The Chapter 3 of Act 60-19 for Export Services & Commerce can be used to promote Puerto Rico as an international service center and commerce hub. It reduces income taxes and exempts income from municipal and property taxes. There are also exemptions for dividend distributions and income that is generated by the exempt operations. If properly structured, it allows investors to invest in Puerto Rico and engage in business activities for customers outside Puerto Rico. Our team helps you prepare and apply to join the Puerto Rico Act 60 community.
Considering hiring us to apply for Act 60 benefits and opening your business? Our team is ready to guide you through the requirements and opportunities.
-Advertising and Public Relations
-Other Industries considered “Creative” (design, art, music, publications, development of apps and video games, creative education)
-Development of Computer Programs Distribution in Physical Form, through the Internet, Cloud -Computing or Blockchain, Income from Licensing, Subscriptions or Charges for Services. -Education Services and Training Electronic Data Processing Centers
-Engineering, Architecture, Project Management
-Hospital and Laboratory Services, including Telemedicine
-Investment Banking and other Financial Services (including advisory and broker dealer operations)
-Professional Services (law and accounting)
-Research and Development
-Voice and Data Telecommunications
Export Services are eligible services rendered to a foreign natural person or legal entity located outside the borders of Puerto Rico. To qualify for the exemption, the Export Services cannot have any connection with Puerto Rico, at all.
-Products for Export
-Commercial and Mercantile Distribution of Products Manufactured in P.R.
-Commissions on the Sale of Products to Customers outside P.R.
-Purchase of Products for Resale to Customers outside P.R.
-Sale of Intangible Products to Customers outside P.R.
-Storage and Distribution Centers
Income Tax Benefits
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.
Income Tax Exemption for Distributions
Distributions of dividends or profits generated by the exempt operation are 100% exempt from Puerto Rico income tax.
Real and Personal Property Tax Exemption
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 million or less, the property tax exemption is 100% for five years, and 75% thereafter.
Municipal License Tax Exemption
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.
Tax Exemption Period
The tax exemption period is 15 years, which can be extended for 15 additional years.
Individual Investors Chapter 2 of Act 60 provides 100% exemption from Puerto Rico income tax on interest and dividend income. This applies to capital gains that are realized or accrued after an individual becomes a bona-fide resident of Puerto Rico.
Chapter 2 is applicable to:
Any individual investor who becomes Puerto Rico resident ("Individual Investment") before December 31, 2035 (subject to the following conditions:
The individual must not have been a Puerto Rican resident between January 17, 2006 and January 17, 2012. Puerto Rico residents are individuals who reside in Puerto Rico.
For Puerto Rico income tax purposes, a presumption that you have been physically present in Puerto Rico during the taxable calendar year will be made.
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:
(i) meets a physical presence test;
(ii) does not have a tax home outside of Puerto Rico during the taxable year; and
(iii) 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 individual 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.
-Make an annual donation of a minimum of $10,000 to local nonprofit entities that are not controlled by the Individual Investor and are certified under the P.R. Internal Revenue Code. Half of the donation must be to certain organizations that work to eradicate child poverty.
-Within two years of receipt of the grant, the Individual Investor must purchase real property in Puerto Rico for use as his/her principal residence. The property must be owned by the Individual Investor as sole owner or together with the spouse.
-File an Annual Report with the Government of Puerto Rico with a filing fee of $5,000.
The services we offer goes from personal consulting to complex tax resolutions. No matter if you are a small or big business you can count on our services.
Act 60 Services
Gather the required documents and information to complete the Application for the individual under the corresponding sections of Act 60-2019
Preparation and filing of Application
Communications (which includes meetings and follow up) with representatives of the Puerto Rico Incentives Office (“PRIO”) and/or Department of Economic Development and Commerce regarding eligibility, status of application, as well as assistance with any information request
Preparation of documents accepting the tax exemption grant and setting the commencement date.
Act 60 Services
Step I- Creation of a Puerto Rico entity
Filing before the Department of State incorporating the company
EIN number, IVU (“Registro de Comerciante”), patente (municipal permits) and related permits.
Step II-Filing of Applications for Tax Exemption Grant under Act 60-2019
Analyze activities eligible for exemption
Assistance with the preparation of the Eligible Services description for the Application
Gather the required documents and information to complete the Application for the export of services under the corresponding sections of Act 60-2019
Preparation and filing of Application
Communications (which includes meetings and follow up) with representatives of the Puerto Rico Incentives Office (“PRIO”) and/or Department of Economic Development and Commerce regarding eligibility, status of application, as well as assistance with any information reques
Preparation of documents accepting the tax exemption grant and setting the commencement date
Real Estate Opportunities
Contacts to short & long term leasing
Considering hiring us ? Our team is ready to guide you. Call attorney Verónica Irizarry at +1 787-671-3529 or sign up to be contacted via email.