IMPLEMENTATION LEVEL

National

AFFECTED FLOW

Outflow (subsidised)

ANNOUNCED AS TEMPORARY

No

NON-TRADE-RELATED RATIONALE

No

ELIGIBLE FIRMS

all

JUMBO

No

TARIFF PEAK

No
← back to the state act
Inception date: 17 Jan 2012 | Removal date: open ended
Still in force

Tax-based export incentive

On 17 January 2012, the government of Puerto Rico approved Act No. 20 otherwise known as the "Act to Promote the Export of Services". The core scope of Act 20 is to provide for eligible activities the following benefits on income derived from customers located outside of Puerto Rico in relation to services rendered from Puerto Rico:

  • 4% fixed income tax rate;
  • 3% fixed income tax rate in the case of services considered strategic;
  • 100% tax exemption on distributions from earnings and profits;
  • 90% tax exemption from personal property taxes for certain types of businesses;
  • 90% tax exemption from real property taxes for certain types of businesses (100% tax exemption for the first five years of operation);
  • 60% tax exemption on municipal taxes (90% tax exemption if business operates in the industrial development zone constituted by the municipalities of Vieques and Culebra).

Eligible activities to receive benefits under the Act are services in the following areas:

  • Research and development;
  • Advertising and public relations;
  • Consulting services;
  • Production of blueprints, architectural and engineering services, and project management;
  • Professional services such as legal, tax and accounting services;
  • Centralized management services;
  • Centers for electronic data processing;
  • Development of licensable computer software;
  • Voice and data telecommunications between persons located outside of Puerto Rico;
  • Call centers;
  • Shared services centers;
  • Storage and distribution centers;
  • Educational and training services;
  • Hospital and laboratory services;
  • Investment banking and other financial services;
  • Commercial and mercantile distribution of products manufactured in Puerto Rico for jurisdictions outside Puerto Rico;
  • Assembly, bottling and packaging operations of products for export; n Marketing centers; n Trading companies;
  • Any other service designated by the Secretary of the Department of Economic Development and Commerce of Puerto Rico.

Furthermore, Act 20 also specifies that the eligible activities must not have a nexus with Puerto Rico (with only Promotor Activities being exempt from this rule). The following services will be considered to have a nexus with Puerto Rico, and will not be eligible services:

  • Business or income producing activities that are or have been performed in Puerto Rico by the applying business;
  • The sale of any property for the use, consumption or disposition in Puerto Rico;
  • Counseling on the laws, regulations and administrative determinations of the Government of Puerto Rico and its instrumentalities;
  • Lobbying on the laws, regulations and administrative determinations of the Government of Puerto Rico and its instrumentalities;
  • Any other activity designated by the Secretary of the Department of Economic Development and Commerce of Puerto Rico.

This act is expected to exist for 20 years, with 10 additional years of possible extention.
 

AFFECTED COUNTRIES

MAP
TABLE
EXPORT

Please report this page in case you detect an inaccuracy in its content.