How to Qualify for Puerto Rico’s Act 20
Act 20, known as the “Export Services Act”, provides tax exemptions and tax credits to businesses engaged in eligible activities in Puerto Rico and has made the island a hot spot for exportation of international services worldwide. These tax laws were the response to Puerto Rico’s ballooning national debt that started accumulating when the US government cut federal subsidies to the island in 1996. Beginning in 2012, Puerto Rico used its special status within the United States to create unique tax incentives that would lure successful employers down to the island to bring capital and create jobs. The tax benefits Puerto Rico’s Act 20 offers are as follows:
- Corporate tax rate reduced to 4%;
- 100% tax exemption on all distributions from earnings and profits;
- 90% tax exemption from personal property taxes for certain types of businesses;
- 90% tax exemption from real property taxes for certain types of businesses; and
- 60% tax exemption on municipal taxes.
For more details on the benefits of Act 20, check out our Act 20: Puerto Rico Tax Incentives blog now.
To be able to take advantage of Act 20, there are 3 major steps you need to take for your company to qualify for these tax benefits.