TAX EXEMPTIONS FOR THE EXPORT OF SERVICES
An entity with a bona fide office or establishment located in Puerto Rico that provides
“eligible services” that, in turn, are “export services” or “promoter services” (an Eligible
Business) could benefit from the following tax incentives/exemptions:
- A 4% fixed income rate on “export service income”. The tax rate would be reduced to
3% if the Eligible Business provides strategic services and derives more than 90% of
its income from export services during the taxable year.
Factors to be taken into consideration to qualify as a strategic service: nature of the
services, the existence or inexistence of industry for those services in Puerto Rico, the
number of Puerto Rico residents to be employed, and investment in technology,
- A 60% exemption from gross receipts taxes imposed by municipalities. The exemption
increases to 90% if the Eligible Business operates in Vieques or Culebra.
- A 100% exemption for the first 5 years and 90% exemption thereafter from real and
personal property taxes in the case of Eligible Businesses engaged in headquarters
services, call centers or shared services (accounting, finance, tax, audit, human
resources and marketing, among other services).
- A 100% exemption from Puerto Rico income tax on dividend distributions out of “export service income”. Subsequent dividend distributions out of such “export service income” made by any entity are 100% exempt from further Puerto Rico income tax.
The “eligible services” are: (a) research and development; (b) advertising and public
relations; (c) consulting on science, technology, environment, economy, management,
marketing, human resources, computers, and audits; (d) advising on matters related to
any trade or business; (e) engineering and architecture services, project management,
and drawing production; (f) professional services such as legal, tax and accounting; (g)
headquarter services; (h) data processing centers; (i) software development; (j) call
centers; (k) shared services centers; (l) warehousing and distributions hub centers; (m)
investment banking and other financial services: asset management, private equity
management, hedge funds management, pool of capital management, and trust
management; and (n) other services that are designated by the relevant authorities
“Export services” are those rendered for the benefit of (a) individuals that are not residents
of Puerto Rico; (b) foreign entities (i.e., not organized under the laws of Puerto Rico); (c)
trusts whose grantors, beneficiaries and trustees are not resident of Puerto Rico; and (d)
non-resident estates, provided such services do not have a nexus with Puerto Rico.
A nexus with Puerto Rico is deemed to exist if the services have some relation to Puerto
Rico, including: (a) business or investment activities conducted in Puerto Rico, (b) sale of
any property for use, consumption or disposition within Puerto Rico, (c) advising on the
laws and regulations of Puerto Rico, (d) lobbying on Puerto Rico laws, and (d) any other
activity that the pertinent authorities designate through regulations.
Promoter services are those “eligible services” related to the establishment of a “new
business” and so designated by the relevant authorities through regulations, regardless
that they may have a nexus with Puerto Rico.
The exemption period is 20 years. An application for a grant of tax exemption must be filed
with the Office of Industrial Tax Exemption.