List of All Puerto Rico Tax Incentives - Relocate to Puerto Rico with Act 20 & Act 22

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List of All Tax Incentives in Puerto Rico

 

Puerto Rico is not only a beautiful Caribbean island territory with a vibrant culture and almost always perfect weather—it also offers a number of generous tax incentives to entice businesses and individuals to come to the island and help it prosper. The most famous are Act 20 and Act 22—now the “Export Services” and the “Individual Resident Investor” tax incentives, respectively, under the newly enacted Act 60—but Puerto Rico offers various other tax incentives that may fit your needs. Read our extensive list of Puerto Rico tax incentives to determine which is right for you.

Puerto Rico Tax Incentives

Professional Physicians (Formerly Act 14)

To attract highly skilled medical professionals to the island, Puerto Rico is offering individual physicians who come to the territory to practice general medicine or any subfield of medicine tax incentives. Physicians completing their residency as part of an accredited medical program are also eligible. Physicians must complete at least 100 hours of work per month at a public or private hospital, federal or state agency, private office, or accredited medical school. Physicians may also qualify for exemption from the requirement to donate $10,000 to a nonprofit entity.
 
Eligible physicians can enjoy a 4% fixed income tax rate, and medical services businesses can enjoy a 100% exemption from withholding and paying income taxes on $250,000 per year.
 
Puerto Rico also offers a student loan repayment program for doctors, dentists, veterinarians, and medical researchers who graduated after July 1, 2019. To receive the $65,000 grant, applicants must remain in Puerto Rico for seven years, although interruptions to study additional medical programs outside of Puerto Rico are permitted.

Professional Researchers or Scientists (Formerly Act 14)

The Professional Researchers or Scientists Act endeavors to bring eligible researchers and scientists to the island to enrich its scientific and technological progress. Researchers and scientists contracted by the University of Puerto Rico or other authorized higher education institutes to engage in eligible scientific research are eligible for an income tax exemption on up to $195,000 in salaries received. Those contracted to engage in scientific and technological research and development services are eligible for an exemption on up to $250,000 in salaries received. To be eligible, researchers and scientists must complete 60 hours of community service per year.
 
Additionally, scientific researchers who earn or have earned a PhD after July 1, 2019, and agree to establish their services in Puerto Rico for a minimum of seven consecutive years may be eligible for a $65,000 subsidy issued at the beginning of the seven-year period.

Professional of Difficult Recruitment (Formerly Act 14)

Puerto Rico offers help in the form of tax incentives to businesses looking to hire difficult-to-recruit professionals whose specialized talents or skills are indispensable to the business. The position must be full-time, and the employee must be (or be willing to become) a resident of Puerto Rico and not benefit from the Individual Resident Investor decree (formerly Act 22). The business is exempt from wages and benefits paid to this employee above $100,000, but all income below this amount is subject to regular income tax. The professional is also exempt from the $10,000 non-profit donation.

Export Services (Formerly Act 20)

The Export Services tax incentive is available to businesses established in Puerto Rico that offer services to customers or clients outside of Puerto Rico. Examples include research and development, consulting services, call centers, software development, and accounting services, among many others. A business must not provide services to the Puerto Rican market to be eligible for this tax incentive. Additionally, businesses that make or expect to make $3,000,000 per year must hire the equivalent of one full-time employee who is a Puerto Rican resident to be eligible. Manufacturing businesses must hire the equivalent of three full-time employees.

Tax advantages include:

  • 4% fixed income tax rate (2% for the first five years of the decree if the business is in Vieques and Culebra)
  • 100% tax exemption on dividends
  • 50% tax exemption on municipal taxes (100% for the first five years of the decree if the business is in Vieques and Culebra)
  • 100% tax exemption on municipal taxes in the first semester of business
  • 75% tax exemption on property taxes (100% for the first five years of the decree if the business is in Vieques and Culebra)
  • 100% tax exemption on property under construction
  • 100% tax exemption on gross capital gains
  • 75% tax exemption on construction excise tax
  • 100% tax exemption on excise tax and sales and use tax

Export Trade and Hubs (Formerly Act 20)

The former Act 20, which focused on businesses established in Puerto Rico that exported their goods or services abroad, was split up into two separate acts in the newly enacted Act 60. With the Export Trade and Hubs act, Puerto Rico incentivizes eligible businesses that derive at least 80% of their gross income from the traffic or export of products. Eligible activities include reselling products to customers outside of Puerto Rico; selling or distributing intangible products, such as copyrights, patents, or digital content, to customers outside of Puerto Rico; storing, transporting, and distributing products of third parties; and assembling, bottling, and packaging goods for export outside of Puerto Rico.

Tax advantages include:

  • 4% fixed income tax rate (2% for the first five years of the decree if the business is in Vieques and Culebra)
  • 100% tax exemption on dividends
  • 50% tax exemption on municipal taxes (100% for the first five years of the decree if the business is in Vieques and Culebra)
  • 100% tax exemption on municipal taxes in the first semester of business
  • 75% tax exemption on property taxes (100% for the first five years of the decree if the business is in Vieques and Culebra)
  • 100% tax exemption on property under construction
  • 100% tax exemption on gross capital gains
  • 75% tax exemption on construction excise tax
  • 100% tax exemption on excise tax and sales and use tax

Individual Resident Investor (Formerly Act 22)

One of the most well-known Puerto Rican tax incentives, the Individual Resident Investor tax incentive is available to any person who was not a resident of Puerto Rico for the 10 tax years preceding July 1, 2019, and who becomes a resident before December 1, 2035. To be eligible, investors must donate $10,000 to nonprofit entities in Puerto Rico. In Act 60, this decree was updated to include tax exemptions on capital gains from cryptocurrencies.

Tax advantages include:

  • 0% taxation on capital gains
  • 0% taxation on interest and dividends

Creative Industries (Formerly Act 27)

One of Puerto Rico’s objectives with Act 60 is to promote the island as a suitable location for film production and postproduction, as well as other creative projects. Thus, eligible creative projects can enjoy generous tax incentives in Puerto Rico. Eligible projects include films or short films, television dramas, reality TV shows, game shows, advertisement campaigns, video game projects, film festivals, and music videos. The final product must be primarily intended for consumption outside of Puerto Rico, although incidental consumption within Puerto Rico is permitted. For postproduction to qualify, the aggregate expenses must be at least $100,000. Strategic suppliers and infrastructure projects that facilitate film projects may also be eligible.

Tax incentives include:

  • 4% fixed income tax rate
  • 100% tax exemption on dividends
  • 100% tax exemption on municipal taxes
  • 75% tax exemption on property taxes
  • 75% tax exemption on property under construction
  • 100% tax exemption on gross capital gains
  • 75% tax exemption on construction excise tax
  • 100% tax exemption on excise tax and sales and use tax
  • 100% tax exemption on rental income of movable property

Small and Medium Enterprises PYMES (Formerly Act 62)

To foster small and medium enterprises in Puerto Rico, the island is offering tax incentives to any natural person or entity operating or considering operating in Puerto Rico who has earned no more than $3,000,000 within the three-year period prior to applying and who has begun operating in Puerto Rico after July 1, 2019.

Tax advantages include:

  • 100% tax exemption on property tax for the first five years of the decree (subsequently 75%)
  • 100% tax exemption on municipal taxes for the first five years of the decree (subsequently 50%)
  • $1 yearly rent of an eligible DDEC property for the first three years of the lease
  • Up to a 30% tax credit for the purchase of products manufactured in Puerto Rico

Manufacturing, Research, and Development (Formerly Act 73)

Puerto Rico is looking to encourage manufacturing, research and development, and high-tech industries to invest in the island, which is why it offers such companies generous tax incentives. Eligible businesses are ones that generate products using raw materials, including plant and animal matter. This definition is broad and even extends to businesses that engage in animal husbandry for research purposes, scientific research and development for new products, and select recycling activities.

Tax advantages include:

  • 4% fixed income tax rate
  • 100% tax exemption on dividends
  • 50% tax exemption on municipal taxes
  • 100% tax exemption on municipal taxes in the two semesters of business
  • 75% tax exemption on property taxes
  • 100% tax exemption on gross capital gains
  • 100% tax exemption on construction excise tax
  • 100% tax exemption on excise tax and sales and use tax
  • 100% tax exemption on eligible investment income

Visiting Economy (Formerly Act 74)

One of Puerto Rico’s objectives for its generous tax incentives is to foster the tourism industry in Puerto Rico and transform the island into a global-level tourist destination. To this end, the island offers tax exemptions to businesses engaging in eligible tourist activities. Among the eligible businesses are accommodation providers, such as hotels, guest houses, vacation clubs, and bed and breakfasts, as well as tourist attractions, such as casinos, theme parks, golf courses, and other entertainment venues that could promote tourism in Puerto Rico. Businesses that support medical tourism and nautical tourism are also included, as are e-sports leagues and businesses that develop and administrate natural resources such as caves, forests, and lakes.

Tax advantages include:

  • 4% fixed income tax rate
  • 100% tax exemption on dividends
  • 50% tax exemption on municipal taxes
  • 75% tax exemption on property taxes
  • 100% tax exemption on property under construction
  • 100% tax exemption on gross capital gains
  • 100% tax exemption on municipal taxes in the first semester of business
  • 75% tax exemption on construction excise tax
  • 100% tax exemption on excise tax and sales and use tax
  • 100% tax exemption on articles of use and consumption

Green Energy (Formerly Act 83-325)

Committed to promoting the green sector and preserving its natural beauty, Puerto Rico offers tax incentives to eligible green energy companies. Green energy companies are defined as entities that engage in the production of green energy; the production of highly efficient energy; the production, sale, or operation of highly efficient energy for consumption in Puerto Rico; equipment assembly and installation for highly efficient generation systems. Businesses requesting this decree are evaluated on various criteria, including paying employees more than the federal minimum wage, engaging in safe development, and using raw materials and agricultural products from Puerto Rico.

Tax advantages include:

  • 4% fixed income tax rate
  • 100% tax exemption on dividends
  • 50% tax exemption on municipal taxes
  • 100% tax exemption on municipal taxes in the two semesters of business
  • 75% tax exemption on property taxes
  • 100% tax exemption on property under construction
  • 100% tax exemption on municipal tax for gross capital gains
  • 75% tax exemption on construction excise tax
  • 100% tax exemption on excise tax and sales and use tax
  • 4% fixed income tax rate on the distribution, sale, or exchange of asset shares

Young Entrepreneur (Formerly Act 135)

Young entrepreneurs are critical to any nation’s economy, and Puerto Rico wants to foster the creativity and innovation of young entrepreneurs to help the island grow and prosper. To encourage young entrepreneurs to set up business in Puerto Rico, the island offers generous tax incentives to qualifying entrepreneurs. To be eligible, entrepreneurs must be between 16 and 35 years of age and intend to open and operate a long-term business for an indefinite amount of time. They must apply for the decree before launching their business and sign a special agreement with the Secretary of the DDEC.

Tax advantages include:

  • 0% fixed income tax rate
  • 100% tax exemption on property taxes
  • 100% tax exemption on municipal taxes

Public Porters of Air Transport Services (Formerly Act 135)

Businesses who provide air transportation services as a public carrier may qualify for Puerto Rico’s tax incentives. Businesses that engage in the repair, maintenance, or general conditioning of aircraft or maritime vessels may also be eligible.

Tax advantages include:

  • 100% tax exemption on income tax
  • 100% tax exemption on municipal taxes
  • 100% tax exemption on movable and immovable property

Maritime Transport Services (Formerly Act 126)

Puerto Rico is looking to improve its economy and the welfare of its people by promoting maritime freight transportation between Puerto Rico and foreign nations. To this end, the island is offering tax incentives to businesses established or to be established in Puerto Rico that engage in sea freight transportation between Puerto Rico and other countries or that derive income from the use, rental, or lease of a vessel or part used in such marine transportation. Businesses that engage in the repair, maintenance, or general conditioning of aircraft or maritime vessels may also be eligible.

Tax advantages include:

  • 100% tax exemption on income tax
  • 100% tax exemption on dividends
  • 100% tax exemption on municipal taxes
  • 100% tax exemption on movable and immovable property

Infrastructure Investment (Formerly Act 185-7)

In an effort to improve Puerto Rico’s construction sector to foster its economic recovery and reconstruction, the island is offering eligible construction companies generous tax incentives. To qualify, companies must engage in the construction of buildings that will benefit the Puerto Rican economy and society. Eligible companies include those that improve, restore, or reconstruct existing buildings or construct new buildings in historical areas of Puerto Rico; construct or restore social interest housing for low- to moderate-income families; construct middle-class homes; construct, rent, or lease properties to senior citizens in a defined income bracket who do not own a home; and develop assisted housing for senior citizens.

Tax advantages include:

  • 4% fixed income tax rate
  • 100% tax exemption on property taxes
  • 100% tax exemption on property under construction
  • 90% tax exemption on municipal taxes

Agriculture, Livestock Industries, and Agribusiness (Formerly Act 225)

To strengthen its agriculture sector, Puerto Rico is offering tax incentives to businesses that engage in qualifying agricultural activities. Businesses that generate at least 51% of their gross income from the eligible agricultural activities can apply for the decree. Eligible agricultural activities include tilling or cultivating land for fruits, vegetables, or other useful plants; raising livestock for meat, eggs, or milk; commercial fishing activities; the commercial production of flowers for export (note that landscaping services do not qualify); and the rearing of thoroughbred racehorses and ride horses.

Tax advantages include:

  • 90% tax exemption on bona fide farmers income tax
  • 100% interest exemption on debt instruments
  • 100% tax exemption on property tax
  • 100% tax exemption on municipal taxes
  • 100% tax exemption on excise tax and sales and use tax

Disclaimer: This list is not exhaustive. The information in this email should not be construed as, and should not be relied upon for, legal or tax advice. We recommend contacting an attorney for advice on specific legal issues and a CPA for advice on specific tax issues.

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