 21% corporate tax rate, plus state taxes, that a business pays on the mainland).
What other perks can your relocated business expect? A 100% tax exemption on distributions from earnings and profits, a 50% tax exemption on municipal taxes, and a 75-100% tax exemption on municipal and state property taxes are among the savings. Take a look at all of these additional tax incentives that may apply to your business, depending on the nature of the educational or training services you provide. In addition, an individual investor who becomes a bona fide resident of Puerto Rico can also receive a 100% tax exemption on interest, dividends, short- and long-term capital gains, and gains on crypto-based assets acquired after moving.
As soon as you’ve settled on the island, you’ll be poised to expand your online education and training offerings thanks to the island’s modern IT infrastructure. Super-fast internet speeds and expanding 5G wireless technology will give you a competitive edge. Developing data-intensive interactive videos and virtual reality-based instruction will be feasible. For example, you might offer substitutes for in-classroom demonstrations to distance learners seeking virtual reality nursing or chemistry lab programs. Consider developing online boot camps to satisfy the growing demand for certain tech skills. Perhaps you’ll make greater use of AI algorithms to offer courses to students based on their behavior, profile, and performance. All of this and more are within your grasp from Puerto Rico.
We can’t stress enough that you and your company must perform at least some of your educational and training work while physically inside Puerto Rico before you can benefit from the tax advantages described earlier. You can follow one of two paths to make this happen: a total relocation of your business or partial relocation of it to the island. Under the latter approach, you’d set up a new entity on the island that charges a “management fee” to the rest of your mainland-based business. To avoid penalties, this would require a transfer pricing analysis and intercompany agreements to determine the share of profits realized in Puerto Rico vs. on the mainland, as laid out in this guide.
Between the major tax benefits and some of the fastest internet speeds in the world, we hope you see that your educational or training business will have what it needs to flourish in Puerto Rico. We’re not the only ones who are pleased with all that the island has to offer. The New York Times selected Puerto Rico as its #1 travel destination in 2019, and many entrepreneurs and cryptocurrency kings and queens have flocked here from the mainland.
Let our professional team at PRelocate educate you on all aspects of your move so that you can educate more of the world.
Disclaimer: Neither PRelocate, LLC, nor any of its affiliates (together “PRelocate”) are law firms, and this is not legal advice. You should use common sense and rely on your own legal counsel for a formal legal opinion on Puerto Rico’s tax incentives, maintaining bona fide residence in Puerto Rico, and any other issues related to taxes or residency in Puerto Rico. PRelocate does not assume any responsibility for the contents of, or the consequences of using, any version of any real estate or other document templates or any spreadsheets found on our website (together, the “Materials”). Before using any Materials, you should consult with legal counsel licensed to practice in the relevant jurisdiction.
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