Puerto Rico already offers significant tax incentives and some tax credits for certain manufacturing industries, hotel and tourism-related operations, agricultural activities, the film industry, international banking operations, green energy projects, and certain hospital facilities.
On July 1, 2019, in search of establishing a new transparent and efficient process for granting and overseeing all the incentives granted by the government, the Governor of Puerto Rico approved Act 60-2019 (hereinafter referred to as the “Incentives Code”), to simplify in a single body of law all the tax incentives that Puerto Rico offers.
The Incentives Code provides an exemption from Puerto Rico income taxes on interest, dividends, and capital gains realized or deemed accrued after such individuals become bona fide residents of Puerto Rico. This relocation should result in new local investments in real estate, services, and consumer products, as well as capital injections to the Puerto Rico banking sector; all of which will accelerate the economy of Puerto Rico.
In order to incentivize medical professionals to stay in Puerto Rico or move to Puerto Rico and practice medicine locally, the Incentives Code provide some tax benefits to bona fide residents admitted to medical practice, podiatry, dental or odontology practice who practice medicine as a full time and provide one hundred eighty (180) hours of community service (the “Qualified Physicians”). The Qualified Physicians must be operating from a geographical area with shortage of specialized physicians. Applicants that are bona fide residents of Puerto Rico will have until September 30, 2019 to request a decree, while physicians that are not bona fide residents of Puerto Rico as of July 1, 2019 will have until June 30, 2020 to file the corresponding application.
A new incentive is available for professionals of difficult recruitment. These are individuals that work full time with a specialized knowledge that is considered indispensable to an exempt business that possess a grant. To avail from the benefits granted on the Incentives Code for such individuals, these individuals must obtain a grant and comply with certain requirements that will be adopted through regulations. Salaries up to $100,000 derived by these professionals will be subject to ordinary PR income tax rates while salaries and benefits over $100,000 will be exempt from PR income taxes, including the alternate basic tax.
The Incentives Code also seeks to establish Puerto Rico itself as an international center for the export of services by encouraging local service providers to expand their services to persons outside of Puerto Rico in aid of promoting the development of new businesses in Puerto Rico and stimulating the inbound transfer of service providers to Puerto Rico.
Act 2016-2011 grants individual residents and non-residents of Puerto Rico various incentives for sale and purchase of certain real property (“Eligible Property”) executed between July 1, 2013 and December 31, 2020 (the “Closing Period”).
The Incentives Code offer tax benefits to businesses engaged in international financial services in Puerto Rico. To avail from such benefits, a business needs to become an international financial entity (“IFE”) by applying for a permit and license from the Office of the Commissioner of Financial Institutions (“OCIF”) and obtaining a tax exemption decree form the Department of Economic Development and Commerce (“DDEC”). An IFE may be any person, that is not an individual, and that is incorporated or organized under the laws of Puerto Rico, the United States, or any other country.
An international insurer is an entity organized in Puerto Rico to offer direct insurance or reinsurance outside of Puerto Rico (“International Insurer”). International reinsurers (“Reinsurers”) may assume risks in Puerto Rico upon compliance of the requirements thereof. An international insurer holding company is a Puerto Rico corporation that holds interest in an international insurer or another international insurer holding company. A foreign insurer may establish a branch as an international insurer.
In an effort to make the island an investment destination for qualified opportunity zone funds that invest in projects located in qualified opportunity zones, the Incentives Code adopted a new incentives regime for these types of projects. Taking into consideration that approximately ninety five percent (95%) of Puerto Rico has been designated as an opportunity zone, the Incentives Code provides tax incentives for eligible businesses that meet the following requirements: (i) render all of its activities in an eligible zone; (ii) is not eligible for a tax decree under Act 20-2012, Act 73-2008, Act 74-2010 or Act 27-2011; (iii) the business activity is performed by a qualified opportunity fund or any qualified opportunity zone business owned by a qualified opportunity fund; and (iv) the business activity is designated as a Priority Project.
The EB-5 Visa Program was established in 1990 by the US federal government to provide opportunities for: (i) foreign investors to obtain a Green Card and US citizenship, (ii) companies and developers to obtain capital for their projects or operations, and (iii) agents and professionals to obtain fees for implementing the EB-5 investments.