Almost all of Puerto Rico has been designated as a Targeted Employment Area (TEA), which means that it has been identified as an area with high unemployment.
Puerto Rico has been-and continues to be-an important social and economic bridge between the Americas. U.S. citizens can travel freely between the island and the U.S. mainland.
which means that it can offer very attractive tax incentives not available on the mainland U.S., with the advantages of being in a U.S. environment. Local government has legislated a series of incentives to attract investment, of which EB-5 Visa program participants can also take advantage.
The U.S. dollar is the official and only currency and is subject to U.S. Federal Court System and Laws, but with valuable tax advantages for individuals and corporations that are not available on the mainland. All U.S. banking regulations apply, including the credibility and protections afforded by the Federal Deposit Insurance Corporation (FDIC).
U.S. federal law, and all the framework and protections that go with it, apply in Puerto Rico, including intellectual property and patent protection.
Incentives aimed to transform Puerto Rico into an international services hub by providing competitive tax incentives to local and foreign businesses. With a strategic location in the Caribbean, robust infrastructure, world-class workforce, and the legal protections of operating in a jurisdiction of the United States, companies that export goods and services from Puerto Rico have a competitive advantage in the global economy.
Export Services are eligible services rendered to a foreign natural or juridical person located outside of Puerto Rico. To qualify for the exemption, the Export Services cannot have a connection with Puerto Rico. In general, the services will be considered to have a connection with Puerto Rico if they are, among others, related to (i) commercial or for-profit activities that have been or will be carried out in Puerto Rico; or (ii) advice regarding the laws and regulations of Puerto Rico, as well as procedures and administrative orders of the Government of Puerto Rico and its agencies. The entity engaged in an export commerce activity must generate at least 80% of its gross income from this activity.
An Eligible Business shall be considered to qualify for the benefits of this Section, if the business has a bona fide office or establishment located in Puerto Rico that conducts the following service activities, within or outside of Puerto Rico, which, in turn, are considered Export Services or Promoter Services:
Exempt businesses with business volumes of over $3 million generally are subject to an income tax rate of 4% on net income derived from the exempt operation. If the business volume is $3 million or less, the income tax rate on net income from the exempt operation is 2% for five years, and 4% thereafter. The income tax rate can be reduced to 1% if the exempt business is engaged in a “Novel Pioneer Activity.” Act 60 imposes a base period income limitation on the income tax benefits for businesses that were engaged in the eligible activity in Puerto Rico before filing the tax exemption application.
Distributions of dividends or profits generated by the exempt operation are 100% exempt from Puerto Rico income tax.
Exempt businesses with a business volume of over $3 million are entitled to a 75% exemption from personal and real property taxes. For businesses with a business volume of $3 or less, the property tax exemption is 100% for five years, and 75% thereafter.
The municipal license tax exemption for exempt businesses with a business volume of over $3 million is 50%. If the business volume is $3 million or less, the exemption is 100% for the first five years, and 50% thereafter.
For businesses with an annual business volume of over $3 million, there is an employment requirement of one full-time employee resident of Puerto Rico, who can be an owner/employee. There is no employment requirement for businesses with annual business volumes of $3 million or less.
The tax exemption period is 15 years, which can be extended for 15 additional years.
To obtain the benefits of Chapter 3 of Act 60 for Export Services & Commerce, the business must request and obtain a grant of tax exemption. Act 60 provides that the grant will be considered a contract between the business and the Government of Puerto Rico, so that it cannot be modified unilaterally and should not be impacted by amendments to Act 60 enacted after the issuance of the grant.
Incentives aimed to attract to Puerto Rico investors, high net worth individuals, empty nesters and retirees who currently relocate to other States and countries.
Chapter 2 of Act 60 for Individual Investors provides 100% tax exemption from Puerto Rico income taxes on all interest and dividend income and on certain capital gains realized and accrued after such individual becomes a bona fide resident of Puerto Rico. Chapter 2 applies to any individual investor who becomes a Puerto Rico resident (“Individual Investor”) on or before the taxable year ending on December 31, 2035, provided that the individual was not a resident of Puerto Rico at any time from January 17, 2006 to January 17, 2012.
A Puerto Rico resident is an individual who is domiciled in Puerto Rico. Physical presence in Puerto Rico for a minimum period of 183 days during the taxable year will create a presumption of residence in Puerto Rico for Puerto Rico income tax purposes.
Section 933 of the U.S. Internal Revenue Code of 1986, as amended (the “US Code”) provides that income derived from sources within Puerto Rico by an individual who is a bona fide resident of Puerto Rico during the entire taxable year is not included in gross income and is exempt from federal income taxation under the US Code (the “Section 933 Exclusion”). An individual is treated as a bona fide resident of Puerto Rico under Section 933 if the person (1) meets a physical presence test; (2) does not have a tax home outside of Puerto Rico during the taxable year; and (3) does not have a closer connection to the United States or a foreign country than to Puerto Rico.
Under Chapter 2 of Act 60, Individual Investors will enjoy 100% exemption from Puerto Rico income taxes on interest and dividend income during the period of exemption. Moreover, pursuant to the Section 933 Exclusion, interest and dividends received by an Individual Investor that qualify as Puerto Rico source income will not be subject to federal income tax under the US Code. Individual Investors who are U.S. citizens or resident aliens, however, will be subject to U.S. federal income tax on interest and dividends that do not qualify as Puerto Rico source income.
In certain circumstances, gains from the disposition of marketable securities, commodities, currency and digital assets based on blockchain technology (the “Assets”) acquired after the individua becomes a bona fide resident of Puerto Rico will not be subject to federal income tax if sold during the period of residency in Puerto Rico. Special rules apply for non-marketable Assets, and for marketable Assets acquired prior to the establishment of residence in Puerto Rico.
The tax incentives granted to Individual Investors under Chapter 2 of Act 60 will expire on December 31, 2035.
Individual Investors must meet the following requirements:
To obtain the benefits for Individual Investors, the individual must request and obtain a grant of tax exemption. Act 60 provides that the grant will be considered a contract between the individual and the Government of Puerto Rico, so that it cannot be modified unilaterally and should not be impacted by amendments to Act 60 enacted after the grant is issued.
***All information provided does not constitute legal advice.***
Puerto Rico, officially known as the Commonwealth of Puerto Rico (Estado Libre Asociado de Puerto Rico), is an unincorporated territory of the United States, located in the northeastern Caribbean, east of the Dominican Republic and west of both the U.S. Virgin Islands and the British Virgin Islands.
Puerto Rico is only 100 miles long by 35 miles wide, making it the smallest island of the Greater Antilles in the Caribbean, located east to the Dominican Republic. Puerto Rico (Spanish for "rich port") consists of an archipelago that includes the main island of Puerto Rico and several islands: Vieques, Culebra, Mona and numerous islets.
Since Puerto Rico is a territory of the United States, locals are American citizens, and American travelers can enter the Island without carrying a passport. Nor do U.S. travelers require international calling plans for their phones. The currency used in Puerto Rico is the U.S. dollar.
The climate in Puerto Rico is warm and tropical (i.e., expect an afternoon shower during the summer months). The temperature varies between 70 and 80 degrees Fahrenheit throughout the year. It can go down to about 60 degrees in the central mountainous area during December and January.
From the stunning diversity of El Yunque National Forest to one of the world’s brightest bioluminescent bays, Puerto Rico is bursting with natural beauty to discover. Pull up a towel and relax on one of the island’s many tropical beaches. Put on hiking boots for a walk through some of Puerto Rico’s 36 nature reserves, 19 state forests and five wildlife refuges for a visual buffet of ever-changing scenery.
Looking for more of an adrenaline rush? There’s zip lining, rock climbing, rappelling, snorkeling, scuba diving, and more. This down-to-earth destination is brimming with authentic, off-the-beaten-path experiences, from local markets to art museums to performances by local musicians. Make sure to see it all – from the colonial city of Old San Juan to the mountains to pristine islands like Vieques and Culebra.
As a real estate team in the area, Reserve continues their mission to listen, build relationships and help people. If you are looking to purchase, rent, sell, or invest in Real Estate; reserve is here to help you.