Tax exemptions and incentives are afforded under the Green Energy Incentive Tax Act (“Act”) for exempt businesses that conduct eligible activities such as a business engaged in the production and sale of Green Energy in commercial scale for consumption in Puerto Rico either as the owner or operator of the production unit; a Producer of Green Energy for consumption in Puerto Rico provided it is its principal business; assembly of equipment for the generation of Green Energy, including the installation of the equipment at the facility; and property devoted to the production of Green Energy. The tax exemption period is 25 years.
For purposes of the Act, Green Energy includes "sustainable renewable energy" (waste to energy, landfill gas, full cells, among others) and "alternative renewable energy" (solar, wind or geothermic energies, qualified hydroelectric energy among others).
The Act provides for a fixed income rate of 4% with a withholding tax on royalty payments of 12%. Certain credits against the income tax are allowed: purchases of products manufactured in Puerto Rico, job creation, research and development, special industrial investment and technology transfer investments.
Distributions out of earnings or profits or upon liquidations derived from the exempt operations are 100% tax free.
The Act provides a 90% exemption from real property taxes and a total exemption from personal property taxes, as well as a 60% exemption from Municipal License Tax.
A 100% exemption from state excise tax and sales and use taxes is provided for raw materials and machinery and equipment used in the production of Green Energy among others.