Puerto Rico Incentives Code (Act 60–2019) Signed into Law
- Posted: November 11, 2019
- Posted by: Travis Lynk
- Last Reviewed: May 25, 2021
SAN JUAN, PR, November 8, 2019 – Governor of Puerto Rico, Ricardo Rosselló, signed Act 60–2019, commonly known as the Puerto Rico Incentives Code, into law on July 1, 2019, with an effective date of January 1, 2020.The Incentives Code consolidates various tax decrees, incentives, subsidies, and benefits, including Act 20, the Promotion of Export Services Act, and Act 22, the Act to Promote the Relocation of Individual Investors to Puerto Rico.
Chapter 3 of the Incentives Code replaces Act 20 and governs the exportation of goods and services. It introduces significant changes relating to employment, oversight, eligible businesses, tax exemptions, and municipal contributions.
Under the new law, exempt businesses with actual or projected total revenue of more than $3 million must directly employ at least one full-time employee, which may be the business owner. Moreover, the Office of Industrial Tax Exemption (OITE) will perform an independent audit of exempt businesses at least every two years. Whether this applies to business established before the implementation of the Incentives Code remains unclear. Additionally, blockchain-related services are specifically included as an eligible business activity.
Exempt businesses will enjoy a 75% exemption on the municipal and state property taxes during the validity of the decree, and they will enjoy a 50% exception on municipal contributions or municipal patents applicable to eligible services provided by the businesses during the validity of the decree.Qualifying small and medium businesses will also enjoy 100% exemption on municipal and state property taxes during their first five years of operation.
Chapter 2, “Individuals,” replaces Act 22 and changes regulations relating to annual charitable donations, the purchase of real estate, and crypto assets, among others. The required annual charitable donation will double from $5,000 to $10,000, with half payable to a government-approved charity and half to any Puerto Rican charity of the grantees’ choice.Within two years of obtaining the decree, grantees must purchase property in Puerto Rico. This property will be the grantees’ primary residences throughout the validity of the decree, and grantees cannot rent out these properties. Finally, cryptocurrencies and other cryptoassets are explicitly included as eligible for tax exemption.
From January 2020, the initial decree will be granted for a term of 15 years, compared to the current 20 years, and may be extended for an additional 15 years, compared to the current 10.Furthermore, the Department of Economic Development and Commerce of Puerto Rico, also known by the Spanish acronymDDEC, will publish a yearly report on all the incentives requested and granted. The report will include the name of the business and principal shareholders, the date the decree was granted, the name of the municipality in which the business operates, and the number of jobs created by the business.
While the consolidation of the decrees, incentives, subsidies, and benefits governing taxation in Puerto Rico improves transparency, it introduces more rigid, restrictive, and expensive requirements.According to Pilar Rivera, operations manager atPRelocate, “The changes to Acts 20 and 22 will apply only to applications submitted after December 31, 2019. Prospective applicants who are planning to begin their residency and business operations in the 2020 tax year should apply now to make the most of the current rules.” She further urged those who are interested in the program to consult an attorney for advice on specific legal and tax issues.
To benefit from the current program requirements, such as the lower donation amount, those who want to apply for Act 20 and Act 22 decrees should contact the PRelocate team today to begin their applications.
About PRelocate: PRelocate provides individuals and small businesses the knowledge and services they need to relocate to Puerto Rico. The company believes that living and working in Puerto Rico is a tremendous opportunity that shouldnot be overlooked due to cost, disjointed information, and an overall lack of clarity.Its goal is to enable and empower its clients to make a sound decision about whether Puerto Rico is right for them. If it is, PRelocate makes it happen for them in a straightforward, accurate, and economical way.
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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.