Puerto Rico Act 73 Tax Incentives

Puerto Rico Act 73 Tax Incentives

Puerto Rico Tax Incentives

The Puerto Rico Industrial Development Company (PRIDCO) is a public corporation dedicated to promoting Puerto Rico as an investment destination among companies and industries worldwide. Since 1950, PRIDCO has led the transition of Puerto Rico from an agrarian to an industrial economy. PRIDCO continues to drive the economy of Puerto Rico, focusing on the promotion of hi-tech industries between the manufacturing, science & technology, and service sectors. This attraction of industries is possible because of the advantages that Puerto Rico offers in areas such as competitive tax incentives, a highly skilled labor force, adequate infrastructure and a pro-business climate.

Puerto Rico Incentives

Aggressive Tax Incentives for Attracting Business  Puerto Rico offers a highly attractive incentives package that includes a fixed corporate income tax rateone of the lowest in comparison with any U.S. jurisdiction – various tax exemptions and special deductions, training expenses reimbursement and special tax treatment for pioneer activities.

Act 73 of May 28, 2008, known as “Economic Incentives for the Development of Puerto Rico Act,” makes industry operations in Puerto Rico highly profitable while stimulating additional economic development.

Tax Rate Incentives

Key provisions include:

  • 4% or 8% fixed income tax rate
  • 2% or 12% withholding tax on royalty payments
  • “Pioneer” industries are subject to an income tax rate of 1% or 0% in cases where the intangible property was created or developed in Puerto Rico
  • Minimum combined tax rate of 3% if at least 50% of the exempt business shareholders are residents of Puerto Rico
  • Minimum combined tax rate of 1% for small or medium-size business (average gross income of $10 million or less during the previous three years)

Tax Credit Incentives

Act 73 also allows companies to take a tax credit on their corporate income tax return. Tax credits allow for:

  • Job creation tax credit of $1,000, $2,500 or $5,000 depending on the physical location of the business operations
  • 50% income tax credit of qualified R&D expenses
  • 50% income tax credit for investment in machinery and equipment for the production of energy using renewable resources
  • 25% income tax credit for the purchase of locally manufactured products
  • Up to 10% credit to reduce the electric energy cost of the industrial exempt business

Municipal and Property Tax Incentives

  • 90% exemption from personal and real property taxes
  • 60% exemption from municipal license taxes (75% for small and medium-size businesses)
  • 100% exemption from state and local sales and use tax on raw material

For more information of Puerto Rico Tax Incentives, visit their website: www.pridco.com or contact Porto Capital.

If you would like to get to know more about the Puerto Rico Tax Incentive programs for businesses, get in touch at the contact information below.

 


Miguel Nicolas Moreda, CPA, CIRA

Miguel Nicolas is the founder of Porto Capital. Prior to working as a financial and restructuring advisor for small and medium-sized businesses, he worked at GFR Media Real Estate Division as Finance Manager. Before that, he worked in the Business Advisory Division at Ernst & Young US, LLP in the United States.

He is holds an undergraduate degree in accounting from the University of Puerto Rico. He also possess graduate degrees from the University of Puerto Rico School of Law and IE Business School in Spain. Miguel is a Certified Public Accountant (CPA) and a Certified Insolvency and Restructuring Advisor (CIRA).

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