Introduced In 2012, Puerto Rico embarked on a transformative journey to revitalize its economy by introducing Acts 20 and 22, which offered enticing tax incentives to businesses and individuals. These initiatives were revamped and unified under Act 60, the Puerto Rico Incentives Code, which came into effect on January 1, 2020. Clients often as us about the myriad benefits of Act 60 for for they and their businesses. Here is the best explanation we can give.
Disclaimer: It is crucial to consult with a specialized lawyer and accountant for comprehensive guidance on Act 60's applicability to your specific situation.
Act 60 presents a lucrative opportunity for businesses, particularly those adapting to the post-COVID-19 digital landscape with virtual models. The act caters to companies focusing on service exportation, offering benefits such as a 4% corporate tax rate and 0% tax on dividend distributions. Additional incentives include considerable exemptions on property tax, municipal construction rates, and municipal license tax. Small to medium-sized businesses establishing their base on the picturesque islands of Vieques or Culebra enjoy even more incentives during their initial years. (Paraiso Realty specializes in life on Vieques, and we have a great number of properties available. Click here to see a sampling.)
Individuals are not left behind in this fiscal paradise. Eligible individuals can enjoy a 100% tax exemption from Puerto Rico income taxes on dividends, interest, capital gains, and cryptocurrencies. However, it’s important to note that this exemption does not extend to dividends sourced from the U.S. or to U.S.-based interest income or real estate.
To reap the benefits of Act 60, businesses must not only focus on exporting services but also fall within specific eligible categories. These include various sectors such as research and development, consulting services, creative industries, educational services, financial services, and more. Businesses exceeding an annual volume of $3 million are required to employ at least one full-time employee who is a resident of Puerto Rico.
For business owners, the act stipulates the establishment of bona fide residence in Puerto Rico. This involves passing several tests, including the presence test (spending at least 183 days in Puerto Rico), the tax home test, and the closer connection test. It is essential for potential beneficiaries to demonstrate a genuine connection to Puerto Rico, not just in business but also in personal life.
Act 60 isn't just a tax code; it's a gateway to a new lifestyle. For U.S. businesses and entrepreneurs, it offers a chance to operate in a tax-advantaged environment while enjoying the vibrant culture and breathtaking scenery of Puerto Rico. The combination of financial benefits and quality of life is unparalleled, making Puerto Rico an increasingly popular destination for those seeking both personal and business growth.
Considering a move under Act 60 is a significant decision and requires careful planning and expert guidance. The process involves intricate legal and financial considerations, making it crucial to work closely with experienced professionals in accounting and law. They will assist in navigating the qualification process, ensuring compliance with all requirements, and helping you make the most of this unique opportunity.
Puerto Rico's Act 60 offers a unique blend of financial incentives and lifestyle benefits. It's an inviting proposition for those seeking to combine business growth with an enriching personal life in a tropical paradise. By meeting the specific criteria and establishing a bona fide residence, individuals and businesses can transform their financial future while contributing to the economic development of this beautiful island.
Remember, the journey to leveraging Act 60's benefits should be navigated with professional advice from lawyers and accountants to ensure full compliance and maximization of its advantages. Embrace the opportunity, and discover how Puerto Rico, the Island of Enchantment, can enchant not just your life but also your business.
Paraiso Realty can help participants with the establishment requirement of Act 60 by finding them a home in Puerto Rico. Many participants have been deciding to make the move to Vieques, as there are extra incentives and affordable properties. Here are three properties that might be suitable for your move to Vieques. Click on an image to see more info:
Evamer Compound. Ocean Front Living
Island Dreemz. Ocean Front Contemporary Living
Vista Linda. Pool, Casita and Ocean Views