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ACT 20-2012

A. Overview

• “Act to Promote the Export of Services”

• Provides tax exemptions and tax credits to businesses engaged in eligible


activities in Puerto Rico for customers located outside of Puerto Rico.

• Business becomes an exempt business by applying for a tax concession


and obtaining a tax exemption decree.

• Tax exemption decrees are essentially a contract with the Puerto Rico
government.

• The Constitution of Puerto Rico states that the government cannot enact
future laws impairing the obligation of its contracts.

• Therefore, tax benefits that are granted must be secured for the duration of
decree.

Ø Decree is granted for 20 years


Ø Extension of an additional 10 years may be granted

B. Tax Benefits

• 4% fixed income tax rate from Puerto Rico sourced income

Ø 3% fixed income tax rate = Applies to strategic services and 90% of


income is derived from export service.

• 100% tax exemption on dividends or profit distributions from export


services
Act 20/22

• 60% tax exemption on municipal taxes

Ø 90% tax exemption if business operates in the industrial development


zone constituted by the municipalities of Vieques and Culebra

C. Eligibility

• Entity must qualify as an “Eligible Business”.

Ø Have a bona fide office or establishment within Puerto Rico


Ø Carry out one or more “Eligible Services”

• An “Eligible Services is a service that fits within one of the designated


categories and are considered Export Services:

Ø Research and Development


Ø Advertising and public relations
Ø Consulting
Ø Advisory services
Ø Professional services
Ø Education and training
Ø Centralized management services
Ø Shared services centers
Ø Storage and distribution centers
Ø Investment banking and financial services
Ø Architectural and engineering services
Ø Electronic data processing center
Ø Call centers
Ø Hospital and laboratory services
Ø Medical Tourism and Telemedicine facilities
Ø Trading companies
Ø Any other service determined by the Secretary of Economic
Development and Commerce

• Requirements:

Ø Service rendered to individuals/entities located outside of Puerto Rico

Ø Export Service has no Nexus to Puerto Rico.

Ø Cannot be services rendered to a resident of Puerto Rico or related to


operations in Puerto Rico of a current or proposed client/customer.

• 2017 amendment eliminated the employment requirement of 5 employees

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Act 20/22

D. Attorney Fees

• Flat Fee: $6,000

E. Government Filing Fees

• Application Filing Fee: $750.00

• Additional Documentation (sworn statements, amendments to application,


acceptance of decree, etc.): $50.00

• Annual Report: $300.00

ACT 22-2012

A. Overview

• “Act to Promote the Transfer of Investors to Puerto Rico”

• Provides tax exemptions to individuals who transfer to Puerto Rico and


become residents.

• Individual must become a “Resident Individual Investor” by applying for a


tax concession and obtaining a tax exemption decree.

• Tax exemption applies until December 31, 2035.

B. Tax Benefits

• 100% tax exemption on dividends and interest

Ø Interest and dividends that qualify as Puerto Rico source income will
not be subject to federal income taxation.
Ø Interest from US and foreign corporations are exempt from PR tax (may
be subject to federal taxes).

• 100% tax exemption on all short term and long- term capital gains accrued
after becoming a new resident

Ø Pre-domiciled gains are taxed at Puerto Rico rates (5% tax may be
granted after 10 years)

Ø 0% federal taxes on Puerto Rico sourced income

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Act 20/22

C. Trusts

• Grantor Trusts:

Ø Investor can establish trusts under the laws of Puerto Rico.

Ø Investor can elect that such trusts be treated as grantor trusts for
purposes of Puerto Rico income taxes.

• Revocable Trusts: Investor can establish revocable (or irrevocable) trusts


under the laws of Puerto Rico.

• Trusts Established Outside Puerto Rico: Cannot be challenged because of


inconsistencies with Puerto Rico law or regulations.

• Investor may freely transfer or donate during his/ her life, at his/her
complete discretion, all or part of his/hers goods to any of the
abovementioned trusts.

• Such transfer or donation may be made without regard to Puerto Rico laws
or regulations to the contrary.

D. Eligibility

• Applicant must have been a non-resident during 6-year period preceding


the effective date of the Act (January 16, 2006 to January 16, 2012).

• Applicant must become a bona fide resident.

• Physical presence in Puerto Rico for 183 days or more

• No tax home outside of Puerto Rico. No closer connection to US or foreign


country than to Puerto Rico.

E. Attorney Fees

• Flat Fee: $4,000.00

F. Government Filing Fees

• Application Filing Fee: $750.00

• One-time fee after approval of decree: $5,000.00

• Yearly charitable contribution to a non-profit organization: $5,000.00

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Act 20/22

• Additional Documentation (sworn statements, amendments to application,


acceptance of decree, etc.): $50.00

• Annual Report: $300.00

Organizing a Legal Entity to Do Business in Puerto Rico

A. Process

• Attorney with review with client the available legal entities to do business
in Puerto Rico

• Draft of all necessary external and internal documents for the organization
of the selected legal entity

• Filing of documents with PR government agencies and register as taxpayer

B. Attorney Fees

• Flat Fee: $3,000

C. Government Filing Fees

• Registration Filing Fee: $250.00

• Annual Report / Fees: $150.00