The new tax incentives have made working and residing in Puerto Rico more appealing despite the discouraging history of this nation economically. Puerto Rico Act 20 Tax Incentives justify why investors are relocating to establish their businesses in this island. Besides incentives, this act also offers tax exemptions to firms that meet the set requirements.
ACT 20 Explained
Often called “Export Services Act” this law was meant to improve the exportation of services by offering significant resources as well as prospects for companies in the United States to relocate to Puerto Rico. This was done with the objective of reversing the adverse economic trends facing this island. It also stimulates the growth of academic and non-public sectors to buy research and incentives to businesspersons investing in the major sectors of the economy.
To qualify for exemptions, any business has to submit an application for a tax concession through decree (a tax exemption) to the Industrial Tax Exemption office The order is offered for twenty years with a possibility of 10-year extension, no matter the adjustments in the law. To qualify, the company or business should not have had any previous dealings, connections or nexus.
Act 20 was recently amended to accommodate new business trying that had not complied with the first legislation. This law requires that the company should have at least five (5) (FTE) full-time employees at the time of the grant. Besides, the business is also expected to comply not later than six moths after starting its operations.
Full-time employees are employees who work 2,080 hours annually, including paid-time-off. Five full-time employees or FTE equal 10,400 hours. If the company has part-time employees, for the employee should be included in the requirement. A person must work for at least 1,040 hours.
Nonetheless, the company should work for least 10,400 hours should the company or business have a combination of FTE and part-time employees. In a nutshell, an equivalent of 5 full-time employees must always be satisfied, and no any employee should work for more than 50% of this time,
Fees and Annual Reports
The application fee for this tax incentive is $750.00 USD. As soon as the tax decree is granted to the company, the company can start enjoying this incentive. However, annual reports need to be filed 30 days after filing the PR Corporate Income Tax Return.
Tax Exemption Decree
To enjoy the tax incentives that are offered under the Export Services Act, the provider of the services must request and get a tax exemption decree that is under this law.