Relocation Brings Incentives
Relocating to Puerto Rico brings numerous financial benefits. This Caribbean island has one of the most dynamic economies in the area and it plans to stay that way.
Though it is a Commonwealth of the U.S., Puerto Rico is fiscally autonomous and, as such, can offer attractive tax benefits not available on the mainland. Puerto Rico recognizes federal U.S. laws, shares a common currency and residents hold U.S. citizenship. Security in the U.S. military and Puerto Rico’s political stability add to the allure of the area. However, because Puerto Rico is not a state, federal taxes do not apply to income generated by individuals or corporations within the Commonwealth.
The Economic Incentives Act for the Development of Puerto Rico went into effect in 2008 and Act 20 and Act 22 in 2012. Together, these incentives make Puerto Rico a tax haven for individuals and businesses. The goal was to attract new, wealthy residents and encourage service-based organizations to conduct business within the Commonwealth’s borders.
Act 20 Benefits
The objective of Act 20 is to establish an international export services center in Puerto Rico. It encourages service-based businesses to work with individuals and organizations outside of Puerto Rico and to promote new business development within Puerto Rico. Tax benefits include:
- 3 to 4 percent corporate tax rate
- 100 percent tax exemption on dividends or profit distributions from export service businesses
- 100 percent tax exemption on property taxes for certain services provided by export service businesses
- 20-year, renewable decree guaranteeing these rates
Act 22 looks to bring new residents to Puerto Rico by providing a total tax exemption from income taxes on all passive income earned after they become bona fide residents. Only new residents who were not residents of Puerto Rico from January 16, 1997 through January 16, 2012 are eligible. Act 22 tax benefits include:
- 100 percent tax exemption from Puerto Rico income taxes on all interest and dividends
- 100 percent tax exemption from Puerto Rico income taxes on all short- and long-term capital gains
Act 20 and Act 22 are only a few of the many financial incentives Puerto Rico offers residents and companies doing business in the Commonwealth. Organizations in manufacturing, agriculture, international finance, creative services, education and more also have industry-specific financial benefits. Contact us today to find out more!