If you’re an investor, a businessman or an entrepreneur from the US mainland or from some other country looking into business opportunities in Puerto Rico you may find Act 20 of special interest especially where it concerns tax breaks and tax incentives.
Known as The Export Services Act, Puerto Rico Act 20 offers the critical elements for the creation of a world-class international service center. To encourage extensive investments, it provides generous tax incentives and credits to eligible businesses in Puerto Rico. Such tax breaks are generally availed of by applying for tax concession and obtaining a tax exemption decree from the Office of Industrial Tax Exemption of Puerto Rico.
Eligibility under this act requires that your business is something involved in services provided from Puerto Rico to outside markets. This may include other types of businesses which may be categorized as being in the fields of:
- Research and development
- Advertising and Public Relations
- Consulting services for any trade or business
- Commercial Art and graphic services
- Production of engineering and architectural plans and designs
- Services performed by electronic data processing centers
- Investment banking and other financial services
- Call centers
- Development of licensee computer software
Tax Breaks and Tax Incentives
The more important tax benefits you can avail of under this act are:
4% fixed income tax rate
3% fixed income tax rate in the case of services.
90% tax exemption from taxes on personal property for certain types of business (100% tax exemption during the first 5 years of operation). The taxable portion that will be subject to the traditional tax rate, because of the 90% exemption is estimated to be no more than 1.0%.
90% tax exemption likewise on real property taxes for certain types of business with 100% tax exemption during the first 5 years of operation. This also, after proper computation will result to just an estimated 1.0% effective tax rate.
Upon getting the Tax Exemption Decree from the Office of the Industrial Tax Exemption, you, as an investor can feel secure in the fact that all the tax benefits, credits and incentives stay as they are, regardless of changes in the applicable Puerto Rico tax laws. This decree has a term of 20 years with an option for you to extend for another 10-years.