Puerto Rico Incentives Code (Act No. 60) Now Officially in Effect

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PRelocate provides an update on the implications of new tax incentives now in effect through Act No. 60 for both businesses and individuals in Puerto Rico.

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While the consolidation of the decrees, incentives, subsidies, and benefits governing taxation in Puerto Rico improves transparency, Act 60 introduces more rigid, restrictive, and expensive requirements.

The former Governor of Puerto Rico, Ricardo Rosselló, signed Act 60–2019, commonly known as the Puerto Rico Incentives Code, into law on July 1, 2019, which came into effect on January 1, 2020. The Incentives Code consolidates various tax decrees, incentives, subsidies, and benefits, including Act 20, the Promotion of Export Services Act, and Act 22, the Act to Promote the Relocation of Individual Investors to Puerto Rico. Act 60 replaces Acts 20 and 22, meaning they are no longer in effect, and all applicants must instead comply with the requirements of Act 60.

Chapter 3 of the Incentives Code, formerly Act 20, governs the exportation of goods and services. It introduces significant changes relating to employment, oversight, eligible businesses, tax exemptions, and municipal contributions.

Under the new law, exempt businesses with actual or projected total revenue of more than $3 million must directly employ at least one full-time employee, which may be the business owner. Moreover, the Office of Industrial Tax Exemption (OITE) will perform an independent audit of exempt businesses at least every two years. Whether this applies to businesses established before the implementation of the Incentives Code remains unclear. Additionally, blockchain-related services are now specifically included as an eligible business activity.

With Act 60, exempt businesses can enjoy a 75% exemption on the municipal and state property taxes during the validity of the decree and a 50% exception on municipal contributions or municipal patents applicable to eligible services provided by the businesses during the validity of the decree. Qualifying small and medium businesses can also enjoy a 100% exemption on municipal and state property taxes during their first five years of operation.

Chapter 2, “Individuals,” formerly Act 22, changes regulations relating to annual charitable donations, the purchase of real estate, and crypto assets, among others. The required annual charitable donation has doubled from $5,000 to $10,000, with half payable to a government-approved charity and the other half to any Puerto Rican charity of the grantees’ choice. Furthermore, within two years of obtaining the decree, grantees must purchase property in Puerto Rico. This property must be the grantee’s primary residence throughout the validity of the decree, and grantees cannot rent out these properties. Finally, cryptocurrencies and other crypto assets are now explicitly included as eligible for tax exemptions.

Under Act 60, the initial decree is now granted for a term of 15 years and may be extended for an additional 15 years. Furthermore, the Department of Economic Development and Commerce of Puerto Rico, also known by the Spanish acronym DDEC, will now publish a yearly report on all the incentives requested and granted. The report will include the name of the business and principal shareholders, the date the decree was granted, the name of the municipality in which the business operates, and the number of jobs created by the business.

While the consolidation of the decrees, incentives, subsidies, and benefits governing taxation in Puerto Rico improves transparency, Act 60 introduces more rigid, restrictive, and expensive requirements. For more details on the new act, visit PRelocate. Please note that the changes listed here are not exhaustive and that you should contact an attorney for specific legal advice about your individual situation.

About PRelocate: PRelocate provides individuals and small businesses the knowledge and services they need to relocate to Puerto Rico. The company believes that living and working in Puerto Rico is a tremendous opportunity that should not be overlooked due to cost, disjointed information, and an overall lack of clarity. Its goal is to enable and empower its clients to make a sound decision about whether Puerto Rico is right for them. If it is, PRelocate makes it happen for them in a straightforward, accurate, and economical way.

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Pilar Rivera
PRelocate
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