If you are an entrepreneur or own a business, you may be faced with the challenge of choosing between 73 tax incentives under Act 60. From agriculture to building software, this Puerto Rico tax incentive code seeks to promote enterprises with foreign investment and innovative businesses from Puerto Rico.
Puerto Rico has implemented several economic incentives over the past decades as part of its economic development strategies. Act 60 was created in 2019 to bring together and put in order the many incentives fragmented in different laws.
Let’s see what are the key benefits provided by the new Incentives Code, and who can take advantage of these tax savings.
Objectives of the new Tax Incentives Code
Act 60 unites most of the tax incentives previously available in Puerto Rico into a single code. The incentive structure is redesigned to adapt to the emerging needs of the island. In addition, legal and administrative frameworks are created to manage the incentives.
Of particular importance, are two laws absorbed by this new code which were first introduced in 2012, the incentives of Act 20 with the possibility of being subject to only a 4% tax when exporting goods and services. And, secondly, Act 22, eliminates local income taxes on certain passive income when moving to the island.
These efforts seek to update tax exemptions and incentives that have proven successful in Puerto Rico and also incorporate emerging industries. Therefore, while certain incentives remain unchanged, others are eliminated or altered to improve the return on public investment. However, under certain circumstances, this Act also introduces new tax incentives.
Key changes in tax incentives
Incorporation of an incentive for “Difficult Recruitment Professionals”.
Refers to those individuals residing in Puerto Rico who have specialization in the operation of a business that is exempt under the Incentives Code. These professionals will benefit from a 100% income tax exemption on the first $100,000.00 of their salary per calendar year.
Additional benefits for small and medium-sized enterprises (SMEs) established in Puerto Rico, as well as companies in the Puerto Rican islands of Vieques and Culebra.”.
SMEs are defined as those companies that generate revenues of less than three million dollars annually. This tax benefit implies a 2% special interest rate on income tax and a 100% exemption on the property and municipal taxes during the first five (5) years of operations. After the initial five (5) years, these businesses will enjoy a 4% rate on income and a 75% and 50% exemption on the property and municipal taxes, respectively.
Maximization of the Opportunity Zones program (more than 95% of the island meets the requirements).
More generally, the new Incentive Code offers companies that establish operations in Puerto Rico in several industrial categories a 4% flat tax on eligible income, a 100% exemption on Capital Gains taxes (including Crypto Gains), a 75% exemption on property taxes, and a 50% exemption on municipal taxes. And in addition, this allows certain industries-specific tax exemptions.
Yes, Act 60 includes astounding tax benefits that could help you lower your taxes quite a bit, especially in some emerging sectors such as crypto. Hence, if you require more information on this or any other tax issue, you can contact us. We will be pleased to assist you.