1. What are Puerto Rico’s tax incentives, and how do they work?
Puerto Rico offers a unique set of tax incentives under Act 60-2019, formerly known as Act 20 and Act 22. These incentives provide significant tax exemptions and reductions for both individuals and businesses who relocate or establish operations on the island. For businesses, Act 60 offers a flat corporate tax rate of just 4% on export services, manufacturing, agroindustrial, green and highly efficient energy, tourism, among others, along with other exemptions. Individuals can benefit from a 100% exemption on dividends, interest, and certain capital gains.
2. Who is eligible to benefit from Puerto Rico’s tax incentives?
Both businesses and individuals can qualify for Puerto Rico’s tax incentives under Act 60. Eligibility criteria vary depending on the specific incentives sought, but generally, businesses engaged in eligible activities and individuals who become bona fide residents of Puerto Rico can take advantage of these incentives.
3. What types of export services businesses can benefit from Puerto Rico’s tax incentives?
Businesses engaged in export services from Puerto Rico to markets outside of Puerto Rico, such as consulting, marketing, telemedicine, research and development, and engineering are eligible to benefit from Puerto Rico’s tax incentives under Act 60. However, it’s essential to review the specific criteria outlined in the legislation and consult with tax professionals to ensure eligibility.
4. How can individuals benefit from Puerto Rico’s tax incentives?
Individuals who become bona fide residents of Puerto Rico and pursue a grant of tax exemption under Act 60 can enjoy a 100% exemption on dividends, interest, and certain capital gains under Act 60.
5. What steps are involved in leveraging Puerto Rico’s tax incentives for financial gain?
To leverage Puerto Rico’s tax incentives, businesses may consider relocating or establishing operations on the island to qualify for the favorable tax treatment under Act 60. Individuals can explore opportunities to become bona fide residents of Puerto Rico and take advantage of the tax exemptions on dividends, interest, and capital gains. Consulting with tax experts and legal professionals is crucial to navigating the complexities of Puerto Rico’s tax laws and optimizing your tax strategy. This is not a DIY endeavor.
6. Are there any limitations or considerations to be aware of when utilizing Puerto Rico’s tax incentives?
While Puerto Rico’s tax incentives offer significant advantages, there are limitations and considerations to be mindful of. Businesses must ensure compliance with eligibility criteria and regulatory requirements to qualify for the incentives. Individuals relocating to Puerto Rico should consider factors such as residency requirements, lifestyle considerations, and the overall tax implications beyond just the incentives offered. It is also important to assess United States and foreign tax consequences.
Remember, while this FAQ guide provides insights into Puerto Rico’s tax incentives, it is not intended as tax advice. Every individual and business situation is unique, and it's essential to consult with qualified tax advisors and legal professionals to tailor a strategy that meets your specific needs and goals.
At CLB Tax, we're ready to assist you in navigating Puerto Rico’s tax landscape and maximizing the benefits available to you. Contact us today at caroline.lopez@clbtax.com to learn more about how we can help you leverage Puerto Rico’s tax incentives for financial success.
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