Puerto Rico Investment Incentives

By David Hammond

Puerto Rico is a natural paradise with palm trees and long sand beaches on the Caribbean Sea.

Unfortunately, Puerto Rico’s economy is in dire shape.

In order to recover, the US territory needs an infusion of investment and talent.

Tax incentives 
In 2012, Puerto Rico started offering a range of economic incentives to attract targeted industries, capital, and expertise.

Targeted industries include manufacturing, tourism, construction, telecoms, filmmaking, banking, financial services, and export services.

Incentives for export services 
One of the most popular incentives is the Export Service Act (Act 20 of 2012). It provides tax incentives to qualifying export service businesses including a flat 4% income tax.

Among the list of qualifying services, you'll find software development, consulting, professional services, management, and graphic arts.

To qualify for Act 20 incentives, a business must only provide services to customers outside of Puerto Rico.

Incentives for individual investors 
In addition to targeted businesses, Puerto Rico seeks to attract individual investors with the Individual Investor Act (Act 22 of 2012).

This Act provides new residents to Puerto Rico with a 100% tax exemption on passive income (dividends, interest, and capital gains) derived from Puerto Rico income sources.

(Residents of Puerto Rico are US citizens and may enter the US freely, but are not subject to US federal income taxes on Puerto Rico source income.)

The Act is intended to attract retirees dependent on investment income as well as professional investors.

Page with links to PDF fact sheets on Act 20 and Act 22

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