The Tax Incentive Code, more commonly known as "Act 60", provides tax exemptions to businesses and investors that relocate to, or are established in, Puerto Rico. These same investors can still benefit from tax incentives even if the investment is outside of Puerto Rico. However, it should be noted that there are certain qualifications that must be met in order to take advantage of these benefits. Let's take a closer look at what Act 60 entails.
Not everyone can take advantage of this regulation and every case should be analyzed individually by a tax attorney or CPA.
What Is Act 60?
Enacted in 2008, is a set of tax incentive programs that are designed to promote economic development in Puerto Rico by attracting businesses and investments to the island. Under this code, businesses and investors can receive federal and local tax exemptions on income, dividends, interests, and royalties derived from their business or investment in Puerto Rico. In addition, they can also receive a 90% exemption on Municipal License Taxes (MLT) for up to 15 years.
Qualifications For The Tax Exemptions
In order to qualify for the tax exemptions under Act 60, businesses and investment firms must meet certain requirements with regards to their size, industry, and employee count. Smaller businesses must have less than $10 million in assets while larger businesses must have less than $50 million in assets. The business must also fall under one of the following industries: manufacturing; agriculture; information technology; research & development; or export services. Lastly, the business or investment must create or retain at least 5 full-time jobs for Residents of Puerto Rico.
Benefits Of Act 60
Aside from the obvious financial benefits that come with receiving tax breaks on your business or investment income, Act 60 also has other advantages. One such benefit is the accessing of low-interest financing through Puerto Rican government agencies and banks. This financing can be used for a variety of purposes such as working capital, equipment purchases, real estate acquisition or improvements, and more.
Another benefit is the ability to repatriate 100% of profits generated from operations in Puerto Rico back to the mainland United States without incurring any taxes. This is a significant perk as it allows businesses and investors to plow their profits back into their company without having to worry about losing a chunk of it to Uncle Sam.
Thinking of relocating to Puerto Rico for tax advantages?
If you're thinking about relocating your business or making an investment in Puerto Rico, then you should definitely look into taking advantage of the Tax Incentive Code (Act 60). By doing so, you could save a significant amount of money on your taxes while also gaining access to low-interest financing and other benefits. Just be sure that you meet the requirements needed to qualify for the exemptions.
If you are interested in learning how it works when investing in real estate or have additional questions, contact our team: