The Puerto Rico Executive Incentive Plan is a program designed to attract and incentivize top-level executives to establish their businesses in Puerto Rico. This program offers a range of tax incentives and benefits to encourage executives to relocate or expand their operations on the island. One of the key features of the Puerto Rico Executive Incentive Plan is the Act 20 tax decree, also known as the Export Services Act. This decree grants eligible companies a flat 4% income tax rate on export services income for businesses established in Puerto Rico. It aims to incentivize businesses that generate revenue from services provided to clients outside Puerto Rico, such as consulting, software development, research and development, and more. Additionally, the Puerto Rico Executive Incentive Plan includes Act 22, also known as the Individual Investors Act. This act offers attractive tax benefits to high-net-worth individuals who become residents of Puerto Rico. It allows individuals to pay zero capital gains tax on any appreciation of assets acquired after moving to Puerto Rico and exempts them from taxes on qualified dividends and interest income derived while residing on the island. Another component of the Puerto Rico Executive Incentive Plan is the Act 73, also known as the Economic Incentives Act for the Development of Puerto Rico. This act provides various tax incentives for businesses in targeted industries, including manufacturing, tourism, research and development, and others. These incentives include tax credits, exemptions, and deductions, aiming to stimulate economic growth and create employment opportunities on the island. Furthermore, the Puerto Rico Executive Incentive Plan encompasses Act 60, also known as the Exportation of Services Act. This act offers tax incentives to companies engaged in the export of services, including a reduced income tax rate and exemptions from certain local taxes. It aims to attract businesses that provide services globally, such as call centers, customer support, software development, and other service-based industries. In summary, the Puerto Rico Executive Incentive Plan consists of various acts and decrees that provide tax benefits and incentives to both businesses and individuals. The Act 20 and Act 22 decrees target executives and high-net-worth individuals, respectively, while Act 73 and Act 60 offer incentives to businesses in specific industries. These programs aim to boost Puerto Rico's economy by attracting investment, fostering job creation, and stimulating business growth on the island.
Puerto Rico Executive Incentive Plan
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Act 60 was intended to boost the Puerto Rican economy by encouraging mainland U.S. citizens to do business and live in Puerto Rico, and as is the case with many incentive programs, the opportunity and temptation to abuse these programs has led some to do just that.
Specifically, a U.S. citizen who becomes a bona fide Puerto Rico resident and moves his or her business to Puerto Rico (thus, generating Puerto Rico sourced income) may benefit from a 4% corporate tax/fixed income tax rate, a 100% exemption on property taxes, and a 100% exemption on dividends from export services.
What does this mean? It means that once the person becomes a resident individual investor of Puerto Rico unde Puerto Rico Incentives Code 60 ? and until 1/1/2036 ? any dividend or interest income is exempt from tax in Puerto Rico.
Puerto Rico Tax Act 22 A complement to Puerto Rico Acts 20, 27 and 73, Act 22 offers special Puerto Rico tax incentives to business owners, entrepreneurs, and executives.
A 25 percent non-transferable tax credit for the purchase of products manufactured in Puerto Rico (PR-Products Credit) and a transferable tax credit equal to 50 percent of the eligible investment made for research and development activities in Puerto Rico (R&D Credit).
The Island's incentive package for the tourism and hospitality industry is equally enticing. You can access the Puerto Rico Tourism Company's Virtual Clerk to request incentives. A tax credit equal to 40% of the eligible investment, the first tranche at the second year of operation, and the rest in subsequent years.