Act 20 – The Export Services Act
“You can minimize your taxes in Puerto Rico in ways that you can’t do anywhere else in the world.” - John Paulson, Hedge Fund Manager and Act 20 Trailblazer
Puerto Rico’s Acts 20 & 22, tax incentive laws make living and working in Puerto Rico more enticing than ever before for U.S. Citizens. Enacted January 17, 2012, Act 20 and Act 22 provide businesses and investors the opportunity to acquire substantial exemptions simply for relocating.
Act 20 provides tax exemptions and tax credits to businesses engaged in eligible activities in Puerto Rico. To qualify for such benefits, a business needs to become an exempt business by applying for a tax concession and obtaining a tax exemption decree.
Many industries qualify, but only income derived from exporting services from Puerto Rico can be included under the reduced tax rate. Already thousands of companies have capitalized on this unique opportunity, benefits of which include:
- 4% Fixed Income Tax Rate
- 3% Fixed Income Tax Rate for Strategic Services
- 100% Tax Exemption on Profit and Earnings Distributions
- Up to 100% Exemption on Property Taxes
- 60% Exemption on Municipal Taxes (possibly greater in certain municipalities)
- Tax Exemption of 90% of Personal Property Taxes for Certain Businesses up to First 5 Years of Operation (taxable portion subject to regular tax rate of up to 8.83%)
- Tax Exemption of 90% from Real Property Taxes for Certain Businesses up to First 5 Years of Operation (taxable portion subject to regular tax rate of up to 11.83%)
- 20-30 Year Tax Decree
There are currently 20+ industries that can qualify for Act 20 treatment per the Legislative Assembly of Puerto Rico. In addition to this list, the Secretary of the Puerto Rico Department of Economic Development may expand these benefits to include additional businesses at his discretion.
- Logistics & Distribution
- Financial Services
- Investment Banking
- Public Relations