Act 20 primarily promotes the export of services. Act 20 accomplishes this by offering attractive tax incentives to companies at fixed rate of 4%, with minimal requirements that establish and expand the export services industry on the island. The Act 20 tax incentive is guaranteed for a minimum of 20 years.
Act 22 aims to attract new bona fide residents to Puerto Rico, who did not live in Puerto Rico between January 2006 and January 2017, by providing a 0% local income tax rate on Puerto Rico-derived interest and dividend income and a total tax exemption on all capital gains, regardless of the source of gain.
Act 60 offers incentives to attract and retain Private Equity funds. Any partnership or limited liability company, foreign or domestic, engaged in the business of investing in securities and financial instruments (that are not traded or quoted in the public markets at the time of acquisition) is eligible to become a Private Equity Fund, subject to certain requirements: Has an office in Puerto Rico; at least 80% of its paid-in capital invested in securities and financial instruments that are not publicly-traded; and no asset constitutes more than 50% of invested capital. The main Puerto Rico tax incentives under Act 60 are the following: 60% local income tax deduction based on capital committed by Puerto Rico investors in a “PR-PEF” (deduction up to 30% of the investor’s taxable net income per year for up to 15 years); 30% local income tax deduction based on capital committed by Puerto Rico investors in a “PEF” (deduction up to 15% of the investor’s taxable net income per year for up to 10 years); 0% tax on capital gains realized through the Fund by its investors from Puerto Rico sources; and, 75% tax exemption on personal property and real estate owned by the fund.
Act 73 is known as the Puerto Rico Economic Incentives for Development Act. Act 73 was established to provide an efficient business environment, and to provide opportunities for the development of local industry. Act 73 offers an attractive contributory proposal to attract foreign direct investment and to promote the economic and social development of Puerto Rico.
Act 273 regulates the organization and operation of international financial institutions authorized by the Office of the Commissioner of Financial Institutions to operate in Puerto Rico, and grants tax exemption decrees, among other benefits. The export of services is an economic activity that has been identified as one of the key pieces for the economic development of Puerto Rico and financial services employ the largest number of people per business under the tax incentives. The IFE tax incentive is generally used by international banks, investment funds, hedge funds and family offices.
