Thanks to Puerto Rico's Act 20/22-2012 and the current Act 60-2019, the island's legislation offers a corporate tax rate in the single digits and capital gains taxes at zero. Equally compelling, income earned in PR is exempt from US taxes. Our slice of paradise has become quite a desirable top tax haven, welcoming savvy individuals who wish to live in paradise and keep considerable money in their pocket! If this appeals to you, as a US or foreign investor, the new Act 60 of 2019, "Puerto Rico Tax Incentives Code," is for you!
Puerto Rico's Act 60-2019 offers a corporate tax rate of 4% to Puerto Rican companies that export services performed in the territory to people or companies outside of the United States' unincorporated territory of Puerto Rico. An ideal haven for online entrepreneurs and service providers that open a Puerto Rican company and establish their
business on the island and begin exporting Puerto Rico services to the U.S. The U.S. does not apply exit taxes to mainland U.S.-based businesses that move to PR.
Chapter 2 of Act 60 of 2019 - Individual Investors
As an incentive, bona fide PR residents are not subject to US federal income taxes; instead, they are subject to PR income tax laws and the decrees of Puerto Rico's Act 60-2019 Incentives Code.
To be eligible, qualifying residents must:
■ Make a $10,000 annual donation--a donation of $5,000 to two different organizations.
• The nonprofit entities must operate in PR and not involve the investor or their family, spouse, or partner.
■ Purchase their primary residence within two years of the decree.
• The purchased property must be the grantee's primary residence throughout.
• The grantee's subject property is rental restricted.
Proof of residency required 183 days out of the year.
• A Puerto Rican driver's license is required.
• Puerto Rico voter registration is required.
• Executed lease or transfer of title-proof of real estate ownership is required.
• Additional requirements may apply to provide proof of bona fide PR residency-IRS Form 8898.
Chapter 3 of Act 60-2019 - Export Services Tax Incentive
■ A flat 4% corporate tax rate
☐ 50% tax exemption on municipal taxes
■ 75% tax exemption on municipal and state property taxes
☐ 100% tax exemption on distributions from earnings and profits
■ 100% exemption during their first five years of operation for small and medium-sized businesses.
To qualify for these benefits and exemptions, the business model must move to PR and concentrate on exporting services outside of PR. Consulting companies, auditing firms, marketing businesses, and other similar business types are eligible.
Act 60-2019 Application
For those savvy individuals and business owners interested in taking advantage of these incredible tax incentives, they may fill out an official application through The Office of Incentives for Business in Puerto Rico "OIBPR." An application and one-time
acceptance fee to the Office of Industrial Tax Exemption are also required.
The local agency promoting and regulating the tax incentives is the Departamento de Desarollo Economico y Comercio de Puerto Rico "DDEC".
To qualify for an IRS exemption from regular US tax obligations, the IRS must determine that you are a genuine bona fide Puerto Rico resident. Form 8898 is required to declare the beginning or cessation of bona fide residency in a US possession. We suggest a careful review of the detailed instructions to Publication 570, and a "Heart to Heart" with a trusted CPA.
Have Questions?
We have answers. If you have Q&A's on this or any related concern on Act 60-2019, buying,
selling, or relocating to PR, please reach out. We always make time to answer any questions you may have and can provide trusted referrals. Bilingual services are available! Please call (787) 645-4870 or email for a prompt reply!
