• Puerto Rico Tax Incentives

    FOR INDIVIDUAL INVESTORS

Promote Exportation of Services

Applications under Act 20 and Act 22 will be accepted until December 31, 2019.

The objective of Act 20 is to provide the appropriate environment and opportunities to make Puerto Rico a center of international services, focused on encouraging service providers to offer their services from Puerto Rico to clients who are located outside of Puerto Rico.

INCENTIVES FOR EXPORT SERVICES BUSINESSES

  • 4% Corporate Rate
  • Eligible businesses providing services for exportation will enjoy a 4% flat income tax rate on net income related to such services.
  • 100% Tax-Exempt Dividends
  • Distributions from earnings and profits derived from the export services income of eligible businesses are 100% tax exempt from Puerto Rico income taxes
  • 60% Exemption on Municipal Taxes
  • Municipalities in Puerto Rico may levy a gross receipts tax of up to 0.5% (1.5% for financial services).
  • Some eligible businesses will enjoy a 60% exemption on such municipal taxes.

TAX EXEMPTION DECREE

  • To enjoy the benefits granted under the Export Services Act the services provider must request and obtain a tax exemption decree under the Act 20, which will be signed by the Secretary of the Department of Economic Development and Commerce of Puerto Rico.
  • Such decree will have term of 20 years, renewable for 10 additional years, provided certain conditions are satisfied.
  • The Tax Exemption Decree will constitute a contract with the Puerto Rico Government not subject to subsequent legislative changes.

There is no minimum employment requirement for tax exemption decrees issued under Act 20. Applications under Act 20 will be accepted until December 31, 2019.

WHY IS PUERTO RICO THE PERFECT DESTINATION FOR BUSINESSES?​



 

Promote Relocation of Investors

The objective of Act 22 is to attract new residents to Puerto Rico by providing a total exemption from Puerto Rico income taxes on passive income realized or accrued after such individuals become bona fide residents of Puerto Rico.

INCENTIVES FOR INDIVIDUAL INVESTORS

  • 100% Tax Exemption on Dividends and Interest
  • New Residents will enjoy a 100% tax exemption from Puerto Rico income taxes on all dividend and interest income
  • Interest and dividends that qualify as Puerto Rico source income will not be subject to federal income taxation under Section 933 of the U.S. Tax Code
  • 100% Tax Exemption on Short- and Long-Term Capital Gains
  • All capital gains accrued after becoming a New Resident will be 100% exempt from Puerto Rico taxes. These gains will not be subject to federal taxes.
  • Prior Unrealized Capital Gains: Capital gains accrued prior to becoming a New Resident and realized after moving to Puerto Rico may be subject to tax.
  • To qualify for the Act 22 incentives, all gains must be recognized prior to January 1, 2036

ELIGIBILITY

To qualify under Act 22 an individual must have physical presence in the Island for at least 183 days of the year and must not have been a resident in Puerto Rico from 2006 to 2011. 

TAX DECREE EXEMPTION

To enjoy the benefits granted under the Individual Investors Act the New Resident must apply for and obtain a tax exemption decree under the Act, which will be signed by the Secretary of the Department of Economic Development and Commerce of Puerto Rico.

The Tax Exemption Decree will constitute a contract with the Puerto Rico Government not subject to subsequent legislative changes.

ACT 22 REQUIREMENTS

  • To obtain access to the approved and signed Tax Exemption Grant under Act 22 of January 17, 2012 (Act 22), a one-time fee of $5,000 must be satisfied and deposited into the 'Special Fund under the Act to Promote the Transfer of Individual Investors to Puerto Rico'. 
  • Since the amendment made by the Act 45 of July 11, 2017, all Individual Investors that hold a Tax Exemption Grant under Act 22 must comply with an annual contribution of $5,000 to a duly organized and registered non-profit organization.

Applications under Act 22 will be accepted until December 31, 2019.

WHY IS PUERTO RICO AN IDEAL INVESTMENT DESTINATION?


 

BDO HAS ASSISTED MORE THAN 500 CLIENTS WITH THEIR ACT 20/22 NEEDS.

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