Puerto Rico Tax Incentives

Facts and FAQs

Puerto Rico Facts & FAQs

Puerto Rico has long been known as an island paradise full of world-class beaches, natural wonders, golf, arts, shopping, dining and nightlife.

And many also know of its reputation as a serious place committed to business, growth, development and low taxes; and the passage of this law highlights this commitment.

The time to invest, work, live and play in Puerto Rico is now. Make the comparison to your current situation. Move to Puerto Rico and bring your family and friends with you!

With offices in Dallas and San Juan, Friedman & Feiger Attorneys at Law can help you set-up your new office on the beach so you can enjoy sun, sand and zero to 4% tax rates.

Puerto Rico at a Glance

Population: 3,726,000
Gross Domestic Product (GDP): $96.3 B
Gross State Product (GSP): $63.3 B
GDP per Capita: $24,229
GSP per Capita: $15,930
Exports: $68.6 B
Imports: $41.4 B
Retail Sales: $34.9 B

11 of the top 20 prescription drugs sold in the U.S. are manufactured in Puerto Rico

Note: Figures provided are as of 12/31/2010
Source: Puerto Rico Planning Board, U.S. Census Bureau

Puerto Rico Tax Advantages FAQs

Q: Is Puerto Rico a foreign country?
A: No. Puerto Rico is a part of the United States and residents on the island are U.S. citizens.

Q: Do businesses and residents in Puerto Rico pay federal taxes?
A: No. The federal laws that establish the relationship between the United States and Puerto Rico exempt Puerto Rico from federal taxes.

Q: What are the local tax rates in Puerto Rico?
A: Puerto Rico has extraordinary incentives laws that establish tax rates at 4% or lower for business activities that the island seeks to incentivize, such as services, manufacturing, tourism, gaming, film, and many others areas.

Q: Are there tax incentives for individual residents in Puerto Rico?
A: Yes. For qualifying new residents of Puerto Rico, an incentives law provides for a 0% tax rate on passive income tax, including interests, dividends, and capital gains.

Q: Can any company qualify for tax incentive law?
A: Basically, yes. Puerto Rico has tax incentives for Manufacturing, for Tourism (hotels, etc), for Cruise Ship Industry, for Gaming (major casinos), for the Film Industry, and of course, for Exportation of Services and for New Individual Residents (among others), so our incentives cover the gamut. We have it all.

Q: What do you have to do to qualify to take advantage of the tax incentive law?
A: Depends which incentives law. For Laws 20 and 22, please see above and or attached documents.

Q: Do I have to start a PR company to qualify to take advantage of the tax incentive law?
A: But for individual benefits such as those under Law 22, the other benefits require that you form a PR company, but that is not an issue at all as our corporate system is very sophisticated and is very similar to what you will find in Delaware.

Q: Do I have to move all, or can I move part, of my company to qualify to take advantage of the tax incentive law?
A: Assuming we're talking Law 20, you can move part of the company's activities to benefit from the law. For example, if you're a manufacturer in Dallas, you can move the legal department, human resources, and IT departments to PR and provide intra-company services from PR to Dallas.

Q: Same questions for individuals.
A: To benefit from Law 22, you have to become a bonafide resident of Puerto Rico. We are not looking for people that want to game the system - we are looking for people that want to make PR their home and take advantage of all that we have to offer. That said, they need not be here 365 days a year. (Larry, we want to emphasize this point, as we do not want to have press come out where we suggest that PR is a tax haven or that we are looking to cheat the US of its rightful tax base)

Q: What areas/industries are the best to qualify to take advantage of the tax incentive law?
A: We have incentives for all industries, but if you're talking Law 20, the law applies to basically any service that world occur, as it is meant to be very broad in its application.

Q: If I move to PR or move my company to PR, what if the laws change?
A: That's why we established the Tax Decrees as part of the incentive - so that your benefit is contractually guaranteed by PR regardless of what happens to the laws under which the Tax Decrees were granted.

Q: How do I repatriate my money?
A: You bring your funds home as you would from another state.

Q: Is there a way to repatriate my money tax-free?
A: Yes, if you are a PR resident, inasmuch as you would earn your money and once it is yours you can take it wherever without paying additional taxes. However, if you are not a PR resident, then the answer is No. But in that case, you can use the funds outside of the US by investing in your company, or otherwise spending the money outside of the US, and never pay taxes on those funds. And if you should ever move to PR in the future, then you could claim your funds without triggering US taxes.

Q: What are the expiration dates on the tax incentives?
A: For Law 20 your Tax Decree lasts 20 years with a 10 year extension available. For Law 22, until 2036.

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