{"id":12809,"date":"2017-07-20T09:00:09","date_gmt":"2017-07-20T13:00:09","guid":{"rendered":"http:\/\/www.escapeartist.com\/?p=12809"},"modified":"2020-09-17T09:02:55","modified_gmt":"2020-09-17T14:02:55","slug":"puerto-ricos-act-20","status":"publish","type":"post","link":"https:\/\/www.escapeartist.com\/blog\/puerto-ricos-act-20\/","title":{"rendered":"Puerto Rico\u2019s Act 20"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Established in 2012, Puerto Rico\u2019s Act 20 promotes the exportation of services from the US territory. The purpose is to attract foreign capital and professionals from the United States and abroad, all the while positioning Puerto Rico as an internal service center. Here\u2019s a summary of Puerto Rico\u2019s Act 20.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">By providing exponentially reduced tax rates compared to it\u2019s big brother, the Department of Economic Development of Puerto Rico feels that Act 20 leverages the island\u2019s status as a territory, <\/span><a href=\"https:\/\/www.law.cornell.edu\/uscode\/text\/26\/933\" target=\"_blank\" rel=\"nofollow noopener noreferrer\"><span style=\"font-weight: 400;\">IRC 933<\/span><\/a><span style=\"font-weight: 400;\">, and facilitates the creation of jobs, island investment and companies. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Puerto Rico\u2019s Act 20 allows you to set up an office in Puerto Rico, which will export services from the island to persons and companies located outside of Puerto Rico. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Puerto Rico\u2019s Act 20 comes with a 20 year tax decree that guarantees you a 4% corporate rate on any export service income earned from work on the island. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">As part of our service we can offer assistance with the filing application for the tax decree, moreover IRS compliance strategies, Hacienda compliance, feasibility study and business plans. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Puerto Rico\u2019s Act 20 Tax benefits: <\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">4% Maximum Corporate Rate (Fixed)<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">100% exemptions on Dividend and Distribution for PR Residents<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">60% \u00a0Exemption on municipal gross receipts tax<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">4% Tax rate applicable to specific investment income<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Exemptions guaranteed for 20 years, renewable for 10 more if condition are met. <\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">90% Exemption from property tax (100% exemption during the first 5 years, in the case of certain eligible services)<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">List of eligible export service:\u200b<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Research and development;<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Advertising and public relations;<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Consulting services, including, but not limited to, economic, scientific, environmental, technological, managerial, marketing, human resources, computer and auditing consulting services; Advisement on matters of any industry or business;<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Creative industries defined as any business with the potential to create jobs and income, principally on exportation of good and services in the following sectors: Design (graphic, industrial, fashion, interior) Art (music,visual art, performing arts, publications) Media (app development, video games, online media, digital content and multimedia) Creative Services (architecture and creative education);<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Production of blueprints, architectural and engineering services, and project management;<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Professional services such as legal, tax and accounting services;<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Centralized management services, including, but not limited to, strategic direction, planning, distribution, logistics and budgetary services carried out by the headquarters or similar regional offices of an entity engaged in rendering such services;<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Centers for electronic data processing;<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Development of computer software;<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Voice and data telecommunications between persons located outside of Puerto Rico;<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Call centers;<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Shared services centers, including, but not limited to, accounting, finance, tax, auditing, marketing, engineering, quality control, human resources, communications, electronic data processing, and other centralized management services;<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Storage and distribution centers of businesses dedicated to transportation of products and articles pertaining to third parties, also known as hubs;<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Educational and training services;<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Hospital and laboratory services;<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Investment banking and other financial services, including but not limited to, asset management, management of investment alternatives, management of activities related to private capital investment, management of hedge funds and high risk funds, management of pools of capital, management of trusts that serve to turn different types of assets into stocks, and management of escrow accounts;<\/span><\/li>\n<\/ul>\n\n<p><b>What\u2019s the catch?!? Or rather requirements for Puerto Rico\u2019s Act 20:<\/b><\/p>\n<p><span style=\"font-weight: 400;\">The Company applying for act 20 must have at least 5 full time employees. The Act 20 Company will have 2 years starting on the date the business begins \u00a0operating to hire these people, with firms usually hiring 3 to start and then adding 2 more. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Only employees (full time, part time, and temp) shall be counted on this requirement. Independent contractors do not count toward the requirement. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">If you hire temporary workers, the total amount of full time employees maintained by the Company should be computed by dividing the total amount of hours worked by all employees during each taxable year over 2,080 hours, which resulting amount is considered the number of full time equivalents.<\/span><\/p>\n<p><b>No Nexus to Puerto Rico for an Act 20 company<\/b><\/p>\n<p><span style=\"font-weight: 400;\">The company&#8217;s eligible activity must not be related to the conduct of business inside of Puerto Rico (if receivable transactions are serviced to a PR based client then there is a nexus). The purpose of this no nexus clause is to allow companies to develop on the island without depleting the existing local markets, by surplusing the local economy with \u201cnew money\u201d.<\/span><\/p>\n<p><b>But wait there&#8217;s more:<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Puerto Rican residents don&#8217;t pay US federal taxes on <\/span><a href=\"http:\/\/premieroffshore.com\/what-is-puerto-rico-sourced-income-for-an-act-20-business\/\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">Puerto Rico sourced income<\/span><\/a><span style=\"font-weight: 400;\">. If income is determined to be non PR-sourced, then regular rates on apply in sourced income.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Also, if the company decides to hire non PR Residents, then tax rates depends on:<\/span><\/p>\n<ol>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">services performed (what the company did, if can be considered an eligible service)<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">company sourcing (where did they perform it from, inside PR or abroad)<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">the active residency (if who did the work is a bona-fide resident)\\ if not then separate tax rate do apply<img loading=\"lazy\" decoding=\"async\" class=\"alignright wp-image-11819\" src=\"http:\/\/www.escapeartist.com\/wp-content\/uploads\/2017\/05\/image-ad.jpeg\" alt=\"Consumer Resource Guide\" width=\"240\" height=\"328\" \/><\/span><\/li>\n<\/ol>\n<p><span style=\"font-weight: 400;\">In most cases, a Puerto Rican resident is any US citizen living in Puerto Rico and spending a minimum 183 days a year on the island. Any US citizen can become an employee, they don\u2019t need to have previously resided on the island. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Remember that anyone born in Puerto Rico is a US citizen. Travel between Puerto Rico and the US mainland is a domestic flight with no immigration controls. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">The reason for Puerto Rico\u2019s Act 20 is to bring employment to the island. It seems to be working as some very large businesses have moved to the territory. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">If you would like to compare Puerto Rico\u2019s Act 20 to the tax incentives available to offshore businesses, see: <\/span><a title=\"Panama vs Puerto Rico, which is right for your business?\" href=\"http:\/\/www.escapeartist.com\/blog\/panama-vs-puerto-rico-right-business\/\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">Panama vs Puerto Rico, which is right for your business?<\/span><\/a><\/p>\n<p><span style=\"font-weight: 400;\">For more information, or to speak with us about moving your business to Puerto Rico, you can reach me at (619) 550-2743 or at <\/span><a href=\"mailto:info@premieroffshore.com\"><span style=\"font-weight: 400;\">info@premieroffshore.com<\/span><\/a><span style=\"font-weight: 400;\">. All consultations are free and confidential.<\/span><\/p>\n<p>&nbsp;<\/p>\n\n","protected":false},"excerpt":{"rendered":"<p>Established in 2012, Puerto Rico\u2019s Act 20 promotes the exportation of services from the US territory. The purpose is to attract foreign capital and professionals from the United States and abroad, all the while positioning Puerto Rico as an internal service center. Here\u2019s a summary of Puerto Rico\u2019s Act 20. By providing exponentially reduced tax [&hellip;]<\/p>\n","protected":false},"author":686,"featured_media":11899,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","om_disable_all_campaigns":false,"footnotes":"","_jetpack_memberships_contains_paid_content":false},"categories":[1401],"tags":[],"yst_prominent_words":[4017,3128,2873,14889,6894,6897,23178,23177,23175,23174,23176,2903,2809,2849,2825,2926,2952,2892,4626,2131],"acf":[],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"https:\/\/www.escapeartist.com\/wp-content\/uploads\/2017\/05\/Tax1jpg.jpg","_links":{"self":[{"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/posts\/12809"}],"collection":[{"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/users\/686"}],"replies":[{"embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/comments?post=12809"}],"version-history":[{"count":4,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/posts\/12809\/revisions"}],"predecessor-version":[{"id":41806,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/posts\/12809\/revisions\/41806"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/media\/11899"}],"wp:attachment":[{"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/media?parent=12809"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/categories?post=12809"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/tags?post=12809"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/yst_prominent_words?post=12809"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}