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Puerto Rico Tax Advantages

Acts 20 and 22: Tax Incentives for Investors

If you’re looking for a strong return on your investment, you need to understand the details of Act 20 and Act 22, Puerto Rico tax incentives for business and individual investors. In a recent attempt to strengthen its economy and attract investors, the local government has stepped up its economic and tax incentives for those wanting to do business here.

A self-governing territory of the U.S., Puerto Rico has authority over its internal affairs, including certain exemptions from the Internal Revenue Code. Because corporations within Puerto Rico are viewed as foreign corporations, income generated here is not subject to U.S. corporate taxes. Nor are individual residents of Puerto Rico subject to federal taxes on earned income.

Act 20 for Export Service

  • 4% Corporate Tax Rate
  • 100% Tax Exemption on Dividends or Profit Distributions
  • 100% Tax Exemption on Property Taxes

Act 20 provides Puerto Rico tax incentives for companies establishing and expanding export services. The act encourages research and development investments, as well as grants credits and exemptions for research initiatives from both private and academic sectors. To help companies remain efficient and profitable, Act 20 promotes a decrease in operational and energy spending.

To qualify for Act 20, which carries a 20-year term of exemption with a possible 10-year extension, service providers must apply to the Office of Industrial Tax Exemption of Puerto Rico. Business owners who leave Puerto Rico to return to their native country are subject to applicable tax laws of their country of origin.

Act 22 for Individual Investors

  • 4% Corporate Tax Rate
  • 100% Tax Exemption on All Dividends and Interest Income
  • 100% Tax Exemption on All Capital Gains

In an attempt to attract individuals to move to Puerto Rico, Act 22 allows for a total exemption from Puerto Rico income taxes on all passive income, both realized and accrued, once that individual becomes residents of the country. Any individual investor who becomes a good-faith resident of Puerto Rico (typically anyone living here for more than 183 days per year) on or before December 31, 2035, is eligible.

Qualifying for Act 22 is a matter of obtaining a tax exemption decree from the Secretary of Economic Development and Commerce, which is, in effect, a contract between the government of Puerto Rico and the individual investor. The contract can be revoked for failure to comply with regulations, obligations or terms or for fraudulently representing one’s circumstances.

An Investment in Your Future

In addition to its old-world charm, sun-drenched beaches and crystalline blue seas, Puerto Rico beckons with enticing tax advantages for both individual and business investors. If you’re searching for a better way of life and a better return on your investments, it’s time to understand all the Puerto Rico Tax Code offers.

Give us a call today at 787.796.3172. We have the tax information and the Puerto Rico Real Estate you need!