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TaxBites 2019-08

NEW INCENTIVES CODE BRINGS MANY CHANGES

On July 1, 2019, Governor Roselló signed into law the Puerto Rico Incentives Code, hereinafter “Incentives Code”, which includes tax benefits granted to different industries, individuals and businesses in Puerto Rico. Below, we summarize some of the most significant changes.

Medical Professionals – Former Act 14-2017

  • Dentists were included in the definition of Qualified Physicians, so they may request the incentives.
  • New deadlines for requesting a Decree:
Qualified Physician Due Date
Puerto Rico Residents September 30, 2019
Nonresidents at the effective date of the Incentives Code (July 1, 2019) June 30, 2020
Dental surgeons who do not practice any odontology specialty June 30, 2020

Resident Investors – Former Act 22-2012

  • The benefits will be granted to resident investors who have not been residents of Puerto Rico during the 10 tax years prior to January 1, 2020, who become residents of Puerto Rico no later than the taxable year ending December 31, 2035.
  • The individual investor must:
    • Starting on their second tax year after receiving the Decree, include in their annual report evidence of having made an annual contribution of at least $ 10,000.00 to non-profit organizations (increased from $5,000).
    • Acquire, as sole owner or in conjunction with their spouse, by purchase, the ownership of real property in Puerto Rico to serve as their principal residence. This requirement must be met by the second year after obtaining the Decree.

Export Services – Former Act 20-2012

  • The following is included as an eligible activity:
    • Creative Industries: shows and musical productions and eSports and Fantasy Leagues events held in Puerto Rico.
  • The exemption on personal and real property is reduced to 75%
  • The exemption on Municipal Taxes or Municipal License (Patente) is reduced to 50%
  • If the Exempt business has an annual, actual or projected, volume of business greater than $3,000,000.00, it will be required to have at least 1 full-time direct employee. The is no such requirement under Act 20.
  •  Exemption period: 15 years

Economic Incentives for the Development of Puerto Rico – Former Act 73-2008

  • The following are included as eligible activities:
    • Video games development that can be reproduced on a commercial scale
    • Programs’ transmission by “blockchain”
  • The exemption on personal and real property is reduced to 75%
  • The exemption on Municipal Taxes or Municipal License (Patente) is reduced to 50%
  • If the Exempt business has an annual, actual or projected, volume of business greater than $3,000,000.00, it will be required to have at least 3 full-time direct employees.
    • Currently the Government requires 10 employees under Act 73.

Young Entrepreneurs – Former Act 135-2014

  • The exemption period will be for a period of 3 years from the date of commencement of operations, as indicated in the Decree.

The Incentives Code also established new incentives such as:

  • The Student Loan Repayment Program for Physicians or Dentists, Veterinarians and Researcher Scientists. Under this program, student loan debt could be forgiven to those medical students who stay working in Puerto Rico.
  • “My Future Account”, under which the Government of Puerto Rico will open an account with $1,000.00 to all public-school students when starting kindergarten.

About the Author

Carrion Sanchez LLC
Carrion Sanchez LLC
author

Carrión Sánchez, LLC is a highly dynamic legal firm specialized in tax and corporate matters for high-net-worth individuals and businesses within and without Puerto Rico. Contact Us at [email protected]

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