Act 20 Investment Act

On January 17, 2012 Puerto Rico enacted Act No. 20 of 2012, as amended, known as the “Export Services Act” (the “Act”), to offer the necessary elements for the creation of a World Class International Service Center. The Act provides tax exemptions and tax credits to businesses engaged in eligible activities in Puerto Rico. To avail from such benefits, a business needs to become an exempt business by applying for a tax concession and obtaining a tax exemption decree.

The Act provides benefits for services provided from Puerto Rico to outside markets. Eligible activities to receive benefits under the Act are services in the following areas:

  • Research and development;
  • Advertising and public relations;
  • Economic, scientific, environmental, technological, managerial, marketing, human resources, engineeringinformation systems, auditing and consulting services;
  • Consulting services for any trade or business;
  • Commercial art and graphic services;
  • Production of engineering and architectural plans and designs, and related services;
  • Professional services such as legal, tax and accounting services;
  • Centralized managerial services, including, but not limited to, strategic direction, planning and budgeting. provided by regional headquarters or a headquarters company engaged in the business of providing such services;
  • Services performed by electronic data processing centers;
  • Development of licensee computer software;
  • Telecommunications voice and data between persons located outside of Puerto Rico;
  • Call centers;
  • Shared service centers;
  • Medical, hospital and laboratories services;
  • Investment banking and other financial services, including but not limited to asset management, management of investment alternatives, management of activities related to private capital investment, management of coverage funds or high risk funds, management of pools of capital, trust management that serves to convert different groups of assets into securities, and escrow accounts management services; and
  • Any other service designated by the Secretary of the Department of Economic Development and Commerce of Puerto Rico.

Act 22 › Individual Investors Act

On January 17, 2012, Puerto Rico enacted Act No. 22 of 2012, as amended, known as the “Individual Investors Act” (the “Act”). The Act may have profound implications for the continued economic recovery of Puerto Rico. The Act provides tax exemptions to eligible individuals residing in Puerto Rico. To avail from such benefits, an individual needs to become a resident of Puerto Rico and apply for a tax exemption decree.

Eligibility

The benefits of Act No. 22, are only available to bona-fide residents of Puerto Rico that were not bona-fide residents of Puerto Rico for the 6-year period preceding the enactment of the Act on January 12, 2012 (“Eligible Individuals”). Generally, a bona-fide resident of Puerto Rico is a person who: (1) is present for at least 183 days during the taxable year in Puerto Rico; (2) does not have a tax home outside of Puerto Rico during the taxable year; and (3) does not have a closer connection to the United States or a foreign country than to Puerto Rico.
Although Puerto Rico is a U.S. territory, pursuant to Section 933 of the U.S. Internal Revenue Code of 1986, as amended, bona-fide residents of Puerto Rico are not subject to U.S. federal income taxes on income derived from sources within Puerto Rico.
Therefore, U.S. citizens that are bona-fide residents of Puerto Rico benefiting from the Act will only be subject to federal income taxation on income derived from sources outside of Puerto Rico.