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Puerto Rico governor further relaxes tax incentive Acts 20, 22

By on July 11, 2017

Accompanied by lawmakers, cabinet members and private sector entrepreneurs, Gov. Ricardo Rosselló signed three bills to boost economic development on the island. (Courtesy)

SAN JUAN – Gov. Ricardo Rosselló signed Tuesday a series of amendments to Acts 20 and 22 of 2012 to reduce the “bureaucratic requirements” for those who want to benefit from their potential. The tax incentive laws were designed to foster the export of services and attract foreign investors to Puerto Rico, respectively.

Amendments to Act 20 seek to relax the requirements for obtaining a tax exemption decree by eliminating the need to employ a minimum of five people when exporting services from Puerto Rico.

The governor believes the change will allow the participation of small and midsize businesses (SMBs), as well as individuals whose architecture, technology, programming and other services do not require more than one or two employees.

“It’s aimed at SMBs, at innovators, and aims at creating and adding value to services we can provide here and export abroad,” Rosselló said during a press conference in Puerto Rico Industrial Development Co.’s (Pridco) headquarters. The five-employee requirement, he added, “is an obstacle because sometimes these companies need to start and don’t have money.”

The amendments also include telemedicine and medical tourism services as part of Act 20’s incentives to attract doctors to Puerto Rico. With regard to telemedicine, at least 30 percent of the physicians are required to reside on the island.

As for the changes to Act 22, these seek that foreign investors who arrive in the island contribute $5,000 annually to nonprofit organizations operating in Puerto Rico.

It also requires individual investors to submit evidence of having filled form 8898 to notify the Internal Revenue Service (IRS) that they became a bona fide resident of a U.S. possession, in this case Puerto Rico.

The governor also signed into law changes to Act 73 of 2008, the Economic Incentives for the Development of Puerto Rico Act, to allow companies that operate with federal grants to obtain the tax credits provided by this law. This is aimed primarily at SMBs and startups.

The amendments to Act 73 also authorize the use of 10 percent of the money received by the Special Economic Development Fund (FEDE by its Spanish acronym) to provide special incentives for programs to encourage and promote investment in innovation, science and technology.

“These amendments are aimed at creating a program to direct incentives and efforts to develop a high-impact local business class with export potential in strategic sectors such as advanced manufacturing, aerospace and aeronautics,” Economic Development Secretary Manuel Laboy said.

Even though the Economic Development and Commerce Department (DDEC by its Spanish initials) is working on the creation of the Incentives Code, which will be presented in a bill in the coming months, the governor defended the amendments to these laws, saying they would benefit the island.

Laboy projects that the changes to Acts 20 and 22 will produce about 10,000 tax decrees. This would result in the creation of an estimated 100,000 jobs within four years. So far, these incentives have lured about a thousand people to the program.

Present for the signing of the laws were architect Ricardo Álvarez and Cristina Villalón, contractors who, thanks to Act 20, have been able to export services to the Middle East, Panama and New York. Also participating were Sen. Zoé Laboy, Reps. Antonio Soto and Víctor Parés, as well as Trade and Export Co. Director Ricardo Llerandi.

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