Under Act 60 in Puerto Rico, also known as the "Incentives Code," Chapter 3 incentives are provided to encourage the establishment and growth of export service businesses on the island. Here is a summary of the incentives available under Act 60 for export services:
1. Tax Benefits:
- Reduced Income Tax Rate: Qualified export service businesses can benefit from reduced income tax rate of 4% on eligible export service income. A 2% tax rate is available to certain new small and medium sized businesses during the first 5 years of operations.
- Dividends: 100% exempt from Puerto Rico income tax.
- Property and municipal taxes: 75% exemption on property taxes (property used in the business); 50% exemption on municipal license tax.
2. Eligibility Requirements:
- Export Service Activities: Businesses must primarily engage in qualified export services for markets outside of Puerto Rico, such as consulting, shared services, education and training, telemedicine, software development, research and development, and other eligible service activities.
- Bona fide office in Puerto Rico: Export service businesses must have a physical presence in Puerto Rico and conduct their operations on the island for clients outside of Puerto Rico. Services cannot have a nexus with Puerto Rico.
3. Compliance and Reporting:
- Ongoing Compliance: Export service businesses must comply with certain obligations, including filing annual tax returns and providing annual reports to the Puerto Rico government.
- Recordkeeping: Maintaining accurate and detailed records of business activities, expenses, and employee information is necessary to meet Act 60 requirements.
4. Duration
- Tax Grants have a duration of 15 years, which can be extended for 15 additional years. Tax grant may be effective from the date of filing of the application, or up to five years from the filing of the grant application.
It's crucial to consult with tax professionals or legal advisors familiar with Puerto Rico tax laws to fully understand the eligibility criteria, compliance requirements, and potential benefits available under Act 60 for export service businesses. These incentives are designed to promote economic growth, attract investment, and create employment opportunities in the export services sector in Puerto Rico.
This post is not meant to be legal or tax advice. Rather, our objective is to educate on the numerous business opportunities in Puerto Rico. Contact us at info@clbtax.com to learn about how we can assist you.
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