Introduction
If you’re looking to invest in Puerto Rico, Act 60 provides a suite of tax incentives to boost your return on investment. There are many questions and misconceptions surrounding these incentives, so let’s take an in-depth look at Act 60 and what it can offer investors.
What is Act 60?
Act 60 is a comprehensive tax code overhaul that aims to make Puerto Rico a more attractive destination for investors. It consists of four parts:
1. The Export Services Act – aimed at attracting service industries to Puerto Rico
2. The Individual Investors Act – aimed at attracting individual investors to Puerto Rico
3. The Business Investors Act – aimed at attracting business investors to Puerto Rico
4. The Municipal and Industrial Property Tax Exemption Act – aimed at attracting manufacturing and other industrial activity to the island
Each part of Act 60 has different requirements and incentives associated with it, so let’s break down what each part entails.
The Export Services Act
The Export Services Act is aimed at service providers who sell their services to customers outside of Puerto Rico. To qualify for the incentives offered under this act, a service provider must:
– Be engaged in a qualifying service: This includes services such as research and development, engineering, architecture, consulting, and others
– Be located in Puerto Rico: The service provider must operate from Puerto Rico and have employees and contractors on the island
– Generate at least 50% of their income from exporting their services: To benefit from the incentives under this act, the service provider must generate at least 50% of their annual income from exporting their services outside of Puerto Rico
– Obtain a tax exemption decree from the government of Puerto Rico: To take advantage of the incentives offered under the Export Services Act, the service provider must apply for and receive a tax exemption decree from the government of Puerto Rico
The Individual Investors Act
The Individual Investors Act is aimed at attracting high-net-worth individuals to reside in Puerto Rico. To qualify for the incentives offered under this act, an individual must:
– Be eligible for Puerto Rican residency: This includes US citizens, green card holders, and foreign nationals who are not considered US citizens for tax purposes but who meet the requirements for economic activity in Puerto Rico
– Move to Puerto Rico: The individual must become a resident of Puerto Rico and reside on the island for at least half of the year
– Actively invest in Puerto Rico: The individual must invest in Puerto Rican bonds or stocks, or in a Puerto Rican business
– Obtain a tax exemption decree from the government of Puerto Rico: To take advantage of the incentives offered under the Individual Investors Act, the individual must apply for and receive a tax exemption decree from the government of Puerto Rico
The Business Investors Act
The Business Investors Act is aimed at attracting businesses to Puerto Rico. To qualify for the incentives offered under this act, a business must:
– Be a new business in Puerto Rico: The business must be newly established in Puerto Rico or be relocating to Puerto Rico from another jurisdiction
– Create jobs in Puerto Rico: The business must create at least 5 new jobs within the first 2 years of operations, and maintain those jobs for at least 2 years thereafter
– Meet certain investment thresholds: The business must invest a certain amount of money in fixed assets, depending on the size of the business
– Obtain a tax exemption decree from the government of Puerto Rico: To take advantage of the incentives offered under the Business Investors Act, the business must apply for and receive a tax exemption decree from the government of Puerto Rico
The Municipal and Industrial Property Tax Exemption Act
The Municipal and Industrial Property Tax Exemption Act is aimed at attracting manufacturing and other industrial activity to Puerto Rico. To qualify for the incentives offered under this act, a business must:
– Own or lease qualifying property: The business must own or lease a building or land that is used for industrial or manufacturing purposes
– Meet certain investment thresholds: The business must invest a certain amount of money in qualifying property
– Generate employment in Puerto Rico: The business must create new jobs in Puerto Rico
– Obtain a tax exemption decree from the government of Puerto Rico: To take advantage of the incentives offered under the Municipal and Industrial Property Tax Exemption Act, the business must apply for and receive a tax exemption decree from the government of Puerto Rico
FAQs
1. Do I need to be a US citizen to take advantage of Act 60?
No, Act 60 is open to US citizens, green card holders, and foreign nationals who are not considered US citizens for tax purposes but who meet the requirements for economic activity in Puerto Rico.
2. How long does it take to receive a tax exemption decree under Act 60?
The timeline for receiving a tax exemption decree can vary, but generally takes between 30 days and several months.
3. What types of businesses qualify for Act 60 incentives?
Under the Business Investors Act, any new business in Puerto Rico can qualify for incentives if it creates at least 5 new jobs within the first 2 years of operations and meets certain investment thresholds. Under the Municipal and Industrial Property Tax Exemption Act, businesses involved in manufacturing or other industrial activity can qualify for incentives if they own or lease qualifying property, meet certain investment thresholds, and create new jobs in Puerto Rico.
4. Can I take advantage of more than one Act 60 incentive?
Yes, it is possible to take advantage of more than one Act 60 incentive, depending on the nature of your investment.
Conclusion
Puerto Rico’s Act 60 provides a comprehensive suite of tax incentives to attract investors to the island. By carefully reviewing the requirements of each part of Act 60, investors can determine which incentives may be most beneficial for their particular investment. While the application process for Act 60 incentives can be complex, the potential return on investment makes it a worthwhile endeavor for many investors.