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Puerto Rico Tax Incentives

Posted by Administrator on July 5, 2019
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Puerto Rico has put together an innovative set of tax incentives designed to help you save money on taxes and achieve your business goals.

Export Services Incentive:
Formally known as Act No. 20 or the Act to Promote the Exportation of Services, this law provides attractive tax incentives for companies that establish and expand their export services businesses in the island. Moreover, the law promotes investments on research and development and initiatives from the academic and private sectors by granting credits and exemptions for these activities. Furthermore, it helps to decrease operational and energy spending for companies moving to the island in order to help their operations remain profitable and efficient.

Incentive highlights:

4% Corporate tax rate

100% Tax exemption on dividends or profit distributions.

100% Exemption on property taxes.

Individual Investor Incentive:
The idea behind the incentive afforded by Act No. 22 is to attract new residents to Puerto Rico by providing a total exemption from Puerto Rico income taxes on all passive income realized or accrued after such individuals become bona fide residents of Puerto Rico. This relocation should result in new local investments in real estate, services and other consumption products, and in capital injections to the Puerto Rico banking sector, all of which will accelerate the economy of the island.

Incentive highlights:

100% Tax exemption on all dividends and interest income.

100% Tax exemption on all capital gains.

4% Corporate tax rate.

Incentive for the Development of Puerto Rico:
Known as the Economic Incentives Act for the Development of Puerto Rico, Act. No. 73 was established to provide the adequate environment and opportunities to continue developing a local industry, offer an attractive tax proposal, attract direct foreign investment and promote economic development and social betterment in Puerto Rico.

Incentive highlights:

4% Fixed income tax rate.

1% Fixed income tax rate for innovative firms introducing “pioneer” activities or operations in Puerto Rico.

100% Tax exemption on dividend distribution.

Other Incentives:


Private Equity incentive:
By promoting this investment vehicle used by investors around the world, Act No. 185 promotes the creation of jobs for professionals in the field of securities and financial business in Puerto Rico, as well as the development of the securities industry on the Island.

Incentive for Financial Institutions (Act. No. 273)
Regulates the organization and operation of international financial institutions authorized by the Office of the Commissioner of Financial Institutions to operate in Puerto Rico, and grants tax exemption decrees, among other benefits.

Incentive for International Insurers and Reinsurers (Act. No. 399)
The law allows companies to organize a captive insurance in Puerto Rico and may incorporate a holding company for the interest in another company. Tax exemptions for insurers that qualify for an international insurer license are 100% exempt on all income, including liquidation and dissolution of its operations in Puerto Rico.

Incentive for Young Entrepreneurs
Act No. 135 was established for hard working young adults within the ages of 16 to 35. The subsections of this Act grants tax exemption for individuals (from ages 16 to 26 making under $40,000) and new business (from ages 16 to 35 until $500,000).

Tourism Development Incentive (Act. No. 74)
Offered through the Puerto Rico Tourism Company, this law provides incentives for the development of a world-class tourist industry. Act 74 is most commonly used by large hotel projects.

Renewable Energy Incentive (Act. No. 83)
Establishes standards to promote renewable energy, in accordance with short, medium and long-term compulsory targets, known as the Renewable Energy Portfolio.

Source: Invest Puerto Rico

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