Law 60 Incentives Code of Puerto Rico
Law No. 60 of the year 2019
(P. of C. 1635); 2019, law 60
(Conference)
Puerto Rico Incentives Code.
L e. No. 60 of July 1, 2019
To adopt the "Puerto Rico Incentives Code" ; consolidate the dozens of decrees, incentives, subsidies, refunds, or existing tax or financial benefits; promote the right environment, opportunities and tools to promote the sustainable economic development of Puerto Rico; establish the legal and administrative framework that will govern the request, evaluation, grant or denial of incentives by the Government of Puerto Rico; promote the effective and continuous measurement of the costs and benefits of the incentives granted to maximize the impact of the investment of public funds; give stability, certainty and credibility to the Government of Puerto Rico in everything related to private investment; improve the economic competitiveness of Puerto Rico,add a new Section 5 to Act No. 135 of May 9, 1945, as amended, known as the "Tax Exemption for Public Carriers of Air Transport Services"; amend Article 8 of Act No. 7 of March 4, 1955, as amended, known as the “Tax Exemption of Historic Areas”; repeal Section 61.240 of Act No. 77 of June 19, 1957, as amended, known as the "Puerto Rico Insurance Code"; amend Section 6 of Act No. 72 of June 21, 1962, as amended, known as the “Exemption of Contributions to the Dairy Industry Corporation of Puerto Rico, Inc.”; amend Article 9 of theAct No. 126 of June 28, 1966, as amended, known as the "Sea Freight Transportation Act"; repeal Act No. 42 of June 19, 1971, as amended, known as the "Annual Farm Workers' Bonus Act"; amend Section 8 of Act No. 54 of June 21, 1971, as amended, better known as the “Tax Exemption for Commercial Production of Flowers and Ornamental Plants”; amend Article 12 of Act No. 47 of June 26, 1987, as amended, known as the “Public and Private Sector Co-Participation Law for the New Housing Operation”; repeal theAct No. 46 of August 5, 1989, as amended, known as the “Law to Establish the Salary Subsidy Program for Eligible Farmers”; repeal Law 225-1995, as amended, known as the "Puerto Rico Agricultural Tax Incentives Act"; amend Article 8 of Law 165-1996, as amended, known as the “Rental of Housing for the Elderly Program with Low Income”; add a new Article 7 to theLaw 213-2000, as amended, better known as the “Social Interest Housing for People with Disabilities or the Elderly”; amend Article 2.3 of Law 140-2001, as amended, known as the “Tax Credit Law for Investment in Construction or Rehabilitation of Housing for Rental to Low or Moderate Income Families and Tax Credit for Investment in Acquisition, Construction or Rehabilitation of Affordable Housing to Rent for the Elderly ”; add a new Article 23 to Act 244-2003, as amended, known as the “Law for the Creation of Housing Projects of“ Assisted Living ”for the Elderly in Puerto Rico”; repeal lLaw 325-2004, as amended, known as the "Law for the Development of Renewable Energy"; repeal Act 464-2004, as amended, known as the "JUVEMPLEO Program Law"; repeal Law 26-2008, as amended, known as the "Law of the Program for the Financing of Agricultural and Food Technology Research and Development"; amend Sections 5 and 20 of Act 73-2008, as amended, known as the "Puerto Rico Economic Incentives for Development Act"; amend Section 15 of Act 74-2010, as amended, known as the "Puerto Rico Tourism Development Act of 2010"; amend Article 3.6 of theLaw 83-2010, as amended, known as the "Green Energy Incentives Act of Puerto Rico"; amend Article 19 of Law 118-2010, as amended, known as the "Law on Incentives for Municipal Economic and Tourism Development"; repeal Law 159-2011, as amended, known as the “Tax Incentives Law for Investment in Facilities for Reduction, Disposal and / or Treatment of Solid Waste”; amend Article 20 of Law 20-2012, as amended, known as the “Law to Promote the Export of Services”; amend Article 12 of theLaw 22-2012, as amended, known as the “Law to Encourage the Transfer of Investor Individuals to Puerto Rico”; amend Section 9.7 of Act 27-2011, as amended, known as the "Law of Economic Incentives for the Film Industry of Puerto Rico"; repeal Law 1-2013, as amended, known as the "Employment Now Law"; repeal Act 95-2013, as amended, known as the "Business Incubator Incentives Program Act"; repeal Articles 5, 6 and 7 of Act 73-2014, as amended; amend Article 17 of Law 135-2014, as amended, known as the "Law on incentives and financing for young entrepreneurs"; repeal Articles 5, 6 and 7 of Law 171-2014, as amended;repeal Act 185-2014, as amended, known as the "Private Capital Funds Act"; repeal Articles 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12 and 13, renumber conformity, and amend Article 115 of Law 187-2015, as amended, known as “Law of the Interagency Portal of Validation for the Concession of Incentives for the Economic Development of Puerto Rico”; amend Article 20 of Law 14-2017, as amended, known as the "Incentive Law for the Retention and Return of Medical Professionals"; amend Section 8 of Act No. 74 of June 21, 1956, as amended, known as the "Puerto Rico Employment Security Act " ; amend Article 24 of theLaw 272-2003, as amended, known as the “Canon Tax Law for Housing Occupation of the Commonwealth of Puerto Rico”; amend section (b) of Section 2 of Act 132-2010, as amended, known as the “Real Estate Market Encouragement Act”; amend Sections 1023.10, 1031.02, 1031.06, 1033.14, 1033.15, 1034.04, 1040.02, 1040.05, 1061.20, 1062.03, 1062.05, 1062.07, 1063.01, 1063.16, 1071.02, 1071.10; add a Subchapter G to Chapter 7 of Subtitle A, 1081.05, 1082.01, 1082.02, 1114.16, 4010.01, 4050.09, 6030.25, 6041.11, add a new Section 1115.11, and repeal Section 1033.12 of Act 1-2011, as amended, known as “Internal Revenue Code for a New Puerto Rico”; for the purpose of promoting incentives and a favorable regulatory environment to establish qualified Opportunity Areas in Puerto Rico; repeal Law 21-2019, as amended known as the "Puerto Rico Economic Development Opportunity Zones Development Law 2019"; and for other related purposes.
STATEMENT OF MOTIVES
Economic development and private capital investment is a cornerstone on the road to economic recovery. In just over two (2) years, this administration has made strong decisions aimed at achieving a better and more efficient business and investment environment. Among these, we can highlight:
a) Labor Transformation, Law 4-2017;
b) Reform of Permits, Law 19-2017;
c) BMD, Law 17-2017;
d) Invest Puerto Rico, Inc., Law 13-2017;
e) MEDICINAL Law, Law 42-2017;
f) Amendments to Law 20 and 22, Law 43-2017 and 45-2017, respectively;
g) Transformation of the Puerto Rico Electric System;
h) New Tax Model that reduces the tax rates;
i) Agreement with China Yingke company to develop cultural tourism complex on the island;
j) Expansion of the Puerto Rican Company LinkActiv;
k) Millionaire investment of Italian company COPAN in Aguadilla;
l) Air Master expansion in Barceloneta;
m) Primal film filming, whose production will generate 737 direct and over 2,000 indirect jobs;
n) Renewable energy agreements with Tesla;
o) The arrival of cruise ships to the port of Ponce;
p) The Freedom of the Seas ship establishes its base port in San Juan;
q) Agreement with AirBNB to promote the island;
r) Governor meetings with executives from Google, Linkedin, Gap, Facebook, Uber and other multinationals to encourage investment in Puerto Rico.
s) Law 120-2018 that promotes the transformation of the Electric Power Authority;
t) About 6 Public Private Alliances advanced to start operating soon;
u) The stable decrease in the unemployment rate in Puerto Rico during the past months;
v) The construction of District Live! In the Convention District;
w) The expansion of companies such as Pan Pepín, Rock Solid, Stryker, COPAN and Sartorius;
x) The establishment of Uber Eats on the island;
y) The approval of the New Tax Model, which encourages the local economy and does justice to taxpayers; Y
z) The approval of the “Puerto Rico Economic Development Opportunities Development Act of 2019”; Law 21-2019.
After the passage of hurricanes Irma and María, the economic situation of Puerto Rico, greatly affected by our colonial situation, worsened. After 8 difficult months of recovery, investors are putting their trust back in Puerto Rico. The road to the reconstruction of Puerto Rico includes the allocation of tens of billions of federal funds related to hurricane recovery, money that will enter the economy, but temporarily. This is why we have to maximize opportunities and maximize our talents. The abovementioned achievements are further proof that we are going in the right direction to return to being an attractive jurisdiction to do business. Looking ahead, it is up to us to continue identifying more and better ways to attract economic activity.
With the arrival of funds for the reconstruction of Puerto Rico, the island is open for business and will continue to promote economic development measures that relocate Puerto Rico as a connecting bridge between the Americas.
Puerto Rico has a long history and track record of providing incentives to stimulate investment and job creation in Puerto Rico. The use of various economic incentives has been a central part of the various economic development strategies that the island has been implementing over the past decades. To such ends, throughout the years the Legislature has approved a multiplicity of laws that have defined the priorities that existed in Puerto Rico at that time, which are not necessarily the priorities or needs of Puerto Rico that we live today. The present economic and fiscal reality of Puerto Rico requires that the Government make a holistic review of all its incentives in order to bring coherence,
The economy of Puerto Rico has contracted in eleven of the past twelve years, and no significant changes are projected in that macroeconomic pattern, excluding the effects of Hurricane Maria and the recovery funds that Puerto Rico has to receive from the United States as a result. . There is no doubt that one of the tools available to the Government of Puerto Rico to counteract such economic contraction is to provide incentives to industries, both local and foreign, of high performance and whose primary activity is focused on the export of goods or services, of We encourage you to bring new capital to Puerto Rico through these exports. Likewise, The consequent increase in public debt and the precariousness of Puerto Rico's fiscal situation make it imperative that an evaluation of the incentives that have historically been granted to determine which have the highest return, and which produce a negative return, is carried out. Armed with that information, Puerto Rico will have the tools to redirect our limited resources towards those activities that truly stimulate the economic growth of our economy, raise our level of commercial competitiveness, encourage export and external investment in Puerto Rico, and create more Well-paid jobs for our people.
The Plan for Puerto Rico contemplates a change of vision in the management of the incentives that Puerto Rico uses to promote economic activity, so that we can temper and refocus our efforts to correct the problems that past strategies have fostered. It is imperative for the economic development of Puerto Rico that we create a dynamic platform of economic stimulus that is consistent with the fiscal and economic reality of Puerto Rico. That is why, consistent with the Plan for Puerto Rico, we are creating an Incentive Code that promotes activities that contribute to the growth of the economy in Puerto Rico through investment, export and job creation; to responsibly expedite the application and approval process; and to establish uniform regulatory processes, measurement and continuous evaluation after the granting of incentives to guarantee compliance, transparency and the achievement of development tax objectives. As stated in the Plan for Puerto Rico, the use of incentives must yield a benefit not only for the incentive entity, but also for Puerto Rico in general. It is important that incentives result in tangible benefits to raise funds to the treasury, avoiding redundant activities, and promoting economic development in a more comprehensive, balanced and diversified manner. The tax and economic incentives should be aimed at strategically and intelligently balancing the investment of external capital with the ecosystem of creation of local companies, to encourage the continuous transfer of knowledge, processes, innovation and technology between the two.
In compliance with our programmatic commitment, the Department of Economic Development and Commerce of Puerto Rico (DDEC) was given the task of analyzing the current laws, economic principles, methodology and results of all economic incentives that have been granted in Puerto Rico, taking into account the most recent data available. From the analysis it appears that at present there are around 76 laws or programs that promote investment through the granting of incentives. Of the total, 58 stimulate economic activity and 18 serve social needs. According to the available data, it was determined that the programs identified as economic represent a total fiscal cost in excess of $ 7,462 million, of which eighty-one percent (81%) is considered an opportunity cost. [one]
The fiscal costs attributable to the granting of economic development incentives consist of:
(a) Opportunity Cost - These are revenues that the Government ceases to receive for the preferential rates granted on income subject to contributions and, therefore, the Government does not budget its cost.
(b) Reimbursements and Subsidies - This is the cash that is granted for economic stimulus activities, such as job creation, infrastructure investment and utility payments.
(c) Tax Credit - Contribution by means of a credit to an Exempt Business or an Eligible Person to promote their business development, subject to the limits and terms established in this Code and the Incentive Regulations and which is granted through an incentive contract.
(d) Special Deductions - These are the deductions included in the return granted to investments in machinery, Renewable Energy or other related operational expenses, as provided by law.
(e) Municipal Exemptions - Are the exclusions of property tax payments, municipal patents and Sales and Use Tax (IVU) that correspond to the municipalities, as provided by law.
Although the experience, in general terms, has been positive in granting incentives, to advance the task of economic development more effectively, the Government understands that the incentive program can be maximized by consolidating all the different types of sector incentives that Our existing economic incentive laws provide. We have taken on the task of rethinking the economic incentive system of Puerto Rico, and redesigning its fas so that our incentives are in line with our needs, take into account our limitations, and maximize our potential. The result of this effort is this Incentive Code, through which for the first time in our history, Puerto Rico now has a document that breaks down all stimulus programs economic available in Puerto Rico. Quite the contrary, to the arbitrary efforts that have been used in the past to grant incentives, the Plan for Puerto Rico, taking into account the results that produced a series of rigorous analysis of the effectiveness of these incentives. In addition, this comprehensive evaluation regarding the effectiveness and performance of economic incentives will be carried out continuously. For these purposes, it is imperative that our new Incentive Code contains an agile and pragmatic paradigm to support the continuous improvement of the economic development strategy, and the ability to identify emerging risks and opportunities.
That is why we propose a Code of Incentives that rationalize and consolidate the dozens of decrees, incentives, subsidies, refunds, and tax or financial benefits that Puerto Rico offers, and that we temper or limit this offer to only those that we can demonstrate factually and economically that they will have a favorable macroeconomic impact on the island. The Incentives Code is intended to promote the environment, opportunities and appropriate tools to foster the sustainable economic development of Puerto Rico. This new code will establish the legal and administrative framework that will govern the request, evaluation, grant or denial of incentives by the Government of Puerto Rico; will achieve stability, certainty and credibility for all types of private investment in Puerto Rico and will serve as a promotional tool for investment in the island. By virtue of this, this Code grants incentives that: “they should not be interpreted as the old tax exemptions which were privileges, for which reason it was beneficial to interpret them restrictively. On the contrary, […] they must be interpreted [liberally] in a manner consistent with their creative purpose . ”Textile Dye Works, Inc. v. Secretary of the Treasury , 95 DPR 708, 713 (1968). See also Pfizer Pharm. V. Mun. de Vega Baja , 182 DPR 267, 286 (2011). In addition, this Code maintains the guiding principle that the incentives set forth herein: “ are not a grace, in the old sense of the phrase, that the Government of Puerto Rico confers but is an instrument used by Puerto Rico to promote industry. and productive investment" Id. At the same time, this Legislative Assembly is interested in making it clear that the tax exemptions granted in this Incentive Code are considered to constitute a contract between the Government of Puerto Rico, the Exempt Business and its shareholders, partners or owners, therefore, the general rules regarding contracts apply. And, therefore, “ on these applies the principle of the autonomy of the will of the parties, who can establish the covenants, clauses and conditions they deem appropriate, provided they are not contrary to laws, morals, or public order . " Pfizer Pharm. V. Mun. de Vega Baja , supra , on page 283. In this sense, the Incentives Code will be of great value and utility to entities such asInvest Puerto Rico Inc . and the Puerto Rico Destination Marketing Organization ( DMO ), who will be responsible, among others, for attracting capital to achieve economic development.
The incentive evaluation that was carried out while preparing this Incentive Code, as well as future evaluations that will continue to be made in the future, were carried out and will be carried out under the guiding principle that the most important for such consideration will be the economic fundamentals proposed or defined by the Government and the activities and industries that should be encouraged to ensure the growth of the economy of Puerto Rico. The Incentives Code will allow the Government to achieve the primary goal of enacting development initiatives by creating conditions conducive to promoting competitiveness and innovation and supporting emerging industries and technologies that foster sustainability, with incentives that favor training and operational improvement. , sustainable economic development and job creation to temper them to the fiscal reality of Puerto Rico and the global competitive environment. The Incentives Code will also facilitate the process to institute uniform rules to request, process and grant incentives.while government investment in certain activities that are not competitive or productive is discarded .
The Incentives Code will allow the types of incentives that are now granted to be standardized, and that risky incentives that have historically resulted in losses or that have adversely impacted Puerto Rico's economy be minimized. The Incentives Code recognizes that it is essential to promote the effective and continuous measurement of the costs and benefits of the incentives granted, in order to determine the cash that is invested vis a vis what the treasury receives. Therefore, the new Incentive Code will also incorporate provisions to measure the return on investment (ROI) and maintain updated data on that return by economic sector.
The Incentives Code will facilitate the analysis of our incentives to determine the desirability of maintaining, modifying or discontinuing any incentive that proves to be obsolete, or consequently, that has resulted in negative performance. The analysis, in addition, will allow to determine which incentives can provide positive performance based on specific data, if government resources should be redirected to other industries to maximize performance and stimulate productivity, and even, will identify the need to create New incentive mechanisms . New incentives will be evaluated and approved through mechanisms and processes established in the regulation adopted by the DDEC, based on complete analyzesthat allow informed decisions. This structure will allow processes to be improved, incentives based on ROI, and economic priorities to be analyzed, and the desirability of continuing to grant the incentive to be determined within a reasonable time.
In line with the above, an incentive evaluation model will also be created, in accordance with the needs of the Puerto Rican economy, to measure the effectiveness of the program based on the annual reports submitted by the beneficiaries. The analysis of the reports will allow stimulus programs to be improved, and will ensure that incentives are allocated and used to maximize the economic impact on the island. Likewise, the evaluation will facilitate compliance with the terms and conditions of the incentives granted, including the measurement of risk and return on investment of such stimuli, in line with the public policy of economic development.
As an important element to ensure rigor in the application of standards and transparency, a single office will be designated to monitor compliance aspects. For these purposes, the Tax Exemption Office, now the Incentive Office, will become part of the DDEC and assume other responsibilities in accordance with the new Incentive Code.
The new Incentive Code will be divided into sections based on particular characteristics to meet the various sectors of the economy (manufacturing; exports; visitor's economy; creative industries; finance, investments and insurance; infrastructure; and agro-industries) and to drive strategic activities . It is for these reasons that it is proposed that those funds that have been granted as incentives in negative performance categories or subcategories be reassigned, if possible, to positive performance activities within the same category.
The new Incentive Code amends eligibility and benefits provided prospectively for various economic activities. Companies that are operating in accordance with the terms of decrees granted will not be affected. Some incentives will remain unchanged, as is the case of exporting companies or that are key suppliers for exporters, foreign investors and incentives to the cruise industry, while others have been eliminated, uniformed or amended to produce a better return on public investment.
The Code of Incentives also proposes that all laws and social programs in order to ensure inclusion in the monitoring process are incorporated (oversight ) to give transparency to the use of these subsidies and measure its impact on Puerto Rich.
The Incentives Code defines and imposes the responsibility of overseeing the incentive program and accountability by requiring the DDEC to publish annual reports with data on the expenses and benefits of all incentive programs. The report will facilitate the evaluation of incentives to determine which programs should be modified, expanded or rethought to maximize their impact on the economy, and align with the strategic development plan. The annual report will also improve the visibility of the Government of Puerto Rico regarding the use of its fiscal resources.
Another priority of the Government when adopting a new Incentive Code is to facilitate the transition so that most of the process is automated and focused on a system that allows multiple users, such as proponents, service providers, agencies and other parties interested, have access to public information and can carry out transactions efficiently.
The Incentive Code also formally incorporates the participation of the private sector in the process by creating the figures of the Qualified Promoter and the Certified Professional, who will assist the Government in attracting companies to the Island and facilitating the application processes and fulfillment. Finally, it is imperative that, in order to achieve the purposes of the new Incentive Code, an adequate transition be contemplated with precise change management guidelines for each government agency that administers the particular law and for the beneficiaries, present and future.
Some changes to our economic incentives in the Incentives Code include the organization of exemptions by industry segments and sectors, so that several incentive laws can be grouped into the same category as long as these laws provide stimulus to those sectors, as follows:
1. Individuals
2. Export (Services and Goods)
3. Financial and Insurance Services
4. Visitor Economy
5. Manufacturing, including the Research and Development component
6. Infrastructure
7. Agriculture
8. Creative Industries
9. Entrepreneurship
10. Other
Tax rates are also harmonized as far as possible across industries, to provide a series of tax benefits that as a general rule apply to all sectors, providing a simple guide on what is offered and to whom. Additional benefits are established for small and medium enterprises (SMEs) and for Exempt Businesses established in Vieques and Culebra.
In the agricultural area, we incorporate the participation of the Secretary of Agriculture in the granting of agricultural incentives. The original benefits of salary incentive and bonus to agricultural workers also remain .
Also, in recognition of a recent and emerging global industry, merchandise (commodities), currencies, and any digital assets based on blockchain technology are added, as eligible for the incentive applicable to individual capital gains Investor Residents (former Law 22).
The Incentives Code also incorporates the mechanism of tax credits which, will be distributed by the Secretary of the DDEC to maximize the performance of the incentives subject to healthy administration parameters established by regulation. In no way does this Code limit the State's ability to grant tax credits as respected in Section 208 (b) (1) of the Federal PROMESA Law. Likewise, this Legislative Assembly reserves the right to establish additional controls, as provided herein, in the use of tax credits that impact the General Fund.
The term of tax exemption decrees is also standardized so that everyone has a 15-year term with a possible renegotiation for an additional 15-year term. Similarly, the use of decrees for all tax exemption benefits, including Law 185 of Private Equity Funds, among others, is incorporated.
The power to grant decrees and the regulation of the Incentive Code in the DDEC is centralized, providing that tax and tax matters will be worked together with the Department of the Treasury. All changes established by this Incentive Code are prospective and do not affect companies or individuals with decrees, credits, or incentives granted prior to approval.
On the other hand, in compliance with the commitment expressed in the Plan for Puerto Rico, the Incentives Code includes the My Future Account. Through this new program, this Administration will open an account with one thousand dollars ($ 1,000) to each kindergarten student in the public education system. This account will allow children to accumulate savings they will receive once they graduate fourth year. These funds could be used, among others, to start college, or start a business. This is a mechanism to continue fighting against social inequality, dropping out of school and promoting academic performance. In addition, Account My Future is consistent with the Fiscal Plan certified by the Board of Fiscal Supervision under the PROMESA Federal Law,
It also includes a program to repay student loans to doctors, veterinarians, dentists and scientific researchers in the area of health to remain in Puerto Rico after completing their training. This initiative seeks to promote that these health professionals remain on the island after completing their training. For this purpose, the DDEC may grant a grant for student loans incurred by these doctors, subject to their remaining in Puerto Rico and establishing their practice here. With this measure we also try to reduce the exodus of doctors and specialists that Puerto Rico has been seeing for a few years.
We approve this Incentive Code with the conviction that it will improve the economic competitiveness of Puerto Rico. On the one hand, this Code will create a simple, agile and efficient process, focused on the client, and will generate the trust of the population and the private sector through the transparency of the processes around the incentives granted. At the same time,We make possible the continuous review of the incentives provided to identify those incentives that are not cost-effective and strengthen those for which it is shown that they have an impact and produce a return on investment to the treasury. Finally, with the tools provided by this Code, this Administration will continue to boost the economy and attract private capital to the island. We continue working without pause to position Puerto Rico worldwide as an open jurisdiction to do business.
Although there are many obstacles that we must still overcome on the road to definitive recovery, there is hope and optimism in our people. The road to economic recovery is traced. This Administration will continue committed to Puerto Rico to direct it towards the definitive rebound in our economy. That is our north and we are heading towards that. We are confident that with the actions we have taken and will take, Puerto Rico will rise, with more force than ever.
BE DECLARED BY THE PUERTO RICO LEGISLATIVE ASSEMBLY:
Section 1000.01- Title
This Code, divided into Subtitles, Chapters, Subchapters and Sections, will be known and cited as the “Puerto Rico Incentives Code”.
Section 1000.02- Classification of Provisions
The provisions of this Code are hereby classified and designated as follows:
Subtitle A- General Provisions
Subtitle B - Economic Development Incentives
Subtitle C - Tax Credits
Subtitle D - Subsidies and Other Programs
Subtitle E - Benefit Grant Funds
Subtitle F - Administrative Provisions
Section 1000.03- Guiding Principles of the Incentive Code
(a) Return on Investment - The term Return on Investment as used in this Code refers to the relationship between the net benefit and the cost resulting from an Incentive Grant.The above includes the result of total benefits less total costs, divided by total costs. The benefits taken into consideration include: a) direct payroll taxes; b) indirect and induced payroll taxes; c) Sales and Use Taxes (IVU) generated by direct and indirect economic activity; and d) taxes generated on the consumption of non-residents. The costs used in the calculation include: a) credits; b) investments; c) subsidies; and d) opportunity costs related to income tax exemption. These calculations vary by type of industry and its multipliers by production and by type of employment according to the tables of the North American Industry Classification System (NAICS).The DDEC will consider different types of incentives that will be implemented through the Incentive Regulation, using the Return on Investment formula, ROI, and other factors to assess the effectiveness of such incentives, including, without limitation the following factors:
(i) The various sources of tax revenue generated by the activity;
(ii) All tax and economic benefits granted;
(iii) The direct, indirect and induced effects based on the official multiplier factors provided or endorsed by the Planning Board;
(iv) Local purchases, including purchase of Manufactured Products in Puerto Rico; Y
(v) An analysis of the benefits attributable to incremental and non-redundant economic activity to sustainable economic activity due to aggregate local demand.
(b) Annual Incentive Effectiveness Report - The DDEC will analyze the effectiveness of the incentives and other economic development tools that have been used during the previous Fiscal Year of the Government of Puerto Rico, and will submit a copy of such report before April 1 of each calendar year to the Governor of Puerto Rico. In addition, it will present a copy of the aforementioned report to the Secretariat of both Bodies of the Legislative Assembly.
(c) Avoid Duplication of Regulation - In those cases in which the activities or transactions permitted by this Code to a Exempt Business are subject to federal legislation or regulations, the Secretary of the DDEC will evaluate its processes and regulations and may eliminate or amend any duplication or obstacle to the achievement of the objectives of this Code through the Incentive Regulation, administrative order, circular letter, memorandum, or interpretative document.
(d) Promote Reciprocity with other Jurisdictions- In those cases in which the activities or transactions permitted by this Code to an Exempt Business are covered by reciprocity clauses with other jurisdictions that allow said entities to do business with other jurisdictions, the Secretary of the DDEC shall have the authority to dispense, through the Incentive Regulations, any limitation so that reciprocity can be carried out to the extent that the acts or omissions of the Government of Puerto Rico are an obstacle to said reciprocity.
(e) Public Information - The existence of a Decree or other benefit provided by this Code, the name of an Exempt Business and the Chapter of Subtitle B of this Code under which the Decree was granted is considered public information, provided that any other Information related to the Exempt Business will be disclosed in aggregate by sector or industry, and not by person.
(f) Any person who is interested in establishing new incentives should bring said procedure through the Secretary of the DDEC so that it analyzes the impact of such incentives based on the Return on Investment (ROI) formula.
Section 1000.04- Bill of Rights for Decree Holders
(a) Every Exempt Business and its shareholders will have the right to receive a dignified, considered and impartial treatment by all DDEC officials and employees in any management carried out before this Department.
(b) The Tax Exemption Decrees constitute a contract between the Government of Puerto Rico, the Exempt Business and its shareholders. The terms and conditions agreed in the contract will be honored during the term of the Tax Exemption Decree subject to the Concessionaire being in compliance with the terms and conditions thereof.
(c) Tax exemption decrees are valid throughout Puerto Rico, including its municipalities. When an Exempt Business begins operations in a new Municipality, it will not have to request an amendment to its Tax Exemption Decree to carry out the activities covered by the Decree.
(d) Every Exempt Business and its shareholders shall have the right to negotiate with the Secretary of the DDEC, as a representative of the Government of Puerto Rico, in matters of economic development and tax decrees. Regarding matters of a tax and accounting nature, the endorsement of the Secretary of the Treasury will be necessary.
(e) When a new law is passed or a regulation is adopted, which provides more favorable terms and conditions to those contained in the Decree, the Exempt Business may request a modification to its Decree that reflects such benefits or better terms for the Exempt Business and its shareholders, subject to the discretion of the Secretary of the DDEC and the endorsement of the Secretary of the Treasury.
(f) Every Exempt Business and its shareholders will have the right to a clear and expedited process to obtain a Tax Exemption Decree.
(g) Every Exempt Business and its shareholders shall have the right to be guaranteed the confidentiality of the information submitted to the DDEC. No person outside the DDEC, who is not authorized by the Exempt Business and its shareholders, will have access to such information, unless expressly permitted by this Code or other law. The Exempt Business and its shareholders will also have the right to know the purpose for which the information is requested, the use that will be given and the consequences of not providing it.
(h) Every Exempt Business and its shareholders shall have the right to be assisted by any person authorized to represent them, except that, in the case of Certified Professionals, they shall be licensed lawyers or authorized public accountants in Puerto Rico.
(i) Every Exempt Business and its shareholders will have the right to be notified in writing of any modification to the Decree that the DDEC performs as a result of any audit that demonstrates non-compliance. DDEC notify the nature of the amendment to the Decree and the rationale for such changes, giving you the opportunity to be heard within the framework of due process of law ( due process) .
(j) Every Exempt Business and its shareholders shall have the right not to be discriminated against on the grounds of race, color, sex, birth, origin or social status, political affiliation or religion of the Exempt Business, its shareholders or any person who represents it .
The DDEC will not impose or require arbitrary provisions in the Decrees that could result in the Exempt Business and its shareholders having to incur inofficial operating expenses to comply with such provisions.
The Decrees constitute a valuable instrument used by the State to promote capital investment and the creation of jobs and wealth in Puerto Rico, which is the creative purpose of tax exemptions that should govern its interpretation. Nothing in this Section should be construed as a limitation on the powers of the Secretary of the DDEC or the Secretary of the Treasury to carry out investigations, provided that the rights of the Exempt Businesses, their shareholders or of the persons who do not violate represent them.
It will be a high priority for the Government of Puerto Rico to promote the renewal of existing decrees and the approval of new decrees to maintain or expand the manufacturing activity in Puerto Rico, as a primary sector of revenue collection for the government and generation of economic activity, generation of jobs and income in the local jurisdiction.
SUBTITLE A- GENERAL PROVISIONS
CHAPTER 1- DECLARATION OF PUBLIC POLICY
Section 1010.01- Public Policy Statement
(a) It shall be public policy of the Government of Puerto Rico to collect in a Code the economic principles proposed to encourage competitiveness, innovation, export and activities that increase the long-term sustainable economic growth of Puerto Rico. This new Code seeks to provide the right environment, opportunities and tools to promote the economic development of Puerto Rico in order to offer a better quality of life. With this Code, models of government will be developed that allow: (i) to attenuate the high operational costs and to make more flexible the regulatory limitations that affect the competitive position of Puerto Rico; and (ii) simplify government processes through the use of technology.
(b) This Code seeks to guarantee a relationship between the private sector and the Government of Puerto Rico that is based on stability, transparency, certainty and credibility. It also seeks to promote and exercise controls in order to make us an attractive destination to attract foreign direct investment and promote local capital investment, resulting in the attraction and establishment of new businesses, job creation and growth. economic, as well as retaining high impact activities, thus strengthening the supply and value chain, and the creation of conglomerates in strategic sectors.
(c) This Code offers industries with high growth potential an attractive tax proposal to be able to compete with other jurisdictions and, in accordance with this:
(1) Make Puerto Rico a world-class tourist destination while promoting the fiscal strengthening of municipalities through tourism, among others;
(2) Encourage the promotion and development of Medical Tourism and medical services facilities in our jurisdiction;
(3) Take decisive action to modernize infrastructure and reduce energy costs by investing in infrastructure and the different alternatives of Renewable and Alternate Sources, as well as encouraging the use of technologies that promote sustainability and production of utilities that are cost-effective. efficient and cleaner than those provided by current infrastructure;
(4) Promote a service industry that is aimed at exporting all kinds of services and technology;
(5) Develop Puerto Rico as an International Center for Financial and Insurance Services;
(6) Promote Puerto Rico as a unique location for the film industry and related activities, including postproduction;
(7) Offer manufacturing industries, including their research and development, and high-tech sectors, as primary sectors of the economy, a tax proposal and an attractive incentive structure so that they can preserve and expand their current investment and generate new investment in Puerto Rico, as well as exporting goods and services in a more competitive way compared to other jurisdictions;
(8) Strengthen the agricultural sector and promote the export and added value of its products; Y
(9) Strengthen the construction sector to make viable those important works for the economic recovery and reconstruction of Puerto Rico.
(d) This Code shall be governed by the following guiding principles:
(1) Maximize transparency, by publishing all the costs and benefits of each available incentive to ensure fiscal responsibility;
(2) Minimize risk to the government;
(3) Make economic public policy decisions based on facts and assumptions reported;
(4) Avoid encouraging redundant economic activities that would be carried out equally without incentives;
(5) Restore sustainable economic growth by improving competitiveness;
(6) Continually measure the return on investment (ROI) of all incentives;
(7) Ensure the faithful fulfillment of the commitments made by companies in exchange for economic benefits.
CHAPTER 2- DEFINITIONS
Section 1020.01- General Definitions
(a) For the purposes of this Code, the following terms, phrases and words shall have the meaning and scope expressed below, when not manifestly incompatible with the purposes thereof:
(1) Shares- Means Shares in a corporation, or proprietary interests in a company, limited liability company or other type of Entity.
(2) Affiliated - Means two (2) or more entities where fifty percent (50%) or more of the total combined power of all classes of voting shares or more than fifty percent (50%) of the value Total of all classes of Shares, as the case may be, of these entities is directly or indirectly owned by the same natural or legal person, estate or trust.
(3) Tax Year- Means the Annual Accounting Period of the Exempt Business, be it the Natural Year or the Economic Year.
(4) Economic Year - Means an accounting period of twelve (12) months ending on the last day of any month other than December.
(5) Fiscal Year- Means the accounting year of the Government of Puerto Rico that covers a period of twelve (12) months that begins on July 1 and ends on June 30 of next year.
(6) Natural Year- Means the period of twelve (12) months between January 1 and December 31 of each year.
(7) Auditor- Means an independent Authorized Public Accountant (CPA) licensed to practice the profession in Puerto Rico hired by the Concessionaire to perform the functions contemplated in this Code.
(8) Port Authority- Refers to the Puerto Rico Port Authority.
(9) Extraordinary Circumstances - Means any cause of Force Majeure or of an exceptional nature or any other cause beyond the control of the Exempt Business.
(10) Code- Refers to the "Puerto Rico Incentives Code" adopted here.
(11) Puerto Rico Internal Revenue Code or Internal Revenue Code- Refers to Act 1-2011, as amended, known as the “Puerto Rico Internal Revenue Code of 2011”, or any subsequent law that replaces it .
(12) Insurance Code - Means Act No. 77 of June 19, 1957, as amended, known as the “Puerto Rico Insurance Code”.
(13) Commissioner of Financial Institutions- Means the Commissioner of Financial Institutions of Puerto Rico, as defined by Act No. 4 of October 11, 1985, as amended.
(14) Commissioner of Insurance - Means the Commissioner of Insurance of Puerto Rico, pursuant to Act No. 77 of June 19, 1957, as amended.
(15) Concession- Means a Decree, as such term is defined in this Code.
(16) Dealer - Means any Exempt Business, as such term is defined in this Code.
(17) Tax Credit - Contribution by means of a credit to an Exempt Business or an Eligible Person to promote its business development, subject to the limits and terms established in this Code and the Incentive Regulations and which is granted through an incentive contract.
(18) CRIM- Means the Municipal Revenue Collection Center, created by Law 80-1991, as amended, known as the "Municipal Revenue Collection Center Law".
(19) DDEC - Means the Department of Economic Development and Commerce of Puerto Rico.
(20) Decree - Means the concession, by contract, issued by the Secretary of the DDEC allowing an Eligible Business to enjoy the incentives and / or tax credits corresponding to said Eligible Business, subject to complying with the requirements and applicable regulations , either under this Code or Previous Incentive Laws.
(21) Special deductions - Means the deductions included in the return granted to investments in machinery, Renewable Energy or other related operational expenses, as provided by law.
(22) Developer - Means any Person, who is affiliated with, is owned by or controlled directly or indirectly by an Investor, directly or indirectly responsible for or participating in the construction, development or administration of an eligible project or activity of a Exempt business.
(23) Director of the Tourism Office - Means the Director of the Puerto Rico Tourism Office attached to the DDEC.
(24) Incentive Director - Means the Director of the Office of Business Incentives in Puerto Rico attached to the DDEC.
(25) Entity- Means any corporation, limited liability company, partnership or any other legal entity. Likewise, the tax treatment received by these entities is recognized in accordance with the Puerto Rico Internal Revenue Code, including any election made by such entities under said Code.
(26) Municipal exemptions - Means the exclusions of property tax payments, municipal patents and Sales and Use Tax (IVU) corresponding to the municipalities, as provided by law.
(27) Force Majeure - Means an event that cannot be foreseen or, if foreseen, is inevitable. It includes exceptional acts caused by nature itself, such as: earthquakes, floods and hurricanes (ie acts of God).
(28) Governor - Means the Governor of Puerto Rico.
(29) Foreign Government- Means any government and all its municipalities, instrumentalities, political subdivisions, agencies, public corporations or quasi-public, other than the Government of Puerto Rico.
(30) Government of Puerto Rico - Means the Government of Puerto Rico and all its municipalities, instrumentalities, political subdivisions, agencies, public corporations or quasi-public.
(31) Resident Individual of Puerto Rico- Means a resident individual as defined in Section 1010.01 (a) (30) of the Puerto Rico Internal Revenue Code.
(32) Eligible Income or Exempt Income- Means the income earned from activities eligible for Exempt Businesses under this Code, as provided in Subtitle B of this Code.
(33) Financial Institution - Means a Person or Entity, as described in Section 1033.17 (f) (4) of the Puerto Rico Internal Revenue Code.
(34) Eligible Investment - Means the amount of cash used by an Exempt Business pursuant to this Code, or any Entity Affiliated to such Exempt Business, and qualifying under one of these categories:
(i) Eligible Tourism Investment
(ii) Special Eligible Investment
(iii) Creative Eligible Investment
(iv) Eligible Green Energy Investment
(v) Eligible Manufacturing Investment
(vi) Eligible Investment of Agroindustrial or Agricultural Operations
(vii) Strategic Projects
(35) Special Eligible Investment- For the purposes of this Code, the definition of the term “Special Eligible Investment” means the amount of cash used by the Exempt Business that has a Decree granted pursuant to this Code or under any of the Previous Incentive Laws, or any Entity Affiliated to said Exempt Business in research and development activities carried out in Puerto Rico during a Tax Year, as defined in the Incentive Regulations. The term Special Eligible Investment shall include an investment of the Exempt Business that is made with cash from programs, a loan that is guaranteed by the Exempt Business itself or by its Assets, or any Entity Affiliated to the Exempt Business or by its Assets. The term Special Eligible Investment will also include an Exempt Business investment, made with cash from a scholarship, agreement or otherwise financed by a government entity from the United States, but not from Puerto Rico. The DDEC Secretary,
(36) Investor - Means any Person who invests in an eligible activity or Exempt Business under this Code.
(37) Invest Puerto Rico Inc. - Non-profit entity created by the DDEC, as authorized by Law 13-2017, as amended, to complement DDEC efforts to attract capital investment to Puerto Rico and identify business opportunities that promote economic development and job creation on the island, in addition to promoting Puerto Rico marketing as a pro-business jurisdiction to attract new investment to the island in collaboration with the DDEC and members of the private sector.
(38) Financial Board - Means the Financial Board attached to the Office of the Commissioner of Financial Institutions.
(39) “Puerto Rico Condohotels Law” - Means Law 249-2008, as amended.
(40) “Municipal Patent Law” - Means Act No. 113 of July 10, 1974, as amended, known as the “Municipal Patent Law”.
(41) "Game of Chance Act" - Means Act No. 221 of May 15, 1948, as amended, known as the "Game of Chance Act".
(42) “Uniform Administrative Procedure Law” - Means Law 38-2017, known as the “Uniform Administrative Procedure Law of the Government of Puerto Rico”.
(43) Previous Incentive Laws - Means Act No. 135 of May 9, 1945, as amended, Act No. 72 of June 21, 1962, as amended, Act 126 of June 28, 1966, as amended as amended, Act No. 54 of June 21, 1971, as amended, Act No. 70 of June 23, 1978, as amended, Act No. 47 of June 26, 1987, as amended, Act No. 46 of August 5, 1989, as amended, Law 78-1993, as amended, Law 225-1995, as amended, Law 165-1996, as amended, Law 135-1998, as amended, the Law 213-2000, Law 244-2003, as amended, Law 325-2004, as amended, Law 73-2008, as amended, Law 26-2008, as amended, Law 74-2010, as amended, the Law 83-2010, as amended, Law 118-2010, as amended, Law 27-2011, as amended,Law 113-2011, as amended, Law 20-2012, as amended, Law 22-2012, as amended, Law 1-2012, as amended, Law 95-2013, as amended, Law 135-2014 , as amended, Article 7 of Law 171-2014, as amended, Law 185-2014, as amended, Law 187-2015, as amended, and Law 14-2017, as amended.
(44) “ Law of the Banking Center” - Means Act No. 52 of August 11, 1989, as amended, better known as the “Law Regulating the International Banking Center”.
(45) Eligible Business - Means those individuals or business activities that qualify to obtain a Decree under this Code, including the following:
(i) Resident Investor Individuals who move to Puerto Rico and Difficult Recruitment Professionals who qualify for tax benefits in accordance with the provisions of Chapter 2 of Subtitle B of this Code.
(ii) Professional Physicians in accordance with the provisions of Chapter 2 of Subtitle B of this Code.
(iii) Eligible Scientific Research, as set forth in Chapter 2 of Subtitle B of this Code.
(iv) Export of Services, Export Trade or Promoter Services, in accordance with the provisions of Chapter 3 of Subtitle B of this Code.
(v) International Financial Entities, International Insurance Companies, Segmented Assets Plans and International Insurance Holding Companies, in accordance with the provisions of Chapter 4 of Subtitle B of this Code.
(vi) Private Equity Funds, in accordance with the provisions of Chapter 4 of Subtitle B of this Code.
(vii) Activities of the visitor's economy, including tourism activities such as Hotels, Condohotels and Medical Tourism and Nautical Tourism activities, as established in Chapter 5 of Subtitle B of this Code.
(viii) Manufacturing activities, in accordance with the provisions of Chapter 6 of Subtitle B of this Code.
(ix) Other businesses designated as Eligible Businesses, in accordance with the provisions of Chapter 6 of Subtitle B of this Code, including:
(A) Fundamental Services to Business conglomerates;
(B) Property Dedicated to Industrial Development;
(C) Certain recycling activities; Y
(D) Certain science, technology and research activities.
(x) Activities dedicated to infrastructure and green energy in accordance with the provisions of Chapter 7 of Subtitle B of this Code.
(xi) Agricultural and agroindustrial activities, in accordance with the provisions of Chapter 8 of Subtitle B of this Code.
(xii) Creative Industries Activities, including Film Projects in accordance with the provisions of Chapter 9 of Subtitle B of this Code.
(xiii) Entrepreneurship activities, in accordance with the provisions of Chapter 10 of Subtitle B of this Code.
(xiv) Activities of air and sea transport services, in accordance with Chapter 11 of Subtitle B of this Code.
(46) Exempt Business - Means any Eligible Business that has been granted a Decree.
(47) Successor Business- Means any business that obtains a Decree under this Code, whose activity is substantially similar to that specified in the Decree of an Antecedent Business.
(48) New SME- Means an Exempt Business that meets the definition of SMEs in this Code that has not started operations as of the effective date of this Code. The Incentive Regulations may provide additional factors to be analyzed to determine if it is a New SME.
(49) OCIF- Means the Office of the Commissioner of Financial Institutions, created by Act No. 4 of October 11, 1985, as amended, known as the “Law of the Office of the Commissioner of Financial Institutions”.
(50) State Office of Energy Public Policy- Means the State Office of Energy Public Policy of Puerto Rico, as established by Law 57-2014 or any office that replaces it.
(51) Office of Incentives - Means the Office of Business Incentives in Puerto Rico attached to the DDEC.
(52) Tourist Office - Means the Tourist Office attached to the DDEC in accordance with Reorganization Plan No. 4-1994, as amended, provided that during the transition period to complete the consolidation of the Puerto Rico Tourism Company With the DDEC under Law 141-2018, known as the “Execution Plan for the Reorganization Plan of the Department of Economic Development and Commerce of 2018”, the term Tourism Office will refer to the Puerto Rico Tourism Company.
(53) Opportunity Zones - Areas designated by the United States Department of the Treasury to participate in a national investment stimulus program.
(54) Annual Accounting Period- Means the annual period on which the taxpayer regularly determines his net income when carrying his books.
(55) Person - Means any natural or legal person, conduit entities, succession or trust.
(56) Domestic Person - Means a Resident Individual of Puerto Rico, a Legal Entity incorporated or organized under the laws of Puerto Rico, a person whose principal business site is located in Puerto Rico, or a foreign corporation that has an office or other fixed premises that, in accordance with the provisions of the Internal Revenue Code of Puerto Rico and its regulations, are considered to be doing business in Puerto Rico.
(57) Foreign Person - Means any person other than a Domestic Person.
(58) Portal - Means the Portal for the Concession of Business Incentives of Puerto Rico.
(59) Production on a Commercial Scale - Production for sale in the market in the normal course of business, in quantities and at prices that justify the operation of an Eligible Business, as an ongoing business.
(60) Intangible Property - Means patents, inventions, formulas, processes, designs, patterns, knowledge (know-how), copyrights, business secrets, literary, musical or artistic compositions, trademarks, stamps of factory, factory names (trade names), brand names, franchises, licenses, contracts, methods, programs, systems, procedures, capital gains, campaigns, perspectives (surveys), studies, trials (trials), projections, Estimates, customer lists, technical data or any other similar property.
(61) Small and Medium Enterprises (SMEs) - are Exempt Businesses, as defined in this Code, which generate an average turnover of three million dollars ($ 3,000,000.00) or less during the three (3) previous taxable years preceding the Current Tax Year. For these purposes, and in accordance with Section 1061.15 of the Internal Revenue Code, the turnover will be the total generated from the sales of goods, products and services without considering the cost of the goods or products sold, by the Eligible Business and will include the volume of business of the controlled group, according to said term is defined by Section 1010.04 of the Internal Revenue Code, or of the group of related entities, as said term is defined under Section 1010.05 of the Internal Revenue Code. For purposes of this Code,
(62) Strategic Projects- Means those projects as provided in the Incentive Regulations in accordance with the provisions of Section 2014.01.
(63) Reimbursements and subsidies - This is the cash granted for economic stimulus activities, such as job creation, infrastructure investment and utility payments.
(64) Return On Investment or ROI- Means the financial index that measures and compares the benefit or profit of an incentive in relation to the investment made by the Government of Puerto Rico. In addition, it measures the profitability of each government incentive and its ability to recover, and exceed that value to the treasury.
(65) Incentive Regulation - Means the document or documents approved by the Secretary of the DDEC for the implementation of the Code and its administration. In these Regulations or regulations, the Secretary of the DDEC will adopt those necessary guidelines, in consultation with the relevant agencies, when the areas or matters to be regulated require the expertise of any agency or office with specialized knowledge about the economic sector to be affected. As regards tax and tax matters, the regulations will be adopted jointly with the Secretary of the Treasury. It is also provided that the Secretary of the DDEC and the Secretary of Agriculture may adopt joint regulations for those agricultural activities contained in this Code,
(66) Secretary of Agriculture - means the Secretary of the Department of Agriculture, in accordance with Reorganization Plan No. 4-2010, as amended.
(67) Secretary of the DDEC- Means the Secretary of the Department of Economic Development and Commerce of the Government of Puerto Rico with the powers conferred on it by Reorganization Plan No. 4 of June 22, 1994, as amended.
(68) Secretary of the Treasury - Means the Secretary of the Department of the Treasury of the Government of Puerto Rico.
(69) Secretary of Health - Means the Secretary of the Department of Health of the Government of Puerto Rico.
(70) USA Patriot Act - Means the "Law for the Unification and Strengthening of America through Appropriate Tools for Intercepting and Obstructing Terrorism", as amended, 115 Stat. 272 (2001).
(71) Securities - means any note, bond, promissory note, evidence of debt, options, futures contracts, so-called forwards , shares, and any other similar or similar instrument including derivative instruments as provided by circular letter, administrative determination, regulation or any other joint pronouncement between the Secretary of the Treasury and the Secretary of the DDEC.
Section 1020.02- Definitions Applicable to Individual Activities
(a) For purposes of activities related to Chapter 2 of Subtitle B of this Code related to activities carried out by individuals, the terms, phrases and words shall have the meaning and scope set forth below:
(1) Special Agreement for the Creation of Companies- Means the Agreement that is carried out between a Young Entrepreneur (as defined in this section) and the Secretary of the DDEC. The Young Entrepreneur must commit to the development of his company, the creation of jobs, and other conditions, as applicable, in exchange for the applicable benefits set forth in this Code. The applicable benefits will be specifically listed in the Agreement. The Agreement will establish the term of its validity and will expire when the benefits granted in it expire, according to the provisions of this Code and the obligations agreed in the Agreement.
(2) My Future - means the student savings plan program established in Section 2026.01 of this Code.
(3) Eligible Dividends of Qualified Physicians- Means dividends from Eligible Income of Qualified Physicians, which declares a Medical Services Business in favor of a Qualified Physician, computed in accordance with the Internal Revenue Code.
(4) Resident Investor Individual - Means an eligible individual to obtain the benefits of Sections 2022.01 and 2022.02 of this Code and who is a Resident Individual of Puerto Rico, who has not been a Resident Individual of Puerto Rico during the previous ten (10) taxable years. to the validity of this Code, and that it becomes a Resident Individual of Puerto Rico no later than the Taxable Year that ends on December 31, 2035. Students who study outside of Puerto Rico residing in Puerto Rico before leaving To study, personnel who work outside of Puerto Rico temporarily for the Government of Puerto Rico, its agencies and instrumentalities, and people in situations similar to those described above, will not qualify to be considered as Resident Investor Individuals,since their domicile in these cases continues to be Puerto Rico for the period in which they reside outside our jurisdiction.
(5) Eligible Income of Qualified Physician- Means the net income derived from the provision of Professional Medical Services offered in Puerto Rico, computed in accordance with the Internal Revenue Code.
(6) Higher Education Institution- Means an educational institution, public or private, accredited pursuant to Act 212-2018, as amended, known as the "Registration and Licensing of Educational Institutions Act" or by the Middle States Commission on Higher Education of the Middle States Association of Colleges and Schools .
(7) Eligible Scientific Investigations- Means any research carried out by the University of Puerto Rico or another Institution of Higher Education that receives a concession (grant) obtained through a peer-reviewed proposal in an open competition to obtain said concession, to carry out a research project or other similar project including concessions for training, development of professional skills or development of the workforce (training, capacity development, and workforce development), of any of the organizations that make up the National Institutes of Health or under similar programs or mechanisms sponsored by any other federal agency that promotes competitive scientific research, including but not limited to, the National Science Foundation, Department of Energy, Department of Defense, NASA, NOAA, Environmental Protection Agency, among others. They will also include concessions resulting from competitive proposals that come from private foundations, other non-profit organizations, or private companies that provide competitive concessions for research and development. Concessions of competitive proposals where competition is restricted to minority populations are considered eligible (underserved minorities) as defined by minorities at the federal level. Concessions for subcontracting of competitive proposals (research subawards) where the principal investigator of the subcontract is a Domestic Person will also be eligible .
(8) as applicable. Except in the case of Multiple Principal Investigators (Multiple Principal Investigators or Multi PI's), there will be no more than one individual eligible for this deduction for an approved concession, as defined by Eligible Scientific Research, including subcontract concessions .
(9) Young Entrepreneur- Shall mean any Resident Individual of Puerto Rico, whose age fluctuates between sixteen (16) and thirty-five (35) years of age, who is interested in creating and operating a new company in Puerto Rico in the long term, by an indefinite term, and that you have obtained your high school diploma or an equivalent certification from the Department of Education of Puerto Rico, or that you are still studying and present evidence that certifies that you are studying to obtain a certificate or high school diploma according to the criteria adopted by regulation.
(10) Qualified Physician - Means an individual admitted to the practice of general medicine or of any specialty, of podiatry, be a dentist or surgeon or practice any specialty of dentistry and who practices full time profession. This definition includes doctors who are studying for residency as part of an accredited program.
(11) Medical Services Business - Means any professional services corporation or limited liability company that provides Professional Medical Services in Puerto Rico, either a domestic Entity or a foreign Entity, and that is authorized to do business in Puerto Rico.
(12) Other Assets- Means goods (commodities) , currencies, and any digital asset based on blockchain technology .
(13) Difficult Recruitment Professional - Means an eligible individual to obtain the benefits of Section 2022.03 of this Code and who is a Resident Individual of Puerto Rico, with a full-time employment, whose talent is indispensable for his specialized knowledge for operations of an Exempt Business under this Code or Previous Incentive Laws. The term "difficult recruitment" will be defined by the Incentive Regulation.
(14) Professional Medical Services- Means diagnostic and treatment services offered by a Qualified Physician.
(15) Full Time - Means that a Qualified Physician dedicates at least one hundred (100) hours per month to offer Professional Medical Services in a public or private hospital, in a federal or state agency, in a private office dedicated to offering Professional Medical Services or in an accredited medical school.
Section 1020.03- Definitions Applicable to Goods and Services Export Activities
(a) For the purposes of Chapter 3 of Subtitle B of this Code related to Export of Goods and Services activities, the following terms, phrases and words shall have the meaning and scope expressed below:
(1) Export Trade - Means those activities described in Section 2031.02 (a) provided that they comply with the requirements of Section 2031.02 (b), and excludes any activity that has a Nexus with Puerto Rico, as provided in Section 2031.02 (c).
(2) Export Trade Income - Means the net income derived from Export Trade for an Exempt Business, computed in accordance with the Puerto Rico Internal Revenue Code.
(3) Export Services Income- Means the net income derived from the Export of Services, or from a Promoter Service, for an Exempt Business, computed in accordance with the Puerto Rico Internal Revenue Code. In the case of Promoter Services, only the net income derived from Promoter Services, provided during the twelve (12) month period ending the day before the first occurrence, shall be considered as Income from Export Services. following alternatives:
(i) The beginning of the construction of facilities in Puerto Rico that will use a New Business in Puerto Rico;
(ii) The start of New Business activities in Puerto Rico; or
(iii) The acquisition or granting of a contract to acquire facilities or the lease of facilities in Puerto Rico for the New Business in Puerto Rico.
(4) New Business in Puerto Rico - Means an Entity that meets the following parameters:
(i) It has never conducted an industry or business in Puerto Rico;
(ii) The industry or business to be carried out in Puerto Rico was not acquired from a business carried out by an industry or business or activity for the production of income in Puerto Rico;
(iii) It is not an Entity Affiliated to an Entity that carries out or has carried out an industry or business or activity for the production of income in Puerto Rico;
(iv) During the period of two (2) years, counted from the beginning of the operations that make the Promoter eligible for a Decree, no more than five percent (5%) of their Shares are directly or indirectly owned by one (1) or more Domestic Persons;
(v) Start operations in Puerto Rico, as a result of Promoter's services, according to the criteria to be determined through the Incentive Regulations, the circular letter or any other pronouncement;
(vi) It will not be dedicated to the retail sale of products or items; Y
(vii) Performs an activity, industry or business that is an Exempt Business.
(5) Nexus with Puerto Rico- The Export Services or Export Trade, as the case may be, shall be considered to have a Nexus with Puerto Rico when they have any relationship with Puerto Rico, including the services described in Section 2031.01 (c) and the activities described in Section 2031.02 (c).
(6) Promoter- Means a person who is dedicated to the provision of Promoter Services.
(7) Promoter Services- Promoter services are those eligible related to the establishment of a New Business in Puerto Rico and that are designated by the Secretary of the DDEC as services that can be treated as services for export, regardless of whether such services have a Nexus with Puerto Rico.
(8) Export Services- Means the services described in Section 2031.01 (a), provided that they comply with the requirements of Section 2031.01 (b), and excludes any service that has Nexus with Puerto Rico, pursuant to the provisions in Section 2031.01 (c).
Section 1020.04- Definitions Applicable to Finance, Investment and Insurance Activities
(a) For the purposes of Chapter 4 of Subtitle B of this Code related to Finance, Investment and Insurance activities, the following terms, phrases and words shall have the meaning and scope set forth below:
(1) Assets - Will include:
(i) Cash and deposits;
(ii) Investments, such as credit or preferential debt instruments, capital and other securities, tangible personal property subject to leasing, mortgage loans and real estate, securities loans, repurchase transactions (Repurchase Transactions), repurchase transactions conversely (Reverse Repurchase Transactions), dollar roll transactions and forecasting strategies;
(iii) Dividends declared and not received;
(iv) Interest due or accrued; Y
(v) Accounts and reinsurance receivable on losses paid and related expenses.
(vi) Any other assets allowed by the Secretary of the DDEC, in consultation with the Secretary of the Treasury, through the Incentive Regulations.
(2) International Insurer - Refers to the International Insurer as defined in Article 61.020 of the Insurance Code.
(3) Registered Investment Advisor or ADIR- Means a company that:
(i) through a contract with another company (which may be a Fund) regularly provides advice to said company regarding the advisability of investing in, purchases or sales of securities or other property, or is empowered to determine what securities or other assets will be purchased or sold by that company, or
(ii) any other person who under a contract with a person described in subsection (i) regularly performs virtually all of the tasks undertaken by such person described in that subsection.
A. The person must be registered (or exempt from registration) under the "Investment Advisers Act of 1940 of the United States", as amended (15 USC § 80b-1 et seq.), Act No. 60 of 18 June 1963, as amended and known as the "Uniform Securities Act of Puerto Rico" or any subsequent analogous law that replaces it.
B. The person must be registered with the Securities and Exchange Commission (SEC) or with OCIF, as applicable.
(4) Bank Secrecy Act or BSA - Refers to the federal law entitled Currency and Foreign Transactions Reporting Act , codified in 31 USC Sections 5311-5330 and 12 USC Sections 1818 (s), 1829 (b), and 1951-1959, or any law that replaces or amends it.
(5) Control or Controlled - Means the participation, directly or indirectly, as the owner, of more than fifty percent (50%) of the voting power with respect to the controlled person.
(6) International Insurer Holding Company - It will have the same meaning as provided in Article 61.040 of the Insurance Code.
(7) COSSEC- Means the Public Corporation for the Supervision and Insurance of Cooperatives of Puerto Rico created under Act 114-2001, as amended, or any subsequent analogous law that replaces it.
(8) International Banking Entity or EBI- Means an International Banking Entity in accordance with the provisions of the “Banking Center Law”. A person, other than an individual, who has been issued a license to operate as an International Banking Entity under Section 7 of Act No. 52 of August 11, 1989, as amended, known as the “Regulatory Law of the International Banking Center ”, and which has not been converted into an International Financial Entity (EFI).
(9) International Financial Institution or EFI- Means any person, other than an individual, incorporated or organized under the laws of Puerto Rico, the United States or a foreign country, or such a unit, to which has issued a license under the "International Financial Center Law".
(10) Private Equity Company or ECP- Means a company that manages private capital investments through multiple investment strategies set up in Funds such as: Growth Capital, Leveraged Buy Out, Mezzanine , Distressed (in financial trouble) and Venture Capital. This company typically serves as a Managing or Limited Partner.
(11) United States - Refers to the United States of America, including any state of the nation, the District of Columbia and all possession, territory, political subdivision and agency thereof, except Puerto Rico.
(12) FDIC- Means the Federal Deposit Insurance Corporation ( FDIC ).
(13) Private Equity Fund - Means any limited liability company or company, organized under the laws of the Government of Puerto Rico, any state of the United States or any foreign jurisdiction, that is dedicated to investments in promissory notes, bonds, notes (including loans with and without collateral and including such collateral), Shares, or any other securities of a similar nature issued by entities that at the time of acquisition, are not quoted or traded in the public securities markets of the United States or countries foreigners, will qualify to be treated as a Fund, under the provisions of Chapter 4 of Subtitle B of this Code, during each Fiscal Year that meets the following requirements:
(i) Office located in Puerto Rico, either its own, of its managing partner or ADIR;
(ii) a minimum of eighty percent (80%) of the capital contributed to the Fund by its Accredited Investors (paid-in-capital), (excluding from said capital the money that the Fund maintains in bank accounts and other investments that are they consider cash equivalents) to be invested in promissory notes, bonds, notes (including loans with and without collateral and including said collateral), Shares or any other value of a similar nature that, when acquired, are not quoted or traded on the public stock markets of the United States or foreign countries;
(iii) the balance of capital that has not been invested in accordance with the provisions of subsection (ii) of this paragraph shall not exceed twenty percent (20%) and must be maintained in any of the following investments:
(A) direct obligations of, or guaranteed by the United States or the Government of Puerto Rico, in terms of capital and interest due within a period of fifteen (15) months from the date of the investment;
(B) resale agreements with institutions insured by FDIC, SIPC, COSSEC, EBI or EFI with a maturity of ninety (90) days or less. The securities underlying the resale agreements must be direct obligations of, or guaranteed in terms of principal and interests by the Federal Government of the United States or those of Puerto Rico with a minimum investment classification of investment grade. The securities must be kept in a custody account in an institution insured by the FDIC or SIPC;
(C) certificates of deposit with a maturity of one (1) year or less, issued by institutions insured by FDIC, or COSSEC;
(D) a deposit account at an institution insured by the FDIC, or COSSEC, subject to a withdrawal restriction of one year or less;
(E) a checking account at an institution insured by the FDIC or COSSEC;
(F) has a cash balance for a reasonable amount for miscellaneous expenses; or
(G) investment certificates in EBI or EFI.
(14) Puerto Rico Private Capital Fund - Means a Private Capital Fund that complies with the provisions described in section (b) of Section 2044.03.
(15) Investment- In relation to Chapter 4 of Subtitle B, it means the property transferred to the Fund in exchange for a proprietary interest in such Fund.
(16) Accredited Investors- Means:
(i) a bank, insurance company, registered investment company, business development company, small business investment company, Economic Development Bank, International Insurance, Segregated Assets Plan, International Insurance Holding Company, according to these terms They are defined in the Insurance Code, EBI or EFI. It will be understood that EBI and EFI may be Accredited Investors regardless of the provisions of this Code applicable to International Financial Centers;
(ii) a benefit plan for employees of the Government of Puerto Rico or any employee benefit plan as defined in the “Employee Retirement Income Security Act of 1974” (ERISA) , only if a bank, insurance company or Registered Investment Advisor makes the investment decisions, or if the plan has total Assets of more than five million dollars ($ 5,000,000.00);
(iii) a charity, corporation or association with Assets that exceed five million dollars ($ 5,000,000.00);
(iv) a director, executive or general partner of the company selling the securities;
(v) a natural person who has individual net worth or joint net worth to his spouse in excess of one million dollars ($ 1,000,000.00) at the time of purchase, not including the value of said person's principal residence;
(vi) a natural person with income of more than two hundred thousand dollars ($ 200,000.00) in each of the two (2) years prior to the purchase or joint income to his spouse of more than three hundred thousand dollars ($ 300,000.00) for said years and a reasonable expectation of the same level of income in the current year;
(vii) a trust with Assets of more than five million dollars ($ 5,000,000.00), which has not been formed to acquire the securities offered and for which a sophisticated person makes the purchase; or
(viii) a business in which all capital owners are Accredited Investors.
(17) Resident Accredited Investor - Means: an Accredited Investor that is: (i) a Resident Individual of Puerto Rico, (ii) a citizen of the United States, (iii) an Entity organized outside of Puerto Rico, if all its shareholders (or its equivalent), direct or indirect, are residents of Puerto Rico; and (iv) an Entity organized under the laws of the Government of Puerto Rico. In the case of a company subject to the provisions of Chapter 7 of the Puerto Rico Internal Revenue Code, the partners of the company may be considered Resident Accredited Investors.
(18) “Puerto Rico Investment Companies Law” - Means Act No. 6 of October 19, 1954, as amended, known as the “Puerto Rico Investment Companies Law” or any subsequent analogous law that replace
(19) "Puerto Rico Investment Companies Act of 2013" - Means Act 93-2013, as amended, known as the "Puerto Rico Investment Companies Act of 2013" or any subsequent analogous law that replaces it.
(20) “Law of the Office of the Commissioner of Financial Institutions” (OCIF) - Means Act No. 4 of October 11, 1985, as amended, known as the “Law of the Office of the Commissioner of Financial Institutions”.
(21) SBA- Means the Small Business Administration , a federal agency created under the Small Business Investment Act of 1958.
(22) SEC- Means the Securities and Exchange Commission created under the Securities Exchange Act of 1934.
(24) SIPC- Means the Securities Investor Protection Corporation .
(25) Managing or General Partners- Means the group that forms the Fund, responsible for the day-to-day operation of the Fund and which typically conducts the investment activity using part of its capital. This concerns a fiduciary duty towards its Investors.
(26) Unit - With respect to Chapter 4 of Subtitle B of this Code, it means and includes any subdivision or branch of any person other than an individual, whose businesses and operations are segregated from the other businesses and operations of said person, as it is required by Chapter 4 of Subtitle B of this Code and the "Law of the International Financial Center".
Section 1020.05- Definitions Applicable to Visitor Economy Activities
(a) For the purposes of Chapter 5 of Subtitle B and Chapter 1 of Subtitle C of this Code related to activities related to the Economy of the Visitor, the following terms, phrases and words shall have the meaning and scope expressed below:
(1) Nautical Tourism Activities - Means the set of services to be provided in contact with water to nautical tourists, which include, but are not limited to:
(i) the lease or freight to tourists of Nautical Tourism Boats for leisure, recreation or for educational purposes by tourists, including excursions;
(ii) the lease of small boats, jet skis, kayaks, sailboats or other similar boats, motorized or not, to tourists, as established by the Incentive Regulation, administrative order, circular letter or any other general communication ; Y
(iii) Operation of an Integrated Boat Leasing Program.
(2) Agrohospedaje - Means any accommodation facility that is established in an agricultural holding by a Bonafide Farmer , with the purpose of accommodating visitors in transit to enjoy the contemplation of nature or to participate in activities related to the agricultural activity or the Agrotourism
(3) Agrotourism - Means the set of activities specifically organized by a Bona Fide Farmer in addition to its main activity, to which tourists are invited; and these constitute other services by pay.
(4) Bed and Breakfast (B&B) - Refers to the bed and breakfast program created by the Tourist Office for Hospederías of a special residential-tourist nature that meet the requirements set forth in the Incentive Regulations.
(5) Guest House - Means any building, part of it or group of buildings approved by the Tourist Office that will operate for tourism purposes; it must consist of not less than seven (7) rooms for guests in transit, and provide administrative personnel during the twenty-four (24) hours of the day, a private bathroom per room and maid service; and may provide the necessary rooms for the housing of their owners or administrators. These Hospederías will comply with the provisions of the Incentive Regulations.
(6) Casino or Game Room- Means a game room operated by franchise issued in accordance with the terms of the "Gambling Law".
(7) Condohotel - Means the set of units of a building or group of buildings converted to the horizontal property regime or the regime according to the "Puerto Rico Condohotels Law", and that meet the requirements of a Hotel; in which no less than fifteen (15) of the rooms or apartments are dedicated to the lodging of passers-by people at all times through an integrated leasing program. The term “Condohotel” also includes a set of residential units, in full domain, within a destination or tourist complex (resort) that also meets all the requirements set forth in this paragraph.
(8) Total Cost of the Tourism Project - Means all expenses and disbursements incurred by the Exempt Business that has a Decree under Chapter 5 of Subtitle B of this Code, including:
(i) all expenses and disbursements incurred by the Eligible Business for:
(A) salaries paid to its employees, land acquisition, construction, habilitation and marketing until the moment of opening;
(B) pre-opening and opening ceremony expenses; Y
(C) payroll and marketing expenses during the first twelve (12) months of operation. In the case of an Exempt Business that consists of a Timeshare or Vacation Club right plan, the Secretary of the DDEC may authorize that the expenses and disbursements of promotion, marketing and sale, related to the sale of Timeshare or Club rights are included Vacation for up to the first sixty (60) months after the opening of all the facilities of said Exempt Business;
(ii) interest and charges on financing (for example, commitment fees) obtained that have been capitalized during the construction period and during the first twelve (12) months of operation;
(iii) direct costs (hard costs) and indirect costs (soft costs) of construction incurred in the substantial renovation or expansion of an Exempt Business;
(iv) expenses related to the purchase of furniture, facilities and equipment (furniture, fixtures and equipment), and operational supplies and equipment (operating supplies and equipment) during the first twelve (12) months of operation;
(v) expenses related to the issuance of debt to obtain capital for the Exempt Business;
(vi) any reserve or contingency account required by the "Puerto Rico Tourism Development Fund" or any creditor or Financial Institution;
(vii) expenses related to the construction and development of infrastructure and utilities necessary for the construction and development of the Exempt Business;
(viii) the acquisition costs, or the market value (fair market value) at the date of the contribution, of facilities used in a Tourist Activity during the period of thirty-six (36) months prior to the date of its contribution acquisition or contribution that meets the renewal or expansion requirement that exceeds one hundred percent (100%) of the purchase price established for New Tourism Businesses; Y
(ix) any other expenses, disbursements or investments that the Secretary of the DDEC, in consultation with the Secretary of the Treasury, determines through regulations.
(x) Provided, however, that the Total Cost of the Tourism Project shall exclude, as a general rule and except in those situations in which at the discretion of the Secretary of the DDEC, in consultation with the Secretary of the Treasury, the best interests of Puerto Rico require otherwise: (i) the money that was invested before the effective date of the law, and (ii) the money that was invested before the Meeting was held to present the proposed Tourism Project (Pre-application conference). Under no circumstances will the estimated cost of time invested by the Developer or by any shareholder of the Exempt Business be considered for the calculation of what constitutes the Total Cost of the Tourism Project.
(9) Distribution of Tourism Development Income - Means any distribution of dividends or profits from an Exempt Business or a liquidation distribution of an Exempt Business and consisting of Tourism Development Income.
(10) Ecotechnics - Means ecologically responsible design and construction practices in order to significantly minimize direct or indirect environmental impact and reduce costs, such as, but not limited to, the use of clean technology, solar energy, treatment and recycling of waste, compost production with organic waste, wastewater management, alternative water supply for domestic or commercial uses.
(11) Nautical Tourism Vessels - Means motor or sail boats that have the capacity to transport six (6) or more passengers, operated by excursion companies or available for rent to be destined for Nautical Tourism Activities, including Mega Yachts for Tourist Purposes when the Secretary of the DDEC determines that such operation is convenient for the development of tourism in Puerto Rico.
(12) Primary issue or offering - Means the first time that a security, action or share is made available to the public. Investors who acquire Shares in a corporation or holdings in a limited liability company or company of a subscriber or a public or public-private corporation of the Government of Puerto Rico, who acquired those Shares or participations in their initial offer to complete the balance sheet of the capital investment required for the closing of the financing for a Tourism Project, it will also be considered that they were acquired in their Primary Issuance for purposes of the Tax Credits provided in Section 3010.01 of this Code.
(13) Hotel - Means any building, part of it, or group of buildings endorsed by the Tourist Office, to properly and in good faith to provide accommodation by paying mainly to guests in transit, and shall have no less than fifteen (15) rooms for guest accommodation. Its facilities will be operated under the standards and conditions of health and efficiency acceptable by the Tourist Office.
(14) Tourism Development Income - Means the income of an Exempt Business for the operation of a Tourism Activity, and the income of the reinvestment in Puerto Rico of the profits of an Exempt Business obtained from a Tourism Activity, provided that said reinvestment is in a Tourist Activity. If the Exempt Business is a Hotel, Condohotel, Puerto Rican Paradores or Guest House, the income subject to the fixed income tax rate established in Section 2052.01 of this Code shall include the income of:
(i) The rental of rooms and charges for services related to the Tourist Activity.
(ii) The sale of food and drinks.
(iii) The operation of retail stores within the physical facilities, but only if said retail stores are owned and operated by the Exempt Business.
(iv) The operation of golf courses and other sports and recreational facilities that are part of the Exempt Business Tourism Activity.
(v) The lease of commercial space within the Hotel, Condohotel, Puerto Rican Paradores or Guest House for the operation of businesses that provide useful services to the transient guest.
(vi) If the Exempt Business is a Tourist Marina, only Tourism Generated Income will be considered income generated by the Activities of Nautical Tourism, so that the income generated by the services provided to people who maintain their vessels in the Navy permanently for their private use, they will not be considered as Tourism Development Income.
(vii) The net income accrued by a Concessionaire for the operation of a Casino.
(15) Eligible Tourism Investment - Means:
(i) the amount of cash that has been contributed to an Exempt Business under Chapter 5 of Subtitle B of this Code or to an Eligible Business that subsequently receives Decree under Chapter 5 of Subtitle B of this Code, to be used in an Activity Tourist in exchange for:
(A) Shares in the corporation, if the Exempt Business is a corporation, or
(B) the participation or increase in participation, in a limited liability company, joint venture or company, or
(C) a unit in a Condohotel, provided that said unit is dedicated to the integrated leasing program of the Condohotel for a period of ten (10) years and for nine (9) months of each calendar year and the Investor has full control of unity;
(ii) the value of existing land and structures that are contributed to an Exempt Business or an Eligible Business that subsequently receives a Decree under Chapter 5 of Subtitle B of this Code, to be used in a Tourist Activity in exchange for:
(A) Shares in the corporation, if the Exempt Business is a corporation, or
(B) the participation or increase in participation, in a limited liability company, partnership or joint venture, if the Exempt Business is a limited liability company, partnership or joint venture. The value of the land or the existing structure will be the fair value in the market, reduced by the balance of the mortgages that tax the land, or existing structure, at the time of the contribution. The fair market value will be determined based on an appraisal of the land or the existing structure made by one (1) or more professional appraisers licensed in Puerto Rico. The Secretary of the DDEC must approve the net determined value of the existing land or structure before it is contributed to the Exempt Business;
(iii) cash contributions made by a public corporation of the Government of Puerto Rico or any of its subsidiaries in exchange for:
(A) Shares or participations in an Exempt Business, or in an Eligible Business that subsequently receives a Decree under this Chapter, which owns such corporations or subsidiaries, or
(B) the subordinated debt held by an Exempt Business or an Eligible Business that subsequently receives a Decree under this Chapter with said corporations or subsidiaries;
(iv) loans granted, financing commitments issued or commitments to make legally enforceable capital investments, provided they have been made by the Hotel Development Corporation, better known as HDC, for its acronym in English.
(v) loan that is guaranteed by the Exempt Business itself, or Eligible Business that subsequently receives a Decree, or by its assets, or any entity, parent or affiliate to the Exempt Business, or Eligible Business that subsequently receives a Decree, or by its assets.
(vi) Only those tourism funds whose funds are used solely and exclusively for the acquisition of land, structures, construction and habilitation of the facilities of a New Tourism Business or for the substantial renovation or expansion of the tourism will be considered as eligible tourism investments. facilities of an Existing Tourism Business, as defined in this Chapter. Any other investment whose funds are not used directly and in its entirety for the acquisition, construction, habilitation, renovation or substantial expansion of the facilities of an Eligible Business shall be excluded from the definition of Eligible Tourism Investment of this Chapter. However, the use of funds for the acquisition of, construction or improvements to a boat dedicated to the Nautical Tourism of small boats, Watercraft, kayaks, sailboats or other similar boats, motorized or not, will not be considered as an Eligible Tourist Investment. In addition, except in those cases in which, at the discretion of the Secretary of the DDEC, the best interests of Puerto Rico require otherwise, only investments made after the meeting with the designated officers of the Tourist Office to present will be considered eligible investments. the proposed Tourism Project (pre-application conference).
(vii) In the event that one of the contributions described in subsections (i) or (ii) of paragraph (15) is made, the contribution will be considered as Eligible Tourist Investment only if said investment is made in the Primary Issuance of the Actions or participations. However, in the case of Exempt Businesses, said contributions will not require the issuance of additional Shares or participations to Investors who at the time of the contribution are or constitute shareholders, partners, members or other owners of the Exempt Business. In the case of Condohotels, Eligible Tourism Investment will be considered as the contribution of cash for the acquisition of a Condohotel unit that is acquired from the Entity that developed or built it.
(viii) In those cases in which the Developer of a Tourism Project considers that the Eligible Business will need to incur cash expenses before the closing date of the financing for the Tourism Project and that the contributions to pay for said expenses are they will characterize in the books of the Exempt Business as a debt of the business until financing for the Tourism Project is closed, such contributions are considered as Eligible Tourism Investment if at the time of closing the financing the principal of the debt is forgiven, excluding interest accumulated The remission will be considered as a cash contribution in exchange for Shares or participations in the Exempt Business,
(ix) The term Eligible Tourism Investment will not include investment made with money disbursed under insurance policy contracts.
(16) Marine - Means a facility that offers water docks, including mooring buoys, for ten (10) or more vessels, baths with showers and trash cans. It also includes facilities for dry slips and dry springs.
(17) Tourist Marina - Means a Navy that provides areas, services and docks for: (i) the lease or freight of Nautical Tourism Boats, (ii) foreign-registered vessels or documented by the United States Coast Guard , whose ownership and possession resides in a Foreign Person, or (iii) any other Nautical Tourism activity, as established by the Incentive Regulation, administrative order, circular letter or any other general communication.
(18) Mega Yachts for Tourist Purposes - Means a boat of eighty (80) feet or more in length that qualifies as a Nautical Tourism vessel under this Code, which is dedicated to leisure, recreational or educational purposes for tourists in return of remuneration in waters inside and outside of Puerto Rico. To be considered eligible, a vessel must: (1) be available in Puerto Rico for such activities for a period of not less than six (6) months during each year; and (2) submit a quarterly report to the Tourist Office, which will contain a log or log of use of the vessel that evidences its use in the Tourist Activity. The obligation to render the quarterly report will expire on the twenty (20th) day of the month following the last month of each quarter.
(19) Existing Tourism Business - Means a business that is dedicated to a Tourist Activity at the time a request for granting incentives is filed under Chapter 5 of Subtitle B of this Code, or that otherwise does not qualify as a New Tourism Business, as defined in this Section, and which undertakes a substantial renovation or expansion of the existing physical facilities that will be used in a Tourist Activity.
(20) New Tourism Business - Means a business that is not operating at the time a request for granting incentives is filed under Chapter 5 of Subtitle B of this Codeand that it will be dedicated to a Tourist Activity, using physical facilities that have not been used in a Tourist Activity during the period of thirty-six (36) months prior to the filing date of the application. In the case of those Eligible Businesses that will use physical facilities that have not been used in a Tourist Activity for a term not less than eighteen (18) months prior to the filing of an application, the Secretary of the DDEC may relieve them of compliance of the aforementioned thirty-six (36) month requirement when at its discretion the best interests of Puerto Rico so require. Likewise, any existing business or structure that, Although they have been dedicated to a Tourist Activity during the aforementioned period of thirty-six (36) months to complete the investment, it is acquired or contributed to the Exempt Business with the purpose that the structures that house it are subject to a renovation or expansion of such magnitude that its cost will exceed one hundred (100) percent of the purchase price of the business, or the market value (fair market value) at the date of the contribution, provided that such amount is invested in its entirety within the thirty-six (36) month period from the date of acquisition or contribution. The Secretary of the DDEC may extend the term of thirty-six (36) months when, at its discretion, the best interests of Puerto Rico so require, but never for an additional period of more than thirty-six (36) months.
(21) Puerto Rican Paradores - Means any lodging under the program sponsored by the Puerto Rico Tourism Office for the establishment of a network of accommodation units throughout the Government of Puerto Rico that complies with the provisions of the Incentive Regulations.
(22) Small and Medium Hospederías- Means those lodges that are considered as a Tourist Activity and that become an Eligible Business after having obtained a Decree and that belong to the Bed & Breakfast and Inns Programs of the Tourist Office, those that meet the definition of Guest Houses; as defined in this Code, and those that meet the definition of Hotel up to a maximum of twenty-five (25) rooms for guest accommodation.
(23) Timeshare and Vacation Clubs Plans - Means plans that have a license issued by the DDEC in accordance with the provisions of Law 204-2016, better known as the "Puerto Rico Property Law".
(24) Integrated Boat Leasing Program - Means a business dedicated to the rental of sail or motor boats of thirty-two (32) feet or more in length to tourists for leisure or recreation. The terms and conditions applicable to the program will be determined through the Incentive Regulation, administrative order, circular letter or any other general communication, which will require that vessels that are eligible for the program be available for rental in Puerto Rico for a period of not less than six (6) months each year.
(25) Property Dedicated to a Tourist Activity - Means:
(i) real estate, including land and improvements dedicated to the operation of a Tourist Activity; Y
(ii) any set of machinery, furniture, fixed movable goods, and equipment necessary or convenient for an Exempt Business in the operation of a Tourist Activity, including infrastructure equipment or furniture used in Ecotécnicas.
(26) Tourism Project - means the physical facilities that will be dedicated to a Tourist Activity of an Exempt Business.
(27) Meeting to present the proposed Tourism Project (Pre-application Conference) - Means the meeting that an applicant will hold with the designated officers of the Tourist Office to present a proposed project, and at which the applicant will explain and will present the merits of the proposed project, its contribution to the development of the tourism industry of Puerto Rico, a description of the tourist activity or activities that are proposed to be carried out, the estimated costs that are expected to be incurred to develop and build the project, the sources of financing, and any other information that the Secretary of the DDEC may require, prior to the request for a Decree.
(28) Medical Tourism - Means any activity that encourages patients to travel to Puerto Rico for the purpose of obtaining medical care and treatment in certified medical facilities or facilities in Puerto Rico, as provided in the Incentive Regulations.
(29) Nautical Tourism - Means the set of services that will be provided in contact with water to nautical tourists, which include, but are not limited to:
(i) the lease or freight to tourists of Nautical Tourism Boats for leisure, recreation or for educational purposes by tourists, including excursions;
(ii) the lease of small boats, jet skis, kayaks, sailboats or other similar boats, motorized or not, to guests of a Hotel, Condohotel, Timeshare or Vacation Club law regime, or which is located within a destination or tourist complex (resort), or in a Tourist Marina or in areas close to the aforementioned places, as provided by the Incentive Regulations, circular letter or administrative determination; Y
(iii) the operation of an Integrated Boat Leasing Program.
Section 1020.06- Definitions Applicable to Manufacturing Activities
(a) For purposes of Chapter 6 of Subtitle B of this Code related to manufacturing activities, the following terms, phrases and words shall have the meaning and scope set forth below:
(1) Flexible Tax Exemption - Means the election allowed to an Exempt Business by Section 2011.05 of this Code.
(2) Industrial Development Income:
(i) The net income derived from the operation of an activity eligible for an Exempt Business that has a Decree granted under this Chapter 6 of Subtitle B of this Code, computed in accordance with the Puerto Rico Internal Revenue Code, adjusted by the special deductions provided by Chapter 6 of Subtitle B of this Code, including the income from the operation of said Exempt Business when making a Flexible Tax Exemption election.
(ii) The Income of Eligible Investments, or under similar provisions of previous or subsequent similar laws.
(iii) The net income derived from the operation of an Exempt Business that has a Decree granted under Chapter 6 of Subtitle B of this Code, as a result of the currency exchange, which is attributable to the sale of products or the provision of services to foreign countries, including the net income derived from hedging transactions.
(iv) The income received as a dividend or benefit by a corporation or company that has Shares in the Exempt Business, that has a Decree granted under this Code, that makes the distribution and that such income is attributable to Industrial Development Income derived by said Exempt business.
(v) The net income derived by the Exempt Business that has a Decree granted under Chapter 6 of Subtitle B of this Code, for business interruption insurance policies, provided there is no reduction in the level of employment in the Exempt Business as a result of the act that resulted in the collection of such income.
(vi) The net income derived from the sale of Intangible Property and any other right to receive income related to activities or Intangible Property owned by the Exempt Business with a Decree under Chapter 6 of Subtitle B of this Code.
(3) Eligible Investment Income-
(i) Interest and dividends on eligible funds invested by the Exempt Business, which has a Decree granted under Chapter 6 of Subtitle B of this Code, in:
(A) loans for the financing of the construction, acquisition or improvement of Housing in Puerto Rico;
(B) loans for the construction, expansion or acquisition of buildings or land, and for the acquisition of machinery and equipment or for operating capital used in Exempt Businesses;
(C) loans for the acquisition of Intangible Property to be used by Exempt Businesses in its operations in Puerto Rico, as well as for the financing of research, experimentation and development activities of new products or industrial processes, or the improvement of same, that are carried out in Puerto Rico;
(D) obligations issued by the Conservation Trust of Puerto Rico and by the Housing and Human Development Trust of Puerto Rico, provided that when issuing said obligations, the Secretary of the Treasury has not revoked his determination that they are trusts for purposes non-pecuniary, in accordance with the terms and conditions established by the Commissioner of Financial Institutions;
(E) capital obligations or Preferred Shares as authorized by Act No. 55 of May 12, 1933, as amended, known as the "Bank Law of Puerto Rico", as well as capital obligations issued by financial institutions, provided that the amount of the capital raised through the capital obligations or preferred Shares issued be invested in Puerto Rico, in accordance with the terms and conditions established by the Commissioner of Financial Institutions;
(F) obligations issued by any subsidiary of the Farm Credit Banks of Baltimore or its successor the AgFirst Farm Credit Bank dedicated to finance directly or indirectly with such funds, agricultural loans, as well as farmers in Puerto Rico, including loans to rural residents to finance rural housing; loans to cooperatives owned and controlled by farmers and dedicated to the marketing or distribution of agricultural products, to the purchase of materials, to provide services to agricultural businesses and to the acquisition of loans or discounts of promissory notes already granted;
(G) loans for the financing of maritime and air operations directly related to the commerce and industry of Puerto Rico, including, but not understood as a limitation, the money used in the construction, acquisition and operation of all types of vessels or sea and air ships;
(H) Shares of Entities that own or operate exempt tourism businesses under the provisions of this Code, the past Law 78-1993, as amended, known as the "Puerto Rico Tourism Development Act of 1993", Law 74-2010 , as amended, known as the "Puerto Rico Tourism Development Act of 2010", which constitutes an Eligible Investment in accordance with Section 2 (n) of said Law.
(I) Shares of Entities that are established as Investment Capital Funds under Act No. 3 of October 6, 1987, as amended, known as the "Investment Capital Funds Act of Puerto Rico", provided that the Fund invests at least twenty percent (20%) of the total contributions received in tourism activities;
(J) any other obligations or loans designated by the Commissioner of Financial Institutions with the approval of the members of the public sector of the Financial Board and the Secretary of the DDEC.
(ii) Interest on eligible funds deposited or invested by the Exempt Business that has a Decree granted under Chapter 6 of Subtitle B of this Code, in institutions dedicated to banking business, including the Economic Development Bank for Puerto Rico, savings and loans associations , savings banks, brokerage houses and other similar institutions doing business in Puerto Rico, that the Commissioner of Financial Institutions, with the approval of the members of the public sector of the Financial Board and the Secretary of the DDEC, determine that they are institutions eligible to receive such eligible funds. The regulations on eligible institutions should take into consideration, among others, that the funds are channeled towards activities that propel production,
(iii) The regulations issued under equivalent provisions of Previous Incentive Laws will continue in force and apply to investments under this Code until the Commissioner of Financial Institutions, with the approval of the Financial Board and the Secretary of the DDEC, amends or repeals said regulation or issue a new regulation, specifically for funds invested under this Code.
(iv) In the event that the Commissioner of Financial Institutions determines that an institution has ceased to be eligible to receive the funds, such determination shall not prevent the interest accrued on them, invested before the institution's loss of eligibility, from continuing. considered as eligible interests under this Code until the expiration of said investment.
(v) For the purposes of paragraph (3), the term “eligible funds” shall include the funds generated in the industrial or service activity, covered by its Exemption Decree under Chapter 6 of Subtitle B of this Code (including taxable years covered by a Flexible Tax Exemption option) or similar provisions of Previous Incentive Laws.
(4) Manufacturing Investment- Means the amount of the investment for which the special deduction provided in Section 2062.06 of this Code is admitted.
(5) Exempt Business Manufacturing predecessor - Means any business that enjoys or has enjoyed exemption under Chapter 6 of Subtitle B of this Code or Previous Incentive Laws for conducting an economic activity substantially similar to that specified in the Decree of a Successor Business of Manufacturing; and is or was owned in twenty-five percent (25%) or more of its issued and outstanding Shares or other interest in property, by the Manufactured Successor Business by any of the shareholders or owners of the Successor Business that own twenty-five per one hundred (25%) or more of the Shares or other interest in ownership of the Successor Business. This last requirement does not apply, when reference is made to Exempt Business Manufatura in paragraph (4) of section (a) of Section 2064. 01 of this Code. The holding of Shares will be determined in accordance with the rules concerning the holding of Shares of Entities under Subtitle A of the Internal Revenue Code of Puerto Rico.
(i) If any of the shareholders or owners of a Successor Manufacturing Business affected by said rules could prove, to the satisfaction of the Secretary of the DDEC and the Secretary of the Treasury, that the capital invested or invested in the Successor Manufacturing Business does not come directly or indirectly from their spouses, ascendants or descendants in a straight line or from their siblings, but it comes from their own pecunium, such rules will not be applicable.
(ii) Under no circumstance shall an Exempt Business be considered Exempt Business Manufacturing Prior to itself.
(6) Manufacturing Successor Business- Means any business that obtains a Decree under Chapter 6 of Subtitle B of this Code for the realization of an economic activity substantially similar to that specified in the Decree of a Exempt Manufacturing Priority Business.
(7) Manufactured Product- Means and includes products transformed from raw materials, including plant material or animal matter, in articles of commerce, articles designated under Previous Incentive Laws, and any product in relation to which substantial industrial operations are carried out in Puerto Rico that In the opinion of the Secretary of the DDEC, they deserve to be considered as Manufactured Products under Chapter 6 of Subtitle B of this Code, due to their nature and extent, the technology required, the substantial employment that is provided, or any other benefit that the operation represents for The welfare of Puerto Rico. An Exempt Business that has a Decree granted under Chapter 6 of Subtitle B of this Code may subcontract the production in Puerto Rico of one (1) or several components or products,
(8) Property Dedicated to Industrial Development- Means:
(i) Real property, including land and improvements, or parts thereof, as well as any addition equivalent to not less than twenty-five percent (25%) of the main floor area, dedicated to the exploitation of an industry that is laid available and used or owned by an Exempt Business that has a Decree granted under Chapter 6 of Subtitle B of this Code or under Law 135-1997 and Law 73-2008 , in its development, organization, construction, establishment or operation.
(ii) Set of machinery and equipment necessary for an Exempt Business that has a Decree granted under Chapter 6 of Subtitle B of this Code or under Previous Incentive Laws, to carry out the activity that motivates its Concession, which is owned, installed, or in any way used under contract by said Exempt Business.
(iii) Nothing in this paragraph shall apply to the so-called finance leases.
(9) Fundamental Services to Business Conglomerates (Clusters) - Means the provision in Puerto Rico of a service, through subcontracting, that is fundamental to the production process of an Exempt Business dedicated to manufacturing and that has a Decree under Chapter 6 of Subtitle B of this Code or under Previous Incentive Laws and belonging to business conglomerates classified as having a high economic impact by the Secretary of the DDEC, provided that the criteria for classifying a Cluster as having a high economic impact shall be established by regulation by the Secretary of the DDEC.
(10) Key Supplier Services - Means the provision in Puerto Rico of services on a commercial scale and on an ongoing basis to an Exempt Business under Chapter 6 of Subtitle B of this Code, or under Prior Incentive Laws as the key supplier of said Exempt Business that is a Unit dedicated to manufacturing. A supplier is considered to be key if its services allow the Exempt Business to be its usual customer to concentrate its activities in the areas of its core competence.
(A) In the case of the service units described under this subsection, not less than eighty percent (80%) of the employees, technicians and professionals of the service unit shall be Resident Individuals of Puerto Rico.
(B) In the case of service units described under this subsection that are operating in Puerto Rico before submitting their application, they will be subject to the limitations related to the entry of the base period, established in Section 2062.01 (g) of this Code.
(C) Legal, accounting or tax advice services will not constitute key services.
(D) For the purposes of this subsection, those services directly related to manufacturing activities, of an Exempt Business with Decree under Chapter 6, of Subtitle B of this Code or under Previous Incentive Laws may be considered as Key Supplier Services , including, among others, the following:
1. Specialized storage.
2. Management of raw material inventory, material in process, finished product and parts inventory, including receipt, storage and inspection.
3. Logistics, regarding the distribution and export of Manufactured Products, except material transportation services and documents offered by businesses mainly dedicated to the business of transportation to the consumer and non-exempt companies.
4. Insertion and distribution of printed material required by federal or state laws or regulations before any Manufactured Product can be distributed or put on sale.
5. Digitalization of documents.
6. Sterilization of instruments, equipment and clean room clothing.
7. Quality control services and validation of processes, equipment and systems.
8. Qualification of equipment, utilities or facilities, and calibration and maintenance of equipment.
9. Repair and remanufacturing of products.
10. Process engineering, which may include, among others, the design of systems and processes that improve the quality and productivity of the operations covered under the Decree.
11. Programming and data systems management services.
12. Specialized technical training.
13. Development and reproduction of educational programs.
14. Logistics related to the purchase and sale of Manufactured Product.
(11) Industrial Unit- Means:
(i) Plant, factory, machinery or set of machinery and equipment with the capacity to carry out the main functions used in the Production of a product on a Commercial Scale, even when it uses in common with other Industrial Units certain minor facilities such as buildings, power plants, warehouses, material conductors or other minor production facilities, or perform some industrial operations outside such Industrial Unit.
(ii) An Industrial Unit may use, in common with other Industrial Units, facilities of greater importance, when the Secretary of the DDEC determines that such use in common is necessary and convenient for the industrial and economic development of Puerto Rico, in view of the nature of operations, additional investment and the number of jobs generated.
(iii) Any Exempt Business, which has a Decree issued under Chapter 6 of Subtitle B of this Code, that establishes an Eligible Business to manufacture a separate or distinct item from that produced by said Exempt Business, with the machinery and equipment necessary to an efficient operation, in addition to any other operation that has enjoyed or is exempted, with an accounting system that clearly reflects the operations of said Eligible Business in accordance with generally accepted accounting standards and principles.
Section 1020.07- Definitions Applicable to Infrastructure and Green Energy Activities
(a) For the purposes of Chapter 7 of Subtitle B of this Code related to Infrastructure and Green Energy activities, the following terms, phrases and words shall have the meaning and scope expressed below:
(1) Environmental and Social Attributes - Means all the qualities, properties of CERs that are inseparable and that include benefits to nature, the environment and society that are the product of the generation of Sustainable Renewable Energy or Alternate Renewable Energy, but excluding the Energy Attributes, as defined; For the purposes of this Chapter, Environmental and Social Attributes include, without limitation, the reduction of environmental pollutants, such as carbon dioxide and other gaseous emissions that produce the greenhouse effect.
(2) Energy Attributes - Refers to the benefits of electric power production (measured in units or fractions of one megawatt hour (MWh), resulting from a Source of Sustainable Renewable Energy or Alternate Renewable Energy, and includes the use or electricity consumption, and the stability of the network, and the capacity for production and contribution to the electric power system of Puerto Rico.
(3) Renewable Biomass - Means any organic or biological material derived from organisms that have the potential to generate electricity, such as wood, waste, and alcohol-derived fuels; and includes natural biomass, which is the one that occurs in nature without human intervention; and residual biomass, which is the by-product or waste generated in agricultural, forestry and livestock activities, as well as solid waste from the agri-food industry, and in the wood processing industry; For the purposes of this Code, it also includes any biomass of a similar nature to those described, as designated by the DDEC, in accordance with Law 17-2019, known as the “Puerto Rico Energy Public Policy Law”.
(4) Urban Center - Means that geographical portion within the heart or town of a town or city that has been defined as such by the municipality in an area plan or designated as a historical zone or delimited by the Planning Board, in close coordination with the Mayor of the Municipality under renovation.
(5) Certificate of Renewable Energy or CER– Means a movable good that constitutes a marketable and negotiable economic asset or value, which can be bought, sold, assigned and transferred between people for any lawful purpose, and that in an integral and inseparable way: represents the equivalent of one (1) megawatt-hour (MWh) of electricity generated by a Sustainable Renewable Energy Source or Alternate Renewable Energy, and in turn comprises all the Environmental and Social Attributes, as defined.
(6) Renewable Source Energy - The term “Renewable Source Energy” means Alternate Renewable Energy and Sustainable Renewable Energy, among other similar sources.
(7) Alternate Renewable Energy - Means energy derived from the following sources:
(i) combustion of gas derived from a landfill system;
(ii) anaerobic digestion;
(iii) fuel cells or cells;
(iv) waste heat.
(8) Sustainable Renewable Energy - Means energy derived from the following sources:
(i) solar energy;
(ii) wind energy;
(iii) geothermal energy;
(iv) combustion of Renewable Biomass;
(v) combustion of gas derived from Renewable Biomass;
(vi) combustion of biofuels derived from Renewable Biomass, or other sources such as microalgae;
(vii) qualified hydroelectric power;
(viii) marine and hydrokinetic renewable energy, according to this term is offered in Section 632 of the "Energy Security and Independence Act of 2007", of the United States of America (The Energy Independence and Security Act of 2007, Pub.L. 110-140, 42 USC § 17211);
(ix) thermal ocean energy.
(9) Green Energy- The term “Green Energy” includes together the terms “Sustainable Renewable Energy” and “Alternate Renewable Energy”.
(10) Low or Moderate Income Family - Means any family or person who does not own their own home and whose annual income does not exceed that established for low income families or moderated by the US Government Social Interest Housing Programs of America or the Government of Puerto Rico, as established by the Secretary of Housing in accordance with the applicable regulations.
(11) Family or Middle Class Person - Means any family or person who does not own their own home and whose annual income exceeds that established for Low Income Families or Moderated by the Social Interest Housing Programs of the Government of Puerto Rico or Government of the United States, up to a maximum equivalent to sixty-five percent (65%) of the maximum amount insured by the Federal Housing Administration (FHA) for the area.
(12) Alternate Renewable Energy Source - Means any of the energy sources that produce electrical energy, through the use of Alternate Renewable Energy, as this term is defined in this Section.
(13) Sustainable Renewable Energy Source - Means any of the energy sources that produce electrical or thermal energy, through the use of Sustainable Renewable Energy, as this term is defined in this Section.
(14) Highly Efficient Generation: Means the production of electrical power in a minimum of sixty percent (60%) in a highly efficient manner, as established by the Energy Bureau, in accordance with Law 57-2014, as amended.
(fifteen) Housing Infrastructure - Means the set of works and permanent improvements that are considered fundamental, including significant improvements to public services, built in conjunction with the construction of a Housing Project, such as systems of aqueducts and storm and sanitary sewers, including all systems to supply, treat and distribute water, sewage treatment and disposal systems, sanitary or potable water lines or trunks, pumping stations, treatment plants, tanks or other facilities for drinking water service or water treatment sewage, solid or hazardous waste disposal systems, stormwater control systems, including lakes, canals and other works to manage stormwater, resource recovery systems,electric power systems, including power distribution or connection lines, substations and any other work or permanent improvement to provide electric power service, roads, access, vehicular intersections, pedestrian walkways, parking facilities, bridges, tunnels, systems transportation, including collective transportation, communication systems, including telephone lines, facilities for cable television, among others.including collective transportation, communication systems, including telephone lines, facilities for cable television, among others.including collective transportation, communication systems, including telephone lines, facilities for cable television, among others.
(16) Regional or Municipal Impact Infrastructure - Means the set of permanent works and improvements that are considered fundamental that are previously required by an agency to several Developers or a Combined as a condition of the endorsement of the Housing Projects of each one of them, as long as : (1) said Infrastructure provides a capacity in excess of the needs of each of the Housing Projects by at least fifty percent (50%), as certified by the agency concerned; (2) the Secretary of Housing and the director of the agency concerned, determine that the construction of the Infrastructure entails a significant investment, which will consider, among other factors, the number of inhabitants to benefit, either directly or indirectly; and (3) the Secretary of Housing determines that it promotes significantly the development of housing in a certain geographical area, municipality or region of the country .
(17) Green Energy Income or IEV - Means income that comes from or is derived from the following sources:
(i) The net income derived from the operation of an activity eligible for an Exempt Business that has a Decree granted under this Code, computed in accordance with the Puerto Rico Internal Revenue Code, adjusted for the special deductions provided by this Code, including the income derived from the sale of CERs, as well as the income from the operation of said Exempt Business when making a Flexible Tax Exemption election under this Code.
(ii) The income received as a dividend or benefit by a corporation or company that has Shares in the Exempt Business that makes the distribution, provided that such income is attributable to IEV derived by said Exempt Business.
(iii) The net income derived by the Exempt Business that has a Decree granted under this Code, for business interruption insurance policies, provided there is no reduction in the level of employment in the Exempt Business as a result of the act that led to the collection of such income.
(iv) Net income derived from the sale of Intangible Property and any other right to receive income related to activities or Intangible Property related to the eligible activity and owned by the Exempt Business with Decree under Chapter 7 of Subtitle B of this Code.
(18) Eligible Green Energy Investment- Means the amount of the investment for which the special deduction provided in Section 2072.06 of this Code is admitted.
(19) Exempt Business Green Energy predecessor - Means any of the following:
(i) Any business that enjoys or has enjoyed exemption under this Code or in accordance with the Industrial or Tax Incentive Laws for the realization of an eligible activity substantially similar to that specified in the Decree of a Successor Green Energy Business; and that it is or was holder in twenty-five percent (25%) or more of its issued and outstanding Shares or other interest in property by the Successor Business of Green Energy or by any of the shareholders or owners of the Successor Business of Green Energy that hold twenty-five percent (25%) or more of the Shares of the Green Energy Successor Business. This last requirement does not apply when referring to a Green Energy Exempt Exempt Business in Section 2074.02 (a) (4) of this Code. For the purposes of this definition:
(A) The holding of Shares will be determined in accordance with the rules related to the holding of Shares of Entities under Subtitle A of the Internal Revenue Code of Puerto Rico.
(B) If any of the shareholders or owners of a Green Energy Successor Business affected by said rules could prove, to the satisfaction of the Secretary of the DDEC and the Secretary of the Treasury, that the capital invested or invested in the Green Energy Successor Business does not comes directly or indirectly from their spouses, ascendants or descendants in a straight line, or from their siblings, but comes from their own peculiar, such rules will not apply.
(20) Operator - Means any person who controls, operates or manages a Production Unit, a Highly Efficient Generation System, a Sustainable Renewable Energy Source or an Alternate Renewable Energy Source.
(21) Person with Disability - Refers to any person with a physical or mental impairment that substantially limits him or her in one or more of the main activities of daily living; or who has a history of such impairment; or that is considered or treated as a person with such a disability.
(22) Elderly People - Refers to any natural person sixty (60) years of age or older.
(23) Highly Efficient Energy Producer — Means an operator of a Highly Efficient Generating System that generates and sells electricity on a commercial scale.
(24) Alternate Renewable Energy Producer - Means an Operator of an Alternate Renewable Energy Source that generates or sells electricity or thermal energy on a commercial scale.
(25) Sustainable Renewable Energy Producer - Means an Operator of a Sustainable Renewable Energy Source that generates or sells electricity or thermal energy on a commercial scale.
(26) Property Dedicated to Green Energy Production - Means any:
(i) Real property, including land and improvements or parts thereof, as well as any addition equivalent to not less than twenty-five percent (25%) of the main floor area, dedicated to the operation of an Exempt Business and which is made available, used or owned by an Exempt Business that has a Decree granted under Chapter 7 of Subtitle B of this Code, in its development, organization, construction, establishment or operation.
(ii) Set of machinery and equipment necessary for an Exempt Business that has a Decree granted under Chapter 7 of Subtitle B of this Code to carry out the activity that motivates its Concession, which is owned, installed or in some way used under contract for said Exempt Business.
(iii) For the purposes of Chapter 7, of Subtitle B of this Code, the term “Property Dedicated to the Production of Green Energy” does not include the so-called finance lease contracts.
(27) Multifamily Project - Means any building or group of buildings that has not less than ten (10) Housing units, independent of each other, but owned by the same owner.
(28) Green Energy Technology - Means technology dedicated to Green Energy Production.
(29) Production Unit - Means plant, machinery or set of machinery and equipment, installed in one or more locations, but which constitutes an integrated Green Energy project, with the capacity to carry out Green Energy Production, including equipment and Supplementary structures, such as those related to the distribution of the energy produced or the administrative functions of the Exempt Business or Green Energy project, even if the latter performs some operations outside the premises of such unit. The determination of whether a set of machinery and equipment, and supplementary facilities, established in different locations constitutes an integrated Green Energy project, will be made taking into account factors such as potential customers for the purchase of the energy that will be produced,
(30) Assisted Living - Means the concept of assistance created in housing programs where any Entity meets the following requirements: (1) provide ample units, as defined in the Incentive Regulations; (2) provide, directly through the employees of such entity or through agreements with another organization individualized personal services for three (3) or more Elderly Persons who are not related within the fourth degree of consanguinity or second affinity with the provider of such services; and (3) can accept payment or reimbursements from third parties, in favor or on behalf of residents, as payment or payment to the lease fee established by the residential contract.
(31) Housing - any structure intended for individual or collective housing, whose development or construction has begun after the approval of the Code, provided that in the case of those projects that are developed or built by phases or units and that, despite Having started the project prior to the effective date of this Code, there are still phases or units to be developed or built after the validity of this Code, the Secretary of the DDEC may consider such phases or units as eligible under the provisions of this Code.
(32) Social Interest Housing - Means those units for sale or rent whose maximum sale price does not exceed the sum of the Adjusted Maximum Benefit to Qualification for Family Composition (MAPCCF) and the elements or factors of increase as provided in the Regulations Incentives or whose lease or market value can not exceed the provisions of said Regulation.
(33) Housing for the Elderly - Means the simple structure, in rows, of pedestrian access or multipurpose, for homes for the Elderly for the Elderly, when they are encouraged or developed by the Department of Housing or its agencies operational, when they are developed or promoted or by private companies.
(34) Historic Areas of Puerto Rico- Means all those areas declared by the Planning Board of Puerto Rico or by the Institute of Puerto Rican Culture as provided by Act No. 374 of May 14, 1949, as amended, known as "Law of Historic, Ancient or Public Interest Areas" and by Act No. 89 of June 21, 1955, as amended, respectively, decreed thus to contain a large number of structures of historical, artistic, cultural or environmental value that They constitute our built and urban heritage.
Section 1020.08 - Definitions Applicable to Agribusiness Activities
(a) For the purposes of Chapter 8 of Subtitle B of this Code related to Agriculture activities, the following terms, phrases and words shall have the meaning and scope expressed below:
(1) Farmer Bona Fide - Means any natural or legal person who during the Tax Year for which he claims deductions, exemptions or benefits provided by Chapter 8 of Subtitle B of this Code has a current certification issued by the Secretary of Agriculture, which certifies that during said year was dedicated to the exploitation of an activity that qualifies as an agribusiness business, as said activity is described in paragraph (2) of section (a) of Section 2081.01, and that derives fifty-one percent (51%) or more than your gross income from an agribusiness business as an operator, owner or lessee, as stated in your income tax return or fifty-one percent (51%) of the value of the production and / or investment of an agribusiness business as an operator , owner or lessee.
(2) Agricultural Workers - Any person who works through remuneration in work that leads to agricultural or livestock production, the maintenance of a farm or its direct dependencies that affects the storage, transportation, distribution and marketing of the products of the farm.
Section 1020.09 - Definitions Applicable to Creative Industry Activities
(a) For the purposes of Chapter 9 of Subtitle B of this Code related to Creative Industries activities, the following terms, phrases and words shall have the meaning and scope expressed below:
(1) Creative Industry Development Districts - Means each geographic area as described in Section 2094.01 of this Code.
(2) Study - Means a high-capacity full-length film and television production studio, built for such purposes, developed and operated anywhere in Puerto Rico, suitable for housing soundstages, outdoor scenery, including facilities for build and design set designs, production offices and production services departments that provide services to the producing community and any other necessary comfort or facility within the study, as determined by the Incentive Regulation, administrative order, circular letter or any other communication of a general nature, whose budget as certified by the Auditor, is equal to or greater than five hundred thousand dollars ($ 500,000.00).
(3) Postproduction Study- Means a completion study of filmic material that contains rooms specialized in sound editing, rooms specialized in video editing, rooms specialized in color correction, equipment for creating visual effects, other equipment and others specialized structures whose value in equipment at the time of purchase and installation or building has been equal to or greater than one million dollars ($ 1,000,000.00), as long as the rooms have the designated process as their sole purpose and do not constitute generic use rooms . The value of the building and land will be excluded from this amount.
(4) Deposit - Means a contingent and irrevocable letter of credit issued by a Financial Institution authorized to do business in Puerto Rico, a guarantee from a bond or insurance company, or a guarantee issued by a Person with a good credit history, in each case acceptable to the Secretary of the Treasury or the Secretary of the DDEC, as the case may be, so that a Film Project will be completed within the proposed terms and parameters. In the case of Film Projects, the term “Deposit” will include a “Completion Bond” (completion bond).
(5) Main Photograph - Means the production phase during which a Film Project is filmed. The term will not include preproduction or postproduction.
(6) Production Expenses - Means those development, preproduction, production and postproduction expenses incurred directly in the production of a Film Project. Only expenses attributable to the development of a Film Project will be included when not less than fifty percent (50%) of the Main Photograph of the Film Project is carried out in Puerto Rico. The expenses attributable to preproduction, production and postproduction will not have to meet the requirement of fifty percent (50%) of the Main Photography stated above to be considered Production Expenses.
(7) Puerto Rico Production Expenses - Means payments made to Domestic or Foreign Persons for services physically provided in Puerto Rico, directly attributable to the development, preproduction, production and postproduction of a Film Project. Only expenses attributable to the development of a Film Project will be included when not less than fifty percent (50%) of the Main Photograph of the Film Project is carried out in Puerto Rico. The expenses attributable to pre-production, production and post-production will not have to comply with the requirement of fifty percent (50%) of the Main Photograph mentioned above to be considered Puerto Rico Production Expenses. To be Puerto Rico Production Expenses, Payments received by Domestic Persons and Foreign Persons will be subject to income taxes in Puerto Rico, pursuant to Chapter 9 of Subtitle B of this Code, either directly or through a professional services corporation or other Entity. Puerto Rico Production Expenses include payments related to the development, preproduction, production and postproduction of a Film Project, including, but not limited to, the following:
(i) Wages, marginal benefits, allowances or fees for talent, administration or labor to a person who is a Domestic Person or a Foreign Person. However, the diets of a person who is not a Domestic Person or Foreign Persons, may be included in the definition of Puerto Rico Production Expenses, at the discretion of the Secretary of the DDEC;
(ii) Interest, charges and fees paid to Persons included in paragraph (4) of section (f) of Section 1033.17 of the Puerto Rico Internal Revenue Code; or
(iii) Any of the following goods or services provided by a supplier that is a Domestic Person or Foreign Person:
(A) the story and script that will be used for a Film Project;
(B) the construction and operation of set designs, clothing, accessories and related services;
(C) photography, sound synchronization, lighting and related services;
(D) postproduction services such as video editing, audio, color correction, visual effects and other related, including the rental of specialized rooms and postproduction equipment within them;
(E) rental of facilities and equipment;
(F) rental of vehicles, including airplanes or boats, as long as the plane or vessel to be rented is registered in, and has Puerto Rico as its main port, and the rental is limited to travel within Puerto Rico, its airspace and territorial waters;
(G) food and lodging;
(H) plane tickets, as long as they are purchased through a travel agency or company based in Puerto Rico to make trips to and from Puerto Rico, or within Puerto Rico, directly attributable to the Film Project;
(I) insurance or bond coverage, as long as it is acquired through an insurance producer authorized to do business in Puerto Rico; Y
(J) other costs directly attributable to the Film Project, in accordance with the general practice accepted in the entertainment industry, as determined by the Incentive Regulation, administrative order, circular letter or any other general communication.
(iv) The following are excluded from the definition of Puerto Rico Production Expenses:
(A) Those items paid to Domestic Persons with the cash of any subsidy, donation, or allocation of funds, from the Government of Puerto Rico. Those items paid to Domestic Persons with the cash of contributions made to a Film Project, which by their nature and terms are refundable, such as loans or investments, excluding contributions by the Cinematographic Fund as defined in the “Law of Economic Incentives for Industry Film ", at the discretion of the Secretary of the DDEC, may be included in the definition of Puerto Rico Production Expenses.
(B) the cost of goods acquired or leased by Domestic Persons , outside of Puerto Rico, for resale or rental to a Concessionaire who does not comply with the rules issued by the Secretary of Development through regulations and / or circular letter and when, in Auditor's opinion, there is no economic substance in the transaction.
(C) Those items paid to Domestic Persons, primarily, for the services of Foreign Persons, except for Entities that render the services of Foreign Persons.
(8) Creative Industries - For the purposes of this Code, Creative Industries are those companies registered in the Creative Industries Registry, which have potential for job creation and economic development, mainly through the export of creative goods and services in the following sectors : Design (graphic, industrial, fashion and interior); Arts (music, visual, performing arts and publications); Media (application development, video games, online media, digital content and multimedia); and Creative Services (architecture and creative education).
(9) Studio Operator - Means the Person dedicated to administering and operating a Studio or a Postproduction Studio.
(10) Domestic Producer - Means the Domestic Person entrepreneur that:
(i) directly or indirectly controls the intellectual property rights of the Film Project and is responsible for the financing and production of the Film Project; Y
(ii) directly or indirectly, individually or together with other Domestic People producers, you have the right to receive not less than thirty percent (30%) of the net proceeds of the Film Project to be distributed among the producers of the Film Project, after repayment of financing and other economic obligations.
(11) Film Project - Means one or more of the activities contemplated in paragraph (1) of section (a) of Section 2091.01 of this Code.
(12) Transfer - Means, as appropriate, the rent, sale, exchange, transfer, transfer, or any other form of transfer, of movable or immovable property, as the case may be.
Section 1020.10- Definitions Applicable to Activities of Other Industries
(a) For the purposes of Chapter 11 of this Code related to activities covered and related to Other Industries, the following terms, phrases and words shall have the meaning and scope expressed below:
(1) Net Income from Shipping Activities - Means the gross income from, or related to, the use, rental or lease for use, of any vessel or part thereof used in the transportation of cargo between ports in Puerto Rico and ports located in foreign countries or of any property of any other kind, movable and immovable used in the operation of said vessel.
(2) Freight Transportation by Sea - Means:
(i) the transportation of cargo by sea between ports located in Puerto Rico and ports located in foreign countries, and
(ii) renting or leasing vessels, which are used in such transportation, or property of any other type, movable and immovable, used in relation to the operation of such vessels when the transportation meets the requirements mentioned in Section 2110.02 of this Code.
Section 1030.01– Job Creation
(a) The Secretary shall require, as an indispensable requirement to grant the incentives provided in this Code, that the Exempt Business, with an annual, actual or projected turnover, greater than three million dollars (3,000,000.00) maintain at least the number of Direct employees provided in section (b) during their taxable year. Nothing herein provided shall prevent the Secretary from imposing a higher employment requirement on an Exempt Business, considering the best interests of Puerto Rico.
(b) Any Exempt Business with an annual turnover, real or projected, greater than three million dollars (3,000,000.00), must maintain, during the term of the concession, subject to the provisions of section (d) of this Section , at least:
(1) One (1) full-time direct employee, if the decree was granted under the provisions of Chapter 3 of Subtitle B.
(2) Three (3) full-time direct employees, if the decree was granted under the provisions of Chapter 6 of Subtitle B.
(3) Any decree issued under the provisions of another Section or chapter of this Code shall not have a job creation requirement.
(c) For the purposes of this Section, a “direct employee” is any individual resident of Puerto Rico that the Exempt Business has hired as an employee, whether full-time, part-time or temporary, to participate directly in the activities covered by the decree. For the purpose of determining the number of full-time direct employees maintained by the Exempt Business during the taxable year, the total hours worked by all of its direct employees during the year must be added and the resulting amount divided by two thousand eighty ( 2,080). The result, regardless of decimal numbers, will be the number of direct employees during that taxable year. For these purposes, vacation hours and other authorized licenses may be taken into account as hours worked. However, overtime hours,
(1) In addition, in those cases where a regular employee resigns or is terminated, the Exempt Business will have a period of ninety (90) days to hire a new employee. If the Exempt Business hires a new employee during that period, the days in which the vacancy was held will be considered hours worked within the calculation of the two thousand eighty (2,080) hours.
(d) Employment Determination - In determining employment requirements, the Secretary shall follow the following rules:
(1) In those cases in which the employment requirement was imposed as a result of the Exempt Business having a real annual turnover of more than three million dollars $ 3,000,000.00, during the first six (6) months after the issuance of the decree, shall maintain twenty-five percent (25%) of the requirement provided; after six (6) months but before twelve (12) months after the issuance of the decree, you must keep fifty percent (50%) of the required requirement; after twelve (12) months but before eighteen (18) months after the issuance of the decree, you must comply with seventy-five percent (75%) of the requirement; and after eighteen (18) months after the issuance of the decree, it must comply with one hundred percent (100%) of the requirement.
(2) In those cases where the employment requirement was imposed as a result of the Exempt Business to have a projected annual volume of business, the provisions of subsection (1) of this item (d) will begin to apply in the taxable year following the taxable year in which the Exempt Business reaches a turnover of more than three million dollars ($ 3,000,000.00).
(3) The Secretary will take into consideration the owners of the Eligible Business who are full-time employees of the Entity and receive a salary for their services;
(4) The Secretary will take into consideration the employees of another employer who have been hired by the Exempt Business to provide services directly related to the activities covered by the Decree, including those working under an employee lease contract.
(e) Flexible Compliance - Any Exempt Business that fails to meet the employment requirement set forth herein for a taxable year:
(1) If the Exempt Business met at least eighty percent (80%) of the required jobs, it will be understood that it met that requirement. This exception may not be used more than three (3) times during the term of the Decree.
(2) If the Exempt Business did not meet at least eighty percent (80%) of the required jobs, it shall request the Secretary to allow him to meet said requirement with the amount maintained during the year. Said request shall contain the reasons for the breach, the corrective measures that the Exempt Business will take to comply with the requirement and any other information that the Secretary may require through regulations or other general publication. Provided that compliance with the employment requirement through this paragraph may not be used more than two (2) times during the term of the Decree.
(3) The Secretary is empowered to grant the exceptions set forth in paragraphs (1) or (2) of this section in excess of the years there provided if it serves the best interests of Puerto Rico.
(4) Existing Decrees - For taxable years beginning after December 31, 2017, any Exempt Business with a decree granted under Act 73-2008, as amended, Act 20-2012, as amended or Act 135-2014, as amended, you may use the provisions of this section to comply with that requirement. This exception may not be used more than three (3) times during the remainder of the Decree.
(d) Any Exempt Business with a decree granted under Act 73-2008, as amended; Law 20-2012, as amended or Law 135-2014, as amended, may request an amendment to said decree, and the Secretary may grant it provided that it serves the best interests of Puerto Rico, to apply the requirement of employment provided in section (b) of this Section.
SUBTITLE B- ECONOMIC DEVELOPMENT INCENTIVES
CHAPTER 1- GENERAL APPLICATION INCENTIVES
SUBCHAPTER A - GENERAL RULE
Section 2011.01- General Provisions
The benefits of this Subchapter will be of general application to Exempt Businesses under this Code, unless otherwise provided in this Chapter 1 and in the next Chapters of this Subtitle B.
Section 2011.02– Income Tax
(a) Income tax-
(1) In general- The Exempt Income generated in the eligible activities of an Exempt Business under this Code will be subject to a fixed preferential income tax rate of four percent (4%), instead of any other income tax , if any, provided by the Puerto Rico Internal Revenue Code or any other law . For the purpose of this exemption, the funds from an insurance policy for business interruption that covers the eligible activities of an Exempt Business will be considered Exempt Income.
(b) Distributions-
(1) The shareholders or partners of a corporation or company that is an Exempt Business that has a Decree granted under this Code shall not be subject to income tax on dividend distributions or profits from the Exempt Income of such Exempt Business, or in the case of an Exempt Business that is not a domestic corporation, on distributions of dividends or profits from income from sources outside of Puerto Rico accrued by the Exempt Business, as provided in the Puerto Rico Internal Revenue Code.
(2) Taxation of Exempt Distributions-
(i) The distribution of dividends or benefits made by an Exempt Business that has a Decree granted under this Code, even after its Decree has expired, shall be deemed to be made from its Exempt Income if, at the date of distribution, it is not exceeds the undistributed balance of your Exempt Incomeaccumulated, unless the Exempt Business, at the time of making the distribution declaration, choose to distribute the dividend or benefit, totally or partially, of other profits or benefits. The amount, the year of accumulation and the nature of the distribution made of the Exempt Income will be the one designated by the Exempt Business by means of notification sent together with the payment thereof to its shareholders or partners and be informed to the Secretary of the Treasury, through informative declaration, not later than February 28 following the year of distribution.
(3) In the cases of an Entity that as of the date of commencement of operations as an Exempt Business have accumulated profits or benefits, distributions of dividends or benefits that are made as of said date, shall be deemed to be taken from the balance sheet. distributed of such profits or benefits, but once the balance is exhausted by virtue of such distributions, the provisions of paragraph (1) shall apply.
(4) Subsequent distributions of the Exempt Income carried out by any Entity will also be exempt from any taxation.
(c) Deduction and Drag of Net Operating Losses—
(1) Deduction for Current Losses Incurred in Activities Not Covered by an Exemption Decree - If an Exempt Business that has a Decree granted under this Code incurs a net loss in operations other than the operation declared exempt under this Code, computed without The benefit of the deduction provided in Sections 2062.06 and 2072.06, in cases where such deductions are applicable, may be used only against income not covered by an exemption decree and shall be governed by the provisions of the Puerto Rico Internal Revenue Code .
(2) Deduction for Current Losses Incurred in the Operation of the Exempt Business- If an Exempt Business that has a Decree granted under this Code incurs a net loss in the operation declared exempt under this Code, computed without the benefit of the special deduction provided in Sections 2062.06 and 2072.06, in cases where such deductions are applicable, you may deduct the loss against your Industrial Development Income from the operation that incurred the loss.
(3) Deduction for Dragging Losses from Previous Years- A deduction will be granted for dragging losses incurred in previous years, as set forth below:
(i) The excess over the deductible losses under paragraph (2) of this section may be carried forward against the Exempt Income of subsequent taxable years. Losses will be carried forward in the order in which they were incurred.
(ii) Any net loss that has been incurred in a year in which the election of the flexible tax exemption provided in Section 2011.05 of this Code is in force may be carried forward only against the Exempt Income generated by the Exempt Business, under the Decree under which the election of Section 2011.05 of this Code was made. Losses will be carried forward in the order in which they were incurred.
(iii) Upon expiration of the exemption period for income tax purposes, the net losses incurred in the operation declared exempt under this Code, as well as any excess of the deduction allowed under Sections 2062.06 and 2072.07, in cases where If such deductions are applicable, which the Exempt Business is dragging to the expiration date of such period, they may be deducted against any taxable income in Puerto Rico, subject to the limitations provided in Subtitle A of the Internal Revenue Code of Puerto Rico. Such losses will be considered as incurred in the last Tax Year in which the Exempt Business that owns a Decree under this Code enjoyed a tax exemption on income under the Decree.
(iv) The amount of the net loss in operations to be carried forward shall be computed in accordance with the provisions of Section 1033.14 of the Internal Revenue Code of Puerto Rico. In the case of Exempt Businesses that have a Decree granted under the provisions of Chapter 6, Subtitle B of this Code, in addition to the exceptions, additions and limitations provided in that Section, the loss shall be adjusted by the Eligible Investment Income of Such Exempt Business.
(d) Payment of the Tax- In the absence of a provision to the contrary, the withheld or payable contributions shall be withheld or paid in the manner and manner provided by the Puerto Rico Internal Revenue Code for the payment of income and withholding contributions in general.
Section 2011.03– Property Contributions
(a) An Exempt Business under this Code shall have a seventy-five percent (75%) exemption in the tax on movable and immovable property as imposed by Law 83-1991.
(b) Tax rate - The taxable portion will be subject, during the term of the Decree, to the tax rate that is in force as of the date of signing the Decree, regardless of any subsequent amendment made to the Decree.
(c) Movable and immovable property under construction ( CIP ) - Movable and immovable property under construction will be totally exempt from contributions on movable and immovable property during the construction period instead of terms and requirements set forth in the "Municipal Property Tax Law".
Section 2011.04– Municipal Contributions
(a) The entry of eligible activities of an Exempt Business under this Code shall have a fifty percent (50%) exemption on municipal contributions, be understood on municipal patents, municipal arbitration and other municipal contributions imposed by any municipal ordinance .
(b) Tax rate - The taxable portion of the turnover will be subject, during the term of the Decree, to the tax rate that is in effect as of the date of signature of the Decree, regardless of any subsequent amendment made thereto.
(c) Exemption of the first semester - The Exempt Business that has a Decree granted under the Code shall enjoy a total exemption on the municipal patents applicable to the turnover of said Exempt Business during the semester of the Government Fiscal Year in which the Exempt Business begin operations in any municipality, in accordance with the provisions of the "Municipal Patent Law".
(d) Prescription period for the appraisal and collection of the patent - Any Exempt Business under this Code or under Prior Incentive Laws may waive the benefit of the five percent (5%) discount for prompt payment provided in Section 11 of the "Municipal Patent Law", and make full payment of your municipal patent on the date provided by said law. Provided, that in the case of Exempt Businesses who choose to make prompt payment and waive the discount, the period of limitation for the appraisal and collection of the patent imposed under the “Municipal Patent Law” shall be three (3) years. as of the date on which the Declaration on Business Volume is rendered, instead of the terms set forth in sections (a) and (b) of Section 19 of the "Municipal Patent Law".
(e) Capital gains- Net capital gains, as well as any other net profits obtained from the sale of any asset or property used in exempt operations, will be subject to municipal contributions (patents), in the taxable portion, only as to the amount of the net profit, if any, instead of the terms set forth in the "Municipal Patent Law".
(f) Construction arbitration - An Exempt Business that has a Decree granted under this Codeand its contractors and subcontractors shall be seventy-five percent (75%) exempt from any contribution, tax, right, license, construction arbitration, arbitration, fee or fee imposed by any municipal ordinance on the construction of works to be used by said Exempt Business in its operations, without understanding that such contributions include the municipal patent imposed on the turnover of the Exempt Business contractor or subcontractor. In those Decrees under this Code or Previous Incentive Laws where the exemption provided in this section is applicable, it will be understood that: (1) a construction site will be used by an Exempt Business to the extent that it is carried out within the properties where the operation is located and to facilitate the operation of the Exempt Business,
Section 2011.05– Flexible Tax Exemption
Exempt Businesses that have a Decree granted under this Code will have the option to choose the specific tax years to be covered under their Decrees regarding their Exempt Income provided they notify the Secretary of DDEC together with the Secretary of the Treasury no later than the date set forth in the Internal Revenue Code of Puerto Rico to file its income tax return for said Tax Year, including the extensions granted for this purpose. Once said Exempt Business opts for this benefit, its exemption period will be extended for income tax purposes, for the number of tax years that has not enjoyed a Decree.
SUBCHAPTER B - SMALL AND MEDIUM ENTERPRISES (SMEs)
Section 2012.01– Tax Exemption
An Exempt Business that is a New SME in accordance with the provisions of this Code, in addition to being subject to the provisions applicable to such Exempt Business under this Code, shall enjoy the benefits provided in this Subchapter. A Successor Business of an SME will not qualify for the benefits contained in this Subchapter. The Exempt Income of a New SME will be subject to a fixed income tax rate of two percent (2%) for a period of five (5) years, and four percent (4%) for the remaining period of the Decree . In addition, the New SME will enjoy one hundred percent (100%) of exemption in contributions on movable and immovable property, as well as municipal contributions for the first five (5) years of the Decree.
Section 2012.02 – Tax Credits for Purchases of Products Manufactured in Puerto Rico
An Exempt Business that is considered a New SME may request a Tax Credit from DDEC for Purchases of Products Manufactured in Puerto Rico of up to thirty percent (30%) of purchases of such products, subject to the provisions of Sections 3000.01 and 3000.02 of this Code.
SUBCHAPTER C - VIEQUES AND CULEBRA
Section 2013.01– Businesses operating in Vieques and Culebra
The benefits of this Subchapter shall apply exclusively to the operations carried out by an Exempt Business operating in the islands of Vieques or Culebra, subject to the criteria and limitations established by the DDEC and the Department of the Treasury through the Incentive Regulations. Exempt Businesses, in addition to being subject to the provisions applicable to such Exempt Business under this Code, shall enjoy the benefits provided in this Subchapter.
Section 2013.02 - Tax Benefits
The Exempt Income generated by the activities carried out by an Exempt Business in the islands of Vieques and Culebra will be subject to a fixed income tax rate of two percent (2%) for a period of five (5) years, and four percent (4%) for the remaining period of the Decree. In addition, the Exempt Business shall enjoy one hundred percent (100%) of exemption in contributions on movable and immovable property, as well as municipal contributions for the first five (5) years of the Exemption Decree. The remaining tax exemption period shall enjoy seventy-five percent (75%) of exemption in contributions on movable and immovable property, and fifty percent (50%) of exemption in municipal contributions.
Section 2013.03 – Tax Credits for Purchases of Products Manufactured in Puerto Rico
(a) Notwithstanding the provisions of Sections 3020.01 of and 3000.02 this Code, an Exempt Business under this Code that operates from the islands of Vieques or Culebra, but only during the period that operates from the islands of Vieques or Culebra, may request from the DDEC a Tax Credit of up to thirty percent (30%) of purchases of Products Manufactured in Puerto Rico, subject to the provisions of Sections 3000.01 and 3000.02 of this Code.
(b) The credit provided in this Section shall be non-transferable, except in the case of an exempt reorganization. The amount of credit not used by the exempt business in a taxable year may be carried over to subsequent taxable years, until it is used in its entirety. This credit will not generate a refund.
SUBCHAPTER D - OTHER INCENTIVES
Section 2014.01– Strategic Projects
The Secretary of the DDEC, with the favorable endorsement of the Secretary of the Treasury, will have the power to designate through the Incentive Regulation those activities and projects that will be considered strategic for the purposes of this Code. In addition, as part of the Government's human capital reform, the Secretary of the DDEC, with the favorable endorsement of the Secretary of the Treasury, through the Economic Incentive Fund or other sources, will have the power to grant incentives that promote development and job creation in high impact industries that are considered Strategic Projects. The Secretary of the DDEC and the Secretary of the Treasury shall ensure that the incentives are based on the best interest and for the economic and social welfare of Puerto Rico.
Section 2014.02– Innovative Pioneer Activity
(a) The Secretary of the DDEC, through the Incentive Regulations will determine that economic activity that has not been produced or carried out, or carried out in Puerto Rico prior to the twelve (12) months ending on the date on which It requests the exemption for the novel pioneer activity, and that it has special characteristics, attributes or qualities that are impactful for the benefit of the socioeconomic development of Puerto Rico, including a profile of the jobs to be created by the aforementioned novel pioneer activity.
(b) Determinationof Pioneering Novel Activity - To determine whether an activity constitutes a pioneering novel economic activity, the Secretary of the DDEC will consider the economic impact that said activity will represent for Puerto Rico, based on priority factors, in particular: (i) the degree or level of use and integration of research and / or development activities to be carried out in Puerto Rico; (ii) the tax impact that the innovative pioneer activity may generate in Puerto Rico; (iii) the nature of the activity with particular interest in those that increase competitiveness in global markets, that require or result in the development of innovation capabilities, and that result in additional capital investment in Puerto Rico; (iv) the capital investment to be made in plant, machinery and equipment; (v) the uniqueness of the innovative pioneer activity in Puerto Rico for the international market; (vi) the technological improvements that will be part of the operations, with particular interest in the implementation of emerging or cutting edge technologies; and (vii) any other factor that merits recognition of the activity as a novel pioneer activity, given that it will result in the best economic and social interests of Puerto Rico.
(c) The income of a Pioneer Novel Activity shall be subject to a fixed preferential rate of income tax of four percent (4%) which may be reduced up to one percent (1%) when the Secretary of the DDEC, prior The favorable recommendation of the Secretary of the Treasury determines that it will result in the best economic and social interests of Puerto Rico. The Secretary of the DDEC, through the Incentive Regulations, shall promulgate the necessary regulations to determine what constitutes a Pioneer Novel Activity, as well as the information requirements that must be submitted to the Secretary of the DDEC.
CHAPTER 2- INDIVIDUALS
SUBCHAPTER A– ELIGIBILITY
Section 2021.01- Investor Individuals that Move to Puerto Rico
Any Investor Resident Individual may request the Secretary of the DDEC for the economic benefits provided in Subchapter B of this Chapter, subject to the limitation provided in Section 2022.03 (b).
Section 2021.02- Difficult Recruitment Professional.
Any Professional with Difficult Recruitment may request the Secretary of DDEC for the economic benefits provided in Section 2022.03 of this Code. New Professional Residents of Difficult Recruitment who obtain a Decree under this Chapter shall be exempt from the contribution of ten thousand dollars ($ 10,000) to non-profit entities set forth in section (b) of Section 6020.10.
Section 2021.03– Qualified Physicians
(to) Any individual admitted to the practice of medicine, of podiatry, whether a dentist or a dentist or practicing any specialty of dentistry, and who meets the requirements set forth in Section 2023.02 of this Code, may request the Secretary of the DDEC to grant the economic incentives set forth in Section 2022.04. All Qualified Physicians who are resident in Puerto Rico, as defined in Section 1010.01 (a) (30) of the Internal Revenue Code, will have until September 30, 2019 to request a Decree under this Chapter. On the other hand, any Qualified Physician who is not a resident of Puerto Rico at the effective date of this Code, as defined in Section 1010.01 (a) (30) of the Internal Revenue Code, will have until June 30, 2020 to request a decree under this Chapter. Applications that are received after the dates set forth above will not be accepted, except in the case of dental surgeons who do not practice any specialty in dentistry, who will have until June 30, 2020 to request a Decree under this Act . Provided, however, that applications submitted after April 21, 2019, will be considered under the provisions of this Code.
(b) The qualified doctors to obtain a decree under this chapter shall be exempt from the contribution of ten thousand dollars ($ 10,000) to non-profit provided in subsection (b) of Section 6020.10.
Section 2021.04- Researchers or Scientists
(a) Any Eligible Researcher or Scientist, as defined in this Code, may request from the Secretary of DDEC the economic incentives established in Section 2022.05 of this Chapter.
SUBCHAPTER B- CONTRIBUTIVE BENEFITS
Section 2022.01- Exemption from Income for Interest and Dividends Accrued by Resident Individual Investor
(a) The income from all sources accrued by an Investor Resident Individual, after having become a resident of Puerto Rico, but before January 1, 2036, which consists of interest and dividends, including, but not limited to, interests and Dividends that come from a registered investment company, as described in Section 1112.01 of the Puerto Rico Internal Revenue Code, will be totally exempt from the payment of income taxes of Puerto Rico, including the alternate basic tax provided in the Internal Revenue Code from Puerto Rico. In addition, the income derived by an Investor Resident Individual after having become a resident of Puerto Rico, but before January 1, 2036, which consists of interest, financing charges,
Section 2022.02- Special Contribution to Resident Individual Investor- Net Capital Gain
(a) Appreciation before becoming a Resident Individual of Puerto Rico - The part of the net long-term capital gain generated by a Resident Investor Individual that is attributable to any appreciation held by Securities or Other Assets, which it possesses before becoming in Resident Individual of Puerto Rico , which is recognized after ten (10) years after becoming Resident Individual of Puerto Ricoand before January 1, 2036, it will be subject to the payment of a contribution of five percent (5%), instead of any other contributions imposed by the Internal Revenue Code of Puerto Rico, and will not be subject to the basic contribution alternate provided by Subtitle A of the Internal Revenue Code of Puerto Rico. If such appreciation is recognized at any other time, the net capital gain in relation to such Securities or Other Assets will be subject to the payment of income taxes in accordance with the tax treatment provided by the Puerto Rico Internal Revenue Code. The amount of this net long-term capital gain will be limited to the portion of the gain that relates to the appreciation of the Securities or Other Assets while the Investor Resident Individual lived outside of Puerto Rico.
(a) Appreciation after becoming a Resident Individual of Puerto Rico - The total net capital gain generated by an Investor Resident Individual related to any appreciation held by Securities or Other Assets, after it becomes a Resident Individual of Puerto Rico, recognized before January 1, 2036, will be totally exempt from the payment of income taxes of Puerto Rico, including the alternate basic tax provided by the Puerto Rico Internal Revenue Code. If such appreciation is recognized after December 31, 2035, the net capital gain in relation to such Securities or Other Assets will be subject to the payment of income taxes pursuant to the tax treatment provided by the Puerto Rico Internal Revenue Code.
Section 2022.03- Special Contribution to a Difficult Recruitment Professional
(a) The salary income, according to said term is defined in Section 1062.01 of the Internal Revenue Code of Puerto Rico, accrued by a Professional of Difficult Recruitment up to an amount of one hundred thousand dollars ($ 100,000 ) will be subject to the payment of income taxes as provided in the Puerto Rico Internal Revenue Code. Salaries and benefits in excess of one hundred thousand dollars ($ 100,000) will be totally exempt from the payment of income tax, including the alternate basic tax provided in the Internal Revenue Code of Puerto Rico.
(b) To receive this tax benefit for accrued salaries, the Hard Recruitment Professional will have to fill a full-time position in an Exempt Business with a current Decree, as established in this Code. In addition, in order to benefit from the benefits provided in this Section, the Hard Recruitment Professional may not benefit from the provisions of Sections 2022.01 and 2022.02 or hold a decree under Act 22-2012, as amended, known as the “Act to Encourage the Transfer of Investor Individuals to Puerto Rico ”.
Section 2022.04- Special Contribution for Qualified Physicians
(a) Tax benefits–
(1) Income tax–
(i) Eligible Income earned by Qualified Physicians who have a Decree under this Code shall be subject, in lieu of any other income tax provided by the Puerto Rico Internal Revenue Code or any other law, at a fixed preferential rate of contribution on income of four percent (4%). The Eligible Income will be that generated by offering Professional Medical Services during the entire period of the Decree, from its effective date. The effective date will be set as follows:
(A) The effective date of a Decree will be January 1 of the Tax Year in which the Qualified Physician submits the Decree request.
(B) When the Decree corresponds to a Qualified Physician who is not a Resident Individual on the date of approval of the Decree, its effective date will be January 1 of the Taxable Year in which the Qualified Physician transfers his medical practice to Puerto Rico and Become a Resident Individual of Puerto Rico.
(C) When the Decree corresponds to a Qualified Physician who is a Resident Individual of Puerto Rico and is studying for residency as part of an accredited program as of the date of approval of the Decree, its effective date will be January 1 of Tax Year in which the Qualified Physician establishes his medical practice in Puerto Rico.
(D) When the Decree corresponds to a Qualified Physician who is studying for residency as part of an accredited program that is not a Resident Individual at the date of approval of the Decree, its effective date will be January 1 of the Tax Year in which the Qualified Physician establishes his practice in Puerto Rico, and becomes a Resident Individual of Puerto Rico.
(ii) Exemption applicable to income from accrued dividends. - Eligible Dividends of Qualified Physicians will be exempt from withholding tax on income at the source and payment of income taxes from Puerto Rico, including the alternate basic tax provided by the Code, up to a maximum of two hundred and fifty thousand dollars ($ 250,000) per Tax Year.
(b) Exemption Period - Any Qualified Physician who has an Exemption Decree under this Code will enjoy the benefits of this Code for a period of fifteen (15) years provided that during said term it complies with the aforementioned requirements.
(c) Extension of the Decree - Any Qualified Physician who, throughout his or her exemption period, has complied with the requirements or conditions established in the Decree, and demonstrates to the Secretary of the DDEC that the extension of his Decree will result in the best economic interests and social of the people of Puerto Rico, may request the Secretary an extension of his Decree for an additional fifteen (15) years, for a total of thirty (30) years. Provided that during a period, which shall never exceed three (3) years, in which the Qualified Physician provides services as an official of agencies or instrumentalities of the Government of Puerto Rico or public corporations, even if these are not medical services, It may be the basis for the Qualified Physician to request a dispensation from the Secretary for compliance with the full-time service requirement as a Qualified Physician so that the Decree is not revoked. The Secretary shall evaluate the request using, at a minimum, the same requirements set forth in this section for the evaluation of the extension of a Decree.
Section 2022.05- Exemption for Researchers or Scientists
(to) An income tax exemption is provided for compensation received by an Eligible Researcher or Scientist for services rendered to the University of Puerto Rico and all other institutions of higher education authorized to operate in Puerto Rico, for Eligible Scientific Research, up to an amount equal to the maximum established by the NIH for grants (grants) as a salary for researchers receiving grants from the NIH for the applicable period in accordance with the notices published by them; however, the exempt amount shall not exceed one hundred ninety-five thousand dollars ($ 195,000). Any income that an Eligible Researcher or Scientist may accrue for services rendered to other persons, natural or legal, is excluded from this benefit.
(b) An income tax exemption is provided for compensation received by an Eligible Researcher or Scientist for services rendered for science and technology research and development activities carried out in the district established in Article 7 of the Law 214-2004, as amended, up to the amount of two hundred and fifty thousand dollars ($ 250,000). For the purposes of this paragraph, the term “Researcher or Eligible Scientist” means a Resident Individual of Puerto Rico during the Tax Year, hired by an institution in the district of Law 214-2004, which is mainly dedicated to carrying out activities of research and development of science and technology. The Secretary of the DDEC will make the final determination in accordance with the Incentive Regulations, circular letter,
(c) Every researcher or scientist who benefits under this Section shall have to render at least sixty (60) annual hours of community service in areas and tasks designated by the Secretary of the DDEC.
Section 2022.06- Student Loan Repayment Program for Doctors or Dentists, Veterinarians and Research Scientists with Intensive Doctoral Degrees in Research in the Health Area
(a) Subject to the availability of funds, the Secretary of DDEC will establish an incentive program aimed at subsidizing the student debt of doctors, dentists, veterinarians and research scientists with intensive doctoral degrees in research in the area of health who graduate later of the effective date of this Code and, in the case of physicians, dentists and veterinarians who meet the requirements of the United States Medical Licensing Examination or the Revalidation of Dental Medicine or the licensing requirements applicable to veterinarians, as applicable, that They undertake to establish their medical, dental, veterinary or scientific research practice in the area of health, and remain in Puerto Rico for a period of seven (7) consecutive years . The Secretary of the DDEC must give priority to those doctors, dentists, veterinarians or researchers who have completed their basic studies in medicine, dental medicine, veterinary medicine or scientific research in the area of health in Puerto Rico. The subsidy may be up to a maximum of sixty-five thousand dollars ($ 65,000) to cover its student debt subject to the regulations approved by the Secretary and considering the availability of funds. The grant will be payable at the beginning of the seven (7) year period, which will begin once the doctor, dentist, veterinarian or scientific researcher in the area of health and the Secretary of the DDEC grant the corresponding incentive contract. The period of seven (7) years may be interrupted while the physician is in a degree of specialty or subspecialty outside of Puerto Rico. In case of non-compliance during the first two (2) years with the commitment period of seven (7) years, the doctor, dentist, veterinarian or scientific researcher in the area of health must return one hundred percent (100%) to the Government ) of the subsidy received. If the breach happens the third (3rd) year,.
(b) The Secretary of DDEC will establish through regulations the eligibility requirements, the maximum amounts and the terms under which this benefit will be granted, among which the following criteria may be considered, without being understood as a limitation: (i) specialties or medical, dental, veterinary or scientific research subspecialties in the area of health for which there is a shortage of doctors; (ii) geographic areas with a shortage of primary doctors, dentists, veterinarians or scientific researchers in the area of health and (iii) geographical areas in which the physician, dentist, veterinarian or scientific researcher in the area of health will provide services. However, in the case of the practice of pediatrics, this geographic area criterion will not apply. Provided, however,
(c) The funds for this program will come from the Economic Incentive Fund.
(d) Every research scientist who benefits under any of Sections 2022.05 and 2022.06 of this Code, shall render at least sixty (60) annual hours of community service in areas and tasks designated by the Secretary of the DDEC.
Section 2022.07- Investor Resident Individual Trusts
(a) Trusts For Benefits of the Trustee - Any Investor Resident Individual to which a Decree is issued under the provisions of this Codemay establish trusts under the laws of Puerto Rico, and in doing so may elect said trusts to be treated as trusts for the benefit of the trustor (“grantor trust”) for purposes of income tax of Puerto Rico. Said election shall be made in accordance with the rules established by the Secretary of the Treasury, irrespective of whether said trust is not otherwise considered a trust for the benefit of the trustor under the applicable income tax rules under the Internal Revenue Code. In that case the nature of any entry of income, gain, loss, deduction or credit included in the income attributable to the trustor under the Internal Revenue Code shall be determined as if such item was made directly from the source from which it was made by the trust, or accrued in the same manner as accrued by the trust. An election made under this subsection, once made, may only be revoked by the procedure established for such purposes by the Secretary of the Treasury.
(b) Revocable Trusts - Any Investor Resident Individual to which a Decree is issued under the provisions of this Code may establish revocable or irrevocable trusts under the laws of Puerto Rico, as established by the trustor in the articles of incorporation; provided that in the absence of a provision in this regard, it shall be presumed irrevocable. Revocable trusts established in accordance with this provision may only be revoked by the trustors, or by the trustor who retains this power in the articles of incorporation.
(c) Trusts granted outside of Puerto Rico- The provisions of any Trust validly granted outside of Puerto Rico, by an Investor Resident Individual to which a Decree is issued under the provisions of this Code , may not be challenged by any person based on Any Law or Regulations of Puerto Rico that could be contrary or inconsistent with the provisions of said Trust. This Section will continue to apply to such Trusts after the termination of the exemptions granted under this Code as long as the Decree had not been revoked in accordance with Section 6020.09 (a).
(d) Every Investor Resident Individual to whom a Decree is issued under the provisions of this Code may transfer or donate freely in life, and in its sole discretion, all or part of its assets to the trusts described in this Section, irrespective of whether they are tangible or intangible movable or immovable property, of the location of said assets, and of any legal or regulatory provision in Puerto Rico that is contrary or inconsistent with said transfer, donation, testamentary disposition of the flow and / or the terms and conditions of said Trusts, including but not limited to the provisions of the Civil Code of Puerto Rico. This Section will continue to apply to such individuals after the termination of exemptions granted under this Code provided that the Decree had not been revoked in accordance with Section 6020.09 (a).
SUBCAPTER C- REQUIREMENTS FOR GRANTING EXEMPTION
Section 2023.01- Requirements for Decree Requests
(a) General Rule - Any individual who qualifies for the benefits established in this Chapter may request the benefits of this Code by submitting an application to the Secretary of the DDEC, in accordance with the provisions of Subtitle F of this Code.
(b) Any person may request the applicable benefits of this Code as long as it meets the eligibility requirements of Subchapter A of this Chapter, and with any other criteria established by the Secretary of the DDEC, through the Incentive Regulations, administrative order, circular letter or any other general communication, including as evaluation criteria the contribution that such Eligible Business will make to the economic development of Puerto Rico.
Every Resident Investor Individual beginning the second Tax Year of having received his Decree, together with the annual reports must include evidence of having made an annual contribution of at least ten thousand dollars ($ 10,000) to nonprofit entities operating in Puerto Rico and are certified under Section 1101.01 of the Internal Revenue Code of Puerto Rico, which is not controlled by the same person who owns the Decree nor by their descendants or ascendants. Evidence of the annual contribution to non-profit entities must be included as part of the annual report required by section (a) of Section 6020.10.
Section 2023.02- Requirements for Decree Requests for Qualified Physicians
Applicants must meet the following requirements:
(1) maintain your Qualified Physician status, as defined in this Code;
(2) practice medicine, podiatry be a dentist surgeon or practice a specialty of full-time dentistry;
(3) be a Resident Individual of Puerto Rico;
(4) comply with your tax liability under this Code or any other law that applies to you;
(5) provide community service hours as set forth in paragraph (1) of section (b) of this Section;
(6) Medical practice-
(i) When the applicant is a Qualified Physician who is studying for residency as part of an accredited program, whether or not a Resident Individual of Puerto Rico, if the determination of the Secretary of the DDEC is favorable, the Decree may be granted, and The Qualified Physician will have a term of one hundred twenty (120) days from the date of obtaining the degree of specialty or subspecialty to establish his or her medical or dental practice in Puerto Rico. This subsection also applies to a Qualified Physician who is not studying residency, who is not a Resident Individual of Puerto Rico, and who has his medical or dental practice outside of Puerto Rico.
(ii) When the applicant is a Qualified Physician who is not a Resident Individual of Puerto Rico, if the determination of the Secretary of the DDEC is favorable, the Decree may be granted and the Qualified Physician shall have a term of one hundred twenty (120) days to establish your residence in Puerto Rico and begin your medical or dental practice in the geographic area indicated in your application.
(7) Comply with any other requirement established in the Decree.
(a) Requirements–
(1) Community Services-
(A) Every Qualified Physician who has a Decree granted under this Code shall comply with the equivalent of one hundred eighty (180) annual hours of community services without remuneration in accordance with the norms adopted by the Secretary of Health.
(B) Eligible community services that may be provided by the Qualified Physician will include, without limitation: (i) assist or be part of the faculty in teaching hospitals and medical schools in the education of medical students, intramural school practice plans of medicine, resident doctors and other health professionals; (ii) provide medical services in regions that the College of Physicians of Puerto Rico or the College of Dental Surgeons of Puerto Rico, as applicable, together with the Department of Health of Puerto Rico determine that they lack certain specialized medical or dental services; (iii) provide on-call services in hospitals selected by the Medical Association of Puerto Rico in conjunction with the Puerto Rico Department of Health; (iv) offer seminars on prevention and other health issues to the community or for the training or continuing education of students and medical or dental professionals of Puerto Rico; (v) provide Professional Medical Services to disadvantaged populations through non-profit entities.
In the alternative, a Qualified Physician may comply with the requirement of this section when providing medical or dental services as part of a service contract with the Puerto Rico Government Health Plan. In this modality of the Government Health Plan, the Qualified Physician must comply with the requirements of one hundred eighty (180) hours, but the work will not have to be offered free of charge and can be offered as an employee or independent contractor of the person or entity contracting with the Health Plan of the Government of Puerto Rico.
The Secretary of the DDEC may establish through the Incentive Regulations, circular letter or administrative determination, the community service requirements that are required in this Code. The Secretary of the DDEC will request and consider the proposals of the College of Physicians. In the regulations adopted, the necessary inspection methods will be established to ensure compliance of the Qualified Physician with his obligation to provide community services.
(b) Criteria for evaluating Decree applications submitted by Qualified Physicians-
(1) Prior to granting a Decree under this Code, the Secretary of the DDEC shall determine that it results in the best economic and social interests of the people of Puerto Rico.
(2) The criteria to determine whether the granting of the Decree results in a benefit for the best economic and social interests of the people of Puerto Rico are the following:
(i) Economic impact of the granting of the Decree.
(ii) The specialties or subspecialties that the requesting physician owns or is in the process of obtaining as part of an accredited residency program.
(iii) If there is a shortage of such specialists in Puerto Rico and the number of doctors of that specialty or subspecialty that are offering services in Puerto Rico.
(iv) The geographical areas to which the doctor provides or will provide services.
(3) It shall be understood that a Decree results in the best economic and social interests of the people of Puerto Rico when:
(i) The doctor possesses a specialty, or is completing his residency to obtain it, and the Secretary of Health has indicated that for this specialty the incentive for a shortage of doctors is required; or
(ii) It is a general practitioner who provides primary health services in a geographic region where, according to the Department of Health, there are not enough doctors and there is a pressing need that requires the granting of the incentive.
(iii) Qualified Physicians who are not residents of Puerto Rico, as defined in Section 1010.01 (a) (30) of the Internal Revenue Code for a New Puerto Rico, and who request a Decree on or before June 30, 2020, under Section 2021.03 of this Code, may not be subject to the requirements set forth in this section (c), as provided by the Secretary of the DDEC through the Incentive Regulations, administrative order, circular letter or any other statement of general .
SUBCHAPTER D- SPECIAL PROVISIONS
Section 2024.01.-Qualified Physicians - Revocation of the Decree
(a) Causes that entail the revocation of the Decree:
(1) A Decree issued in favor of any Qualified Physician will be immediately revoked and will be void when one of the following occurs:
(i) fails to comply with the residency requirements established in paragraph (3) of section (a) of Section 2023.02 of this Code or ceases to be a Resident Individual of Puerto Rico;
(ii) cease to be a Qualified Physician, as defined in this Code;
(iii) cessation of full-time profession in Puerto Rico;
(iv) does not comply with providing the annual community service hours required in Section 2023.02 (b) of this Code; or
(v) does not comply with any other requirement established in this Code or through the Incentive Regulations, circular letter or administrative determination.
(b) If a Decree is revoked for the reasons stated above, the individual will be obliged to remit to the Department of the Treasury an amount equivalent to all unpaid contributions for income on Eligible Income and on Eligible Dividends of Qualified Physicians for all three ( 3) Tax Years prior to the revocation of the Decree or for the total term of the Decree, whichever is less. Said payment shall be remitted no later than sixty (60) days after the effective date of the revocation of the Decree. However, if the doctor satisfactorily accredits, through reliable evidence that the breach was due to an incapacity or illness of his spouse, his children or his parents, the Secretary of the DDEC will proceed to revoke the Decree,
SUBCAPTER E- PROGRAMS FOR YOUNG PEOPLE, STUDENT INTERNSHIPS, ENTERPRISE AND FIRST EMPLOYMENT EXPERIENCES FOR YOUNG PEOPLE, AND PROGRAMS FOR ADVANCED AGES
Section 2025.01- Programs for Youth, Student Internships, Entrepreneurship and First Youth Employment Experiences
(a) It will be the public policy of the Government of Puerto Rico to develop and promote programs, initiatives, internships and first experiences of employment for young people, as well as initiatives that promote the creation of microenterprises or the development, self-support and entrepreneurial culture of our youth, which do not be limited to formal teaching in the classroom. Through these programs, Young people will be given development experiences that propel a culture of entrepreneurship and innovation that allow Young people to enter the labor market with the best skills and / or have sufficient support to become new entrepreneurs.
For the purposes of this Section, the term “Youth” means any Resident Individual of Puerto Rico that is between the age of thirteen (13) and twenty-nine (29) years of age.
(b) Through these programs, it is expected that young people can acquire experiences, knowledge, educational skills and be inserted as part of an entrepreneurial culture and open to entrepreneurship, which will allow maximum development and professional and social performance, as well as ensure their well-being socioeconomic, and promote the development and achievement of their aspirations as Puerto Rican citizens.
The Secretary of the DDEC will establish through the Incentive Regulations the criteria and requirements applicable to internship applications, providing that the participants will be technical, vocational, undergraduate, graduate or post-graduate students who have completed at least one academic semester leading to the degree corresponding, and are enrolled in duly accredited institutions. In the same way, the Secretary of the DDEC will establish through the Incentive Regulation the criteria and requirements applicable to first experiences of employment and other initiatives that promote entrepreneurship, an entrepreneurial culture and innovation, as well as its scope and operation.
(d) The funds for the program described in this Section will come from the Economic Incentive Fund.
Section 2025.02- Programs for the Elderly
(a) It will be the public policy of the Government of Puerto Rico to promote and develop the full development of the Elderly, through their education and training so that they can join the workforce and / or become entrepreneurs and contribute to economic development of Puerto Rico.
(b) Through the programs for the Elderly, it is expected that they can join the workforce and contribute as part of the productive sector, and develop their potential as entrepreneurs, so that in turn they promote the development of the economy through of their business management, thus ensuring their long-term economic well-being.
(c) The Secretary of the DDEC will establish through the Incentive Regulation the criteria and requirements applicable to the Programs for the Elderly, as well as its scope and operation.
(d) The funds for the program described in this Section will come from the Economic Incentive Fund.
SUBCAPTER F- ACCOUNT MY FUTURE
Section 2026.01- My Future Account
(a) For the purposes of this subchapter, the term "My Future Account" shall mean a trust created or organized by the Government of Puerto Rico under the laws of the Government of Puerto Rico for the exclusive benefit of students of the Government's public education system. of Puerto Rico that meet the following requirements, which must be recorded in the document establishing the trust:
(1) The account will be for the exclusive benefit of students enrolling in the public education system of the Government of Puerto Rico, starting from the Kindergarten degree. The account may be available for students studying in private schools in Puerto Rico, subject to the regulations to be issued by the Secretary of the DDEC pursuant to subsection (d) of this Section.
(2) The fund will be managed by a bank, savings and loan association, savings bank, securities brokerage house, trust company, insurance company, federation of credit unions, savings and credit cooperative, cooperative of life insurance or any other financial institution designated by the Financial Advisory Authority and Fiscal Agency of Puerto Rico and duly certified by the Commissioner of Financial Institutions to act as fiduciary. The trustee designated under this paragraph shall comply with the requirements set forth herein.
(3) The funds in My Future Accounts will be invested in accordance with Law 113 of 1995 and in a manner consistent with the objectives of this program to ensure its long-term viability and sustainability.
(4) The Government will make an initial contribution of one thousand dollars ($ 1,000) for each eligible beneficiary. Provided that any other person may make additional contributions to the My Future Account, including natural persons, related or not to the beneficiary, private entities, any agency, instrumentality or public corporation of the Government of Puerto Rico, the Legislature through special assignments, municipalities , and any other natural or legal person, resident or foreign, private or public, to be defined by regulation.
(5) The initial contribution of the Government of Puerto Rico shall come from the General Fund or from any other source established by special legislation. An individual or private entity may make annual cash contributions that do not exceed the maximum allowable amount as a contribution to an educational savings account pursuant to Section 1081.05 (a) (5) (A) of the Internal Revenue Code.
(6) The funds must be maintained in a common trust or common investment fund, but maintaining a separate accounting for each account.
(7) The total balance of the My Future Account will be distributed to each beneficiary after graduating from high school. These funds may only be used to cover university, technical or vocational studies, or as initial capital for your own business and will be distributed in harmony with the regulations approved by the Secretary of the DDEC, in consultation with the AAFAF, in accordance with provided in subsection (d) of this Section.
(8) In the event that the beneficiary abandons his studies or does not comply with the requirements established in the regulations to receive the distributions of the account, cease to be a resident of Puerto Rico prior to graduating from high school, or die before he is If all the funds are distributed in the account, the My Future Account will be inactive and the available balance will be distributed to the people who contribute, pro rata based on their corresponding contributions; provided that the money contributed by the Government of Puerto Rico shall revert to the General Fund for use in the My Future Accounts program of this Section.
(9) The ownership of my future account will be the eligible beneficiary for which it was created. However, the Government of Puerto Rico and any person who has contributed to it retains the rights stipulated in paragraph (i) of this subsection (a), with respect to the returns of the amounts contributed in the circumstances described in Said Section.
(10) Except as provided in this Section and Section 1081.05 of the Internal Revenue Code, the total balance of my future account created in the name of eligible beneficiaries: (i) shall be irrevocable and not transferable by law, (ii) shall not be subject to confiscation, revocation or withdrawal by persons who contributed the funds, (iii) may not be used as collateral for a loan and (iv) shall remain in trust until distribution for the purposes set forth in this Section.
(b) The Financial Advisory Authority and Fiscal Agency of Puerto Rico shall be responsible for organizing the trust, granting the corresponding articles of incorporation and ensuring that it is administered in compliance with the provisions of this Section.
(c) My Future Accounts will be subject to the provisions of Section 1081.05 (c) of the Internal Revenue Code regarding the distribution of assets of the account, Section 1081.05 (d) of the Internal Revenue Code, regarding the tax treatment of the accounts and Section 1033.15 (a) (8) of the Internal Revenue Code, referring to the tax deduction for contributions to the account. Likewise, the trustees of the My Future Accounts must comply with the requirements established by the Commissioner of Financial Institutions and applicable to trustees of educational savings accounts under Section 1081.05 of the Internal Revenue Code.
(d) The Secretary of the DDEC, in consultation with the Secretary of the Treasury and the Executive Director of the Financial Advisory Authority and Fiscal Agency of Puerto Rico, shall establish the eligibility criteria and any other requirements for the My Future Account through regulations.
CHAPTER 3- EXPORT OF GOODS AND SERVICES
SUBCHAPTER A - ELIGIBILITY
Section 2031.01- Export of Services
(a) Eligible Activities- An Eligible Business shall be considered to qualify for the benefits of this Section, any Person with a bona fide office or establishment located in Puerto Rico that conducts or may carry out the following service activities, within or outside of Puerto Rico, which, in turn, are considered Export Services or Promoter Services:
(1) research and development;
(2) publicity and public relations;
(3) economic, environmental, technological, scientific, management, marketing, human resources, IT and auditing consulting;
(4) advice on matters related to any industry or business;
(5) Creative Industries as defined by Section 1020.09 of this Code, including the sale of ticket offices outside of Puerto Rico or the sale of ticket offices that are purchased by tourists in Puerto Rico, as well as income related to the transmission or sale of rights of a recording for audiences outside of Puerto Rico, of shows and musical productions and events of eSports and Fantasy Leagues to be held in Puerto Rico.
(6) production of construction plans, engineering and architecture services, and project management;
(7) professional services, such as legal, tax and accounting services;
(8) centralized management services that include, but are not limited to, strategic management, planning, distribution, logistics and budgetary services, which are carried out at the parent company or similar regional offices by an Entity that is dedicated to the provision of such services. The strategic and organizational process planning, distribution and logistics services for people outside of Puerto Rico will also be eligible;
(9) electronic information processing center;
(10) development of computer programs;
(11) the distribution of physical form, in the cyber network, by cloud computing, or as part of a blockchain network and the income from licensing, program subscriptions or service charges;
(12) voice, video, audio and data telecommunication to people located outside of Puerto Rico;
(13) call centers;
(14) shared services center that includes, but is not limited to, accounting, finance, contributions, auditing, marketing, engineering, quality control, human resources, communications, electronic data processing and other centralized management services ;
(15) educational and training services;
(16) hospital and laboratory services, including Medical Tourism services and telemedicine facilities;
(17) investment banking and other financial services that include, but are not limited to, services of: (a) Asset management; (b) management of alternative investments; (c) management of activities related to private capital investments; (d) management of hedge funds or high-risk funds; (e) management of capital funds (pools of capital); (f) administration of trusts that serve to convert different groups of assets into securities; and (g) escrow account services, provided that foreigners provide such services;
(18) marketing centers that are primarily dedicated to providing, through lease charges, services or other charges, space and services such as: secretarial, translation and information processing services, communications, marketing services, telemarketing and other consulting services to companies outside of Puerto Rico, including export and marketing companies, aggregate and commercial consulates, government agencies responsible for foreign trade, bartering and exhibition centers for products and services; I
(19) any other service that the Secretary of the DDEC, in consultation with the Secretary of the Treasury, determines that it should be treated as an eligible service for understanding that such treatment is in the best interest and for the economic and social welfare of Puerto Rico, taking considering the demand that could exist for those services outside of Puerto Rico, the total jobs that will be created, the payroll, the investment that the proponent would make in Puerto Rico, or any other factor that deserves special consideration.
(b) A service shall be deemed to be an Export Service when such service is provided for the benefit of any of the following:
(1) A Foreign Person, as long as the services do not have a Nexus with Puerto Rico.
(2) A trust whose beneficiaries, trustees and trustees are not Resident Individuals of Puerto Rico as long as the services do not have a Nexus with Puerto Rico.
(3) A succession whose cause, heirs, legatees or executors are not a Resident Individual of Puerto Rico, or, in the case of the deceased, has been a Resident Individual of Puerto Rico, provided that the services do not have a Nexus with Puerto Rico.
(4) A Person doing business in Puerto Rico, provided that the services do not have a Nexus with Puerto Rico and the services are intended for a client of such Person who complies with any of the provisions listed in this section.
(5) It may be established through the Incentive Regulation, administrative order, circular letter or any other general communication, any other criteria, requirements or conditions for a service to be considered an export service, taking into account the nature of the services provided, direct or indirect beneficiaries and any other factor that is relevant to achieve the objectives of this chapter.
(c) The services, including the Export Services, shall be considered to have a Nexus with Puerto Rico when they have any relationship with Puerto Rico, including services related to the following:
(1) business activities or for the production of income that have been or will be carried out in Puerto Rico;
(2) advice on the laws and regulations of Puerto Rico, as well as on administrative procedures or pronouncements of the Government of Puerto Rico, its agencies, public corporations, instrumentalities or municipalities, and judicial precedents of the Courts of Puerto Rico;
(3) lobbying on Puerto Rico laws, regulations and other administrative pronouncements. For these purposes, lobbying means any direct or indirect contact with elected officials, employees or agents of the Government of Puerto Rico, its agencies, instrumentalities, public corporations or municipalities, with the purpose of attempting to influence any action or determination of the Government of Puerto Rico , its agencies, instrumentalities, public corporations or municipalities;
(4) The sale of any property for use, consumption or disposal in Puerto Rico; or
(5) any other activity, situation or circumstance that is related to Puerto Rico and that is designated in the Incentive Regulations or other pronouncement, administrative determination or circular letter.
(d) The Secretary of the DDEC may include in the Incentive Regulations any other criteria, requirements or conditions for an Export Service to be considered, taking into consideration the nature of the services provided, the direct or indirect beneficiaries of the services and any other factor that is relevant to achieve the objectives of this Code.
(e) Promoter Services may be treated as Export Services, regardless of whether such services have a Nexus with Puerto Rico.
(f) An Eligible Business that provides Export Services or Promoter Services may also engage in any other activity or industry or business, provided that it maintains at all times a system of books, records, documentation, accounting and billing that clearly demonstrates , to the satisfaction of the Secretary of the Treasury, the income, costs and expenses incurred in the provision of Export Services or Promoter Services. The activity that is the product of the provision of services as an employee does not qualify as an Eligible Business.
(g) Notwithstanding the provisions of any other law, the licensing requirements related to professional services shall not apply to any Eligible Business, or to its partners, shareholders, employees or officers, provided that the services offered are not provided to Domestic people The Eligible Business must comply with applicable laws and licensing requirements in the jurisdiction to which it exports its services.
(h) The Secretary of the DDEC will establish in the Incentive Regulations the circumstances and conditions under which an Eligible Business will be designated. For the purposes of this Chapter, any applicant who receives, or has received, tax benefits or incentives under Act 20-2012, as amended, Act 73-2008, as amended, Act 135-1997, as amended, Act No. 8 of January 24, 1987, as amended, any other prior or subsequent tax incentive law, or any other special law of the Government of Puerto Rico, that provides benefits or incentives similar to those provided in this Chapter, as determined by the Secretary of the DDEC, in consultation with the Secretary of the Treasury, will be considered an Eligible Business.
Section 2031.02- Export Trade
(a) Eligible Activities- An Eligible Business shall be considered to qualify for the benefits of this Section, any Person with a bona fide office or establishment located in Puerto Rico who is engaged in or can engage in traffic or export of products (trading companies) , which earns not less than eighty percent (80%) of its gross income:
(1) the sale to Foreign Persons, for their use, consumption or disposal outside of Puerto Rico, of products purchased by the Eligible Business for resale;
(2) commissions derived from the sale of products for use, consumption or disposal outside of Puerto Rico; however, it is provided that no part of the income derived from the sale or resale of products for use, consumption or disposal in Puerto Rico shall be considered as Export Trade Income;
(3) from the sale of products manufactured or grown by request, to Foreign Persons, for their use, consumption or disposal outside of Puerto Rico;
(4) the sale or distribution to Persons outside of Puerto Rico of intangible products, such as patents, copyrights, digital content, trademarks, among others;
(5) of the storage, transportation and distribution of products and items belonging to third parties ( hubs );
(6) of the commercial and commercial distribution of products that are manufactured or cultivated in Puerto Rico for jurisdictions outside of Puerto Rico;
(7) operations of assembly, bottling and packaging of products for export;
(8) any other international commercial traffic activity included in the Incentive Regulations, taking into account the nature of the activities carried out, the direct or indirect benefits of the commercial activity for Puerto Rico, and any other factor that is pertinent to achieve the objectives of this Code by understanding that such treatment is in the best interest and for the economic and social welfare of Puerto Rico.
(b) An eligible activity shall be considered to be an Export Trade activity as long as it does not have a Nexus with Puerto Rico.
(c) Export Trade activities will be considered to have a Nexus with Puerto Rico when they have a relationship with Puerto Rico, including activities related to the following:
(1) the sale of any property for use, consumption or disposal in Puerto Rico; or
(2) any other activity, situation or circumstance that the Secretary of the DDEC designates by the Incentive Regulations or other pronouncement, administrative determination or circular letter that is related to Puerto Rico.
(d) The Secretary of the DDEC will establish in the Incentive Regulations the circumstances and conditions under which a business will be designated as an Eligible Business. For purposes of this Section, any applicant who receives or has received tax benefits or incentives for the export of goods and services similar to those provided in this Section under Incentive Laws Before or after Act 20-2012, as amended, the Law 73-2008, as amended, Law 135-1997, as amended, Law 8 of January 24, 1987, as amended, or any other special law of the Government of Puerto Rico, as determined by the Secretary of the DDEC, shall be considered a Eligible Business
SUBCHAPTER B- CONTRIBUTIVE BENEFITS
Section 2032.01- Tax on Income from Export Services and Promoter Services
(a) General rule- The net income derived from the Export of Services or Promoter Services, as provided in section (a) of Section 2031.01 of this Code, shall be subject to a fixed preferential rate of income tax of four percent (4%), instead of any other income tax, if any, provided by the Puerto Rico Internal Revenue Code or any other law .
(b) Special Rules for Promoter Services - The Eligible Business shall report the income, expenses, deductions and concessions of Promoter Services in the Tax Year in which such items are recognized in the Internal Revenue Code. However, the Secretary of the DDEC, in consultation with the Secretary of the Treasury, may allow, through the Incentive Regulation, a method of recognition of such items in those cases in which the conditions that would apply to an Entity that is Affiliated, according to said term defined in Section 1020.01 of this Code, are fulfilled after the Tax Year in which the income would be otherwise recognized in the Internal Revenue Code.
(c) Limitation of Benefits- If, at the date of the presentation of the Decree request, in accordance with the provisions of this Code, an Exempt Business was dedicated to providing Export Services or Promoter Services for which the benefits of This Chapter or has been dedicated to such activity at any time during the period of three (3) Tax Years prior to the date of submitting the application, which is called the “base period”, the Exempt Business may enjoy the fixed rate of income tax provided in section (a) of this Section, only as regards the increase in the net income of the activity that it generates over the average net income of the “base period”, which is referred to as “base period income”, for the purposes of this Subchapter.
(1) For the purpose of determining the base period income, the net income of any previous business of the requesting business will be taken into account. For these purposes, “predecessor business” will include any operation, activity, industry or business carried out by another business and that has been transferred, or otherwise acquired, by the requesting business, and without considering whether it was in operations with another name legal, or with other owners.
(2) The base period income will be subject to the income tax rates provided by the Puerto Rico Internal Revenue Code. In the case of Entities with Tax Exemption Decrees for Export Services activities in accordance with Law 73-2008, Law 135-1997, and Law 8 of January 24, 1987, the fixed rate established in the Decree for the base period income, and the distribution of profits and benefits from such income will not qualify for the treatment set forth in this Chapter.
(3) The base period income will be adjusted, reducing said amount by twenty-five percent (25%) annually, until it is reduced to zero (0) for the fourth Tax Year of application of the terms of the Exempt Business Decree according to what is provided in this Chapter.
(d) Distributions of profits and benefits-
(1) General Rule- Shareholders, partners or members of an Eligible Business that has a Decree granted pursuant to this Chapter shall not be subject to income tax on dividend distributions of profits and benefits from the Export of Services Income Eligible Business Subsequent distributions of the Export Services Income carried out by any corporation or Entity that is taxed as a corporation or any company will also be exempt from any taxation.
(2) The distributions described in paragraph (1) above will also be excluded from:
(i) net income subject to an alternate basic tax of an individual, for purposes of the Internal Revenue Code of Puerto Rico;
(ii) minimum alternative net income of a corporation, for purposes of the Puerto Rico Internal Revenue Code; and
(iii) adjusted net income, according to books of a corporation, for purposes of the Internal Revenue Code of Puerto Rico.
(and) Imputation of exempt distributions - The distribution of dividends or benefits that an Exempt Business carries out in accordance with the provisions of this Chapter, even after its Decree expires, will be considered made from its Export Services Income if, at the date of distribution, it does not exceeds the undistributed balance of the profits and benefits accrued from its Services Export Income, unless such Business, at the time of the declaration, chooses to distribute the dividend or benefit, totally or partially, of other utilities or benefits . The amount, the year of accumulation and the nature of the distribution made of the profits and benefits arising from the Export of Services Income shall be that designated by such Business by means of a notification sent with its payment to its shareholders,
(1) In the case of Entities that as of the date of operations as Exempt Businesses have accumulated profits or benefits, the distributions of dividends or benefits that are made as of such date will be considered made of the undistributed balance of such profits or benefits, but once this is exhausted by virtue of such distributions, the provisions of this section will apply.
(f) Deduction and carryover of net operating losses-
(1) Deduction for current losses incurred in activities not covered by a Decree- If an Eligible Business that owns a Decree granted under this Chapter incurs a net loss in operations that is not attributable to Export Services or Promoter Services covered by the Decree, it may not be used against income from operations covered by a Decree pursuant to this Section, and will be governed by the provisions of the Puerto Rico Internal Revenue Code.
(2) Deduction for current losses incurred in the operation of the Eligible Business - If an Eligible Business that owns a Decree granted by this Chapter incurs a net loss in the operation attributable to the Export Services or the Promoter Services, it may be use only against other income from operations attributable to such services covered by such Decree.
(3) Deduction for carry-over of losses from previous years- A deduction will be granted for carry-over of losses incurred in previous years, as set forth below:
(i) The excess over deductible losses according to paragraph (2) of this section may be carried forward against the Export Services Income of subsequent taxable years. Losses will be carried forward in the order in which they were incurred.
(ii) Once the period of the Decree for income tax purposes has expired, the net losses incurred in the operation covered by the Decree, as well as any excess of the deduction allowed under paragraph two (2) of this section that is dragging the Eligible Business to the expiration date of such period, may be deducted against any taxable income in Puerto Rico, subject to the limitations provided by the Puerto Rico Internal Revenue Code. Such losses shall be considered as incurred in the last Taxable Year in which the Eligible Business that owns a Decree pursuant to this Section enjoyed the tax rate described in section (a) of this Section, in accordance with the terms of the Decree.
(iii) The amount of the net loss in operations that will be taken in the Tax Year and that is carried forward in subsequent years will be computed in accordance with the provisions of the Internal Revenue Code of Puerto Rico.
Section 2032.02- Income Tax for Export Trade Activities
(a) General rule- The net income of the Export Trade activities, as provided in paragraph (1), section (a) of Section 2031.02 of this Code, shall be subject to a preferential fixed rate of income tax of four percent (4%), instead of any other income tax, if any, provided by the Puerto Rico Internal Revenue Code or any other law .
(b) Limitation of benefits-
(one) In the event that at the date of the presentation of the Decree application, in accordance with the provisions of this Code, an Eligible Business was dedicated to the Export Trade activity, pursuant to paragraph (1), paragraph (a) of Section 2031.02 of this Code, or has been dedicated to such activity at any time during the period of three (3) Tax Years prior to the date of submitting the application, which is referred to as the “Base Period of Export Trade”, the Eligible Business may enjoy the fixed rate of income tax provided by this Section, only in terms of the increase in the net income of the activity that it generates over the average net income of the Base Period, which is called the “Base Period Income of Export Trade ”for the purposes of this section.
(2) In order to determine the Base Period Income of Export Commerce, the net income of any Previous Business of the requesting business will be taken into account. For these purposes, “Business predecessor” shall include any operation, activity, industry or business that carries out another business and that has been transferred, or otherwise acquired, by the requesting business, and without considering whether it was in operations under another legal name , or under other owners.
(3) The income attributable to the Income of the Export Trade Base Period will be subject to the income tax rates provided by the Puerto Rico Internal Revenue Code, and the distribution of profits and benefits from such income will not qualify for the treatment provided in section (c) of this Section.
(4) The Income for the Export Trade Base Period will be adjusted, reducing said amount by twenty-five percent (25%) annually, until it is reduced to zero (0) for the fourth taxable year of application of the terms of the decree of the exempt business under this Code.
(c) Distributions of profits and benefits-
(1) General Rule: Shareholders, partners or members of an Exempt Business that has a Decree granted pursuant to this Chapter shall not be subject to income tax on dividend distributions of profits and benefits from Export Trade Income from the Exempt business. Subsequent distributions of the Export Trade Income made by any corporation or Entity that is taxed as a corporation or any company will also be exempt from any taxation.
(2) The distributions described in this section will also be excluded from:
(i) net income subject to an alternate basic tax of an individual, for purposes of the Internal Revenue Code of Puerto Rico;
(ii) minimum alternative net income of a corporation, for purposes of the Puerto Rico Internal Revenue Code; and
(iii) adjusted net income, according to books of a corporation, for purposes of the Internal Revenue Code of Puerto Rico.
(d) Imputation of exempt distributions - The distribution of dividends or benefits made by an Exempt Business that has a Decree granted under this Chapter, even after the expiration of its Decree, shall be considered as realized from its Export Trade Income if at the date of distribution it does not exceed the undistributed balance of the profits and benefits accrued from its Export Trade Income, unless such Exempt Business, at the time of the declaration, chooses to distribute the dividend or benefit, totally or partially, of other profits or benefits The amount,
(e) In the case of Entities that as of the date of operations as Exempt Businesses have accumulated profits or benefits, distributions of dividends or benefits that are made as of such date will be considered made from the undistributed balance of such profits or benefits, but once this is exhausted by virtue of such distributions, the provisions of this section will apply.
(f) Deduction and carryover of net operating losses-
(1) Deduction for current losses incurred in activities not covered by a Decree- If an Exempt Business that has a Decree granted under this chapter incurs a net loss in operations that is not attributable to the operation covered by the Decree , this may not be used against income from operations covered by a Decree pursuant to this Chapter, and shall be governed by the provisions of the Internal Revenue Code of Puerto Rico.
(2) Deduction for current losses incurred in the operation of the Eligible Business - If an Eligible Business that has a Decree granted under this Section incurs a net loss in the operation covered by the Decree, it may only be used against other operating income. covered by a Decree pursuant to this Section.
(3) Deduction for carry-over of losses from previous years- A deduction will be granted for carry-over of losses incurred in previous years, as set forth below:
(i) The excess over deductible losses according to paragraph (2) of this section may be carried forward against the Export Services Income of subsequent taxable years. Losses will be carried forward in the order in which they were incurred.
(ii) Once the period of the Decree for income tax purposes has expired, the net losses incurred in the operation covered by the Decree, as well as any excess of the deduction allowed under paragraph (2) of this section If the Exempt Business is being carried forward to the expiration date of such period, they may be deducted against any taxable income in Puerto Rico, subject to the limitations provided by the Puerto Rico Internal Revenue Code. Such losses will be considered as incurred in the last Tax Year in which the Exempt Business that owns a Decree pursuant to this Chapter enjoyed the tax rate described in section (a) of this Section, in accordance with the terms of the Decree.
(iii) The amount of the net loss in operations that will be taken in the Tax Year and that is carried forward in subsequent years will be computed in accordance with the provisions of the Internal Revenue Code of Puerto Rico.
Section 2032.03- Property Tax
(a) General rule - The movable and immovable property of an Exempt Business that is used in the Export Services, Promoter Services or Export Trade covered by a Decree granted under this Chapter shall enjoy seventy-five percent (75 %) exemption on municipal and state property taxes during the fifteen (15) year period of the exemption.
Section 2032.04- Municipal Contributions
(a) General rule - The Exempt Business shall enjoy a fifty percent (50%) exemption on municipal contributions or municipal patents applicable to turnover during the fifteen (15) year period of the exemption that relates to the Export Services, Promoter Services, or Export Trade covered by a Decree granted under this Chapter.
SUBCAPTER C- REQUIREMENTS FOR GRANTING EXEMPTION
Section 2033.01- Requirements for Decree Requests
(a) Any Person with a bona fide office or establishment located in Puerto Rico that has established or intends to establish an Eligible Business in Puerto Rico under this Chapter may request the benefits of this Chapter by submitting a request for a Decree before the Secretary of the DDEC, in accordance with the provisions of Subtitle F of this Code.
(b) Such Person may request the benefits of this Chapter as long as it meets the eligibility requirements of Subchapter A of this Chapter, and with any other criteria thatThe Secretary of the DDEC establishes through the Incentive Regulations, administrative order, circular letter or any other general communication, including as an evaluation criterion the contribution that the Eligible Business will make to the economic development of Puerto Rico.
SUBCHAPTER D- SPECIAL PROVISIONS
Section 2034.01- Qualified Promoter
(a) A Qualified Promoter is one who provides Promotion Services to a New Business in Puerto Rico that obtains a Decree, and that meets the following requirements:
(1) A Qualified Promoter will have to be a full-time owner, shareholder, member or employee of an Entity that has a Decree of Promotion Services, and may take steps to establish New Businesses in Puerto Rico pursuant to the incentive provided by this Chapter.
(2) To obtain the designation of Qualified Promoter, the Promoter shall submit to the Secretary of the DDEC a sworn petition that demonstrates that it meets the requirements set forth in this Section. The Secretary of the DDEC will evaluate it within a period of thirty (30) days from the filing of the application, unless there is just cause. If the DDEC Secretary determines that the Promoter meets the established criteria and has paid the corresponding fees, he will issue a notification to the Promoter. The Secretary of the DDEC will maintain an electronic registry of Qualified Promoters that will be public and accessible on the Portal.
(3) The Secretary of the DDEC, in collaboration with Invest Puerto Rico Inc. , Will establish through the Incentive Regulations the requirements to be a Qualified Promoter. The Qualified Promoter must meet at least the following requirements:
(i) Possess a baccalaureate from an accredited university;
(ii) have not less than five (5) years of professional experience in their area of competence (ie, accounting, finance, marketing, planning, international trade, law, economics, science, engineering, real estate or other related fields) ;
(iii) demonstrate ability to understand and express adequately on matters related to the establishment of businesses in Puerto Rico;
(iv) submit a criminal record that does not reflect the commission of serious crimes or less serious crimes that violate morals and public order.
(4) The Qualified Promoter may not receive the benefits of this Chapter for the promotion of a New Business in which he has any participation, as a partner or member.
(5) The Qualified Promoter may not receive the benefits of this Chapter for promoting a New Business in which their spouse, parents or children occupy management or decision-making positions, including being a member of a Board of Directors or entitled shareholder to vote.
(6) The Qualified Promoter may not issue any payment, directly or indirectly related to the incentives it has received, to the following persons:
(i) New Business in Puerto Rico, or its Affiliates, in accordance with the provisions of the Internal Revenue Code of Puerto Rico.
(ii) Any officer, director or employee of such New Business in Puerto Rico or its Entities that are Affiliated.
(iii) Any person related to such officer, director or employee, as defined in Section 1010.05 of the Internal Revenue Code of Puerto Rico.
(7) There will be no prohibition for a Qualified Promoter to also serve as a service provider that has appeared before the DDEC or any of its agencies attached as a representative of an applicant for a Decree pursuant to this Code and that generates revenue from the New Business in Puerto Rico for those or other services prior to or after its establishment in Puerto Rico. However, the Qualified Promoter may not perform or have served as a Certified Professional for the New Business in Puerto Rico or participate in the process of preparing the financial statements, income tax returns, or in issuing annual reports of the New Business In Puerto Rico.
(8) The total incentive available to the Qualified Promoter consists of up to fifty percent (50%) of the amount that enters the Economic Incentives Fund and is transferred to Invest Puerto Rico Inc. by reason of the income tax that has been paid to the Secretary of the Treasury for the New Business in Puerto Rico. The incentive will be paid for a maximum of ten (10) tax years from the date the New Business in Puerto Rico has been established.
(9) Invest Puerto Rico Inc. will disburse the incentive through a service agreement between the Qualified Promoter and Invest Puerto Rico Inc. in a period not exceeding thirty (30) days from the receipt of funds from the Economic Incentive Fund.
(10) Invest Puerto Rico Inc. may distribute the total incentive at various stages and to several Qualified Promoters that have intervened in the process of promoting the New Business in Puerto Rico in accordance with the provisions of the Incentive Regulations.
(11) The income received by the Qualified Promoter for the incentive established in this Chapter shall be subject to the ordinary income tax rate in accordance with the provisions of the Puerto Rico Internal Revenue Code.
CHAPTER 4- FINANCES, INVESTMENTS AND INSURANCE
SUBCHAPTER A- ELIGIBILITY FOR EXEMPTIONS
Section 2041.01- International Financial Entities
An International Financial Entity shall be considered as an Eligible Business to benefit from the benefits of this Chapter provided that it is any Entity that is incorporated or organized in accordance with the laws of Puerto Rico, the United States or a foreign country, or a Unit of such Entity, authorized to do business in Puerto Rico, if it complies with the provisions of Subchapter D of this Chapter and of the “International Financial Center Law” applicable to such business.
Section 2041.02- International Insurers Segregated Asset Plans and International Insurance Holding Companies
An International Insurer, Segregated Assets Plan, or International Insurer Holding Company shall be considered as an Eligible Business to avail itself of the benefits of this Chapter provided that it is any Entity that is incorporated or organized in accordance with the laws of Puerto Rico, of the The United States or a foreign country, or a unit of such Entity, authorized to do business in Puerto Rico, if it complies with the provisions of Subchapter D of this Chapter and Chapter 61 of the Insurance Code.
Section 2041.03- Private Equity Funds and Private Equity Funds of Puerto Rico
A Private Capital Fund or a Private Capital Fund of Puerto Rico shall be considered as an Eligible Business to avail itself of the benefits of this Chapter if it complies with the provisions of Subchapter D of this Chapter that are applicable to such funds.
Section 2041.04- Reserved.
Reserved.
SUBCHAPTER B- CONTRIBUTIVE BENEFITS
Section 2042.01- International Financial Entities
(a) Income tax-
(1) The income derived by the International Financial Entities that receive a Decree pursuant to this Chapter, from the permissible activities or transactions, as provided in this Chapter, will be subject to a fixed preferential income tax rate of four percent ( 4%), instead of any other income tax, if any, provided by the Puerto Rico Internal Revenue Code or any other law , except as provided in paragraph (2) of this Section.
(2) In the case of an International Financial Entity that operates as a Unit of a bank, the net income, computed in accordance with the provisions of Section 1031.05 of the Internal Revenue Code of Puerto Rico, which derives the International Financial Entity from the activities permitted by the “International Financial Center Law” that exceeds twenty percent (20%) of the total net income derived in the Tax Year by the bank from which it operates as a Unit (including the income derived from such Unit) will be subject to the tax rates set forth in the Puerto Rico Internal Revenue Code for corporations and corporations.
(3) Gross income from sources of Puerto Rico shall not be considered, for the purposes of paragraphs (1) and (2) of section (a) of Section 1035.01 of the Puerto Rico Internal Revenue Code, interest, charges for financing, dividends or profit sharing of companies that come from International Financial Entities that have a Decree under this Chapter and that comply with the provisions of the “International Financial Center Law”.
(4) The provisions of Section 1062.08 of the Puerto Rico Internal Revenue Code, which impose the obligation to withhold at the source a tax on income in the case of payments made to Foreign Persons who are individuals, shall not apply to interest, charges for financing, dividends or participation for the benefit of companies that have been received from International Financial Entities that have a Decree under this Chapter and that comply with the provisions of the “International Financial Center Law”.
(5) The provisions of Section 1062.11 of the Internal Revenue Code of Puerto Rico, which impose an obligation to withhold at the source a tax on income in the case of payments made to foreign corporations and corporations not engaged in industry or business in Puerto Rico , shall not apply to interest, finance charges, dividends or profit sharing of companies from International Financial Entities that have a Decree under this Chapter and that comply with the provisions of the “International Financial Center Law”.
(6) The income derived by a Foreign Person that is an individual, consisting of interest, financing charges, dividends or participation in benefit of companies shall not be subject to the tax imposed by Section 1091.01 of the Puerto Rico Internal Revenue Code from the “Law of the International Financial Center”.
(7) The income derived by a foreign corporation or corporation, which shall not be subject to the tax imposed by subsection (A) of paragraph (1) of section (a) of Section 1092.01 of the Puerto Rico Internal Revenue Code, which it consists of the interests, finance charges, dividends or participation for the benefit of companies from International Financial Entities that have a Decree under this Code and that comply with the provisions of the “International Financial Center Law”.
(8) The provisions of Section 1092.02 of the Internal Revenue Code of Puerto Rico shall not apply to an International Financial Entity that has a Decree under this Chapter and that complies with the provisions of the “International Financial Center Law”.
(9) Any Domestic Person who is a shareholder or partner of an International Financial Entity that has a Decree under this Chapter and that complies with the provisions of the “International Financial Center Law”, will be subject to a six percent income tax (6%) on distributions of dividends or profits from the net income of such International Financial Institution, including the alternate basic tax and the minimum alternative tax, insofar as they have been subject to the fixed income tax rate set forth in the paragraph (1) of this section.
(b) Municipal contributions and other municipal taxes- The International Financial Entities will be fifty percent (50%) exempt from the payment of municipal patents imposed by the "Municipal Patent Law", as in any other type of tax, tax, law, license, arbitration and taxes, fees and rates, as provided by the "Autonomous Municipalities Law".
(c) Contributions on movable and immovable property - The International Financial Entities shall be seventy-five percent (75%) exempt from the taxation of property taxes imposed by the “Municipal Property Tax Law”, including assets furniture and real estate, tangible and intangible, that belong to them.
Section 2042.02- International Insurers and Holding Companies of International Insurers
(a) Income Tax–
(1) Any International Insurer that receives a Decree pursuant to this Code shall be subject to a contribution of four percent (4%) on the amount of its net income in excess of one million two hundred thousand dollars ($ 1,200,000.00), computed without taking into Consideration of the exemption provided in the third paragraph of this section and not including for this purpose the entry of Segregated Assets Plans established by the International Insurer.
(two) Likewise, any Segregated Assets Plan of an International Insurer that is not a Class 5 Authority, according to said term is defined in Section 61.020 of the Insurance Code, will be subject to a contribution of four percent (4%) on the amount of its net income in excess of one million two hundred thousand dollars ($ 1,200,000.00), which will be paid exclusively with the funds of such Segregated Assets Plan. The net income will be computed as if the Segregated Assets Plan were an International Insurer. The Secretary of the Treasury shall establish by regulation, circular letter, or other determination or general administrative communication, which forms or forms must be submitted with such contributions. In the case of International Insurers with Segregated Assets Plans subject to contribution,
(3) Except as provided in paragraphs (1) and (2) of this section, the income derived from the International Insurance Segmented Assets Plan or by an International Insurance Holding Company that complies with Article 61.040 of the Insurance Code , will not be included in the gross income of said Entities or Segregated Assets Plan and will be exempt from contributions imposed in accordance with Sections 1000.01 et seq. of the Internal Revenue Code of Puerto Rico. The income derived from the International Insurer or the International Insurer Holding Company that complies with Article 61.040 of the Insurance Code, due to the liquidation or dissolution of the operations in Puerto Rico, shall be considered as income derived from the operations that are allow both in this Chapter and in the "International Insurer Law", so it will have the same treatment and will not be included in the gross income of these Entities.
(4) Income derived from dividends and distribution of profits, or in the case of a company, distributions in total or partial liquidation, or other income items similar to these, distributed or paid by an International Insurer, a Segregated Assets Plan or an International Insurer Holding Company that complies with Article 61.040 of the Insurance Code, shall be exempt from the payment of contributions, pursuant to Sections 1000.01 et seq . of the Internal Revenue Code, and of the payment of municipal patents imposed by the “Municipal Patent Law”.
(5) The amounts received by a Foreign Person that is not dedicated to industry or business in Puerto Rico as benefits or interests of any kind under a life insurance contract or an annuity issued by an International Insurer, shall be exempt from payment of income taxes under Sections 1000.01 et seq . of the Puerto Rico Internal Revenue Code and the payment of municipal patents, pursuant to the "Municipal Patent Law".
(6) Except as provided in paragraph one (1) and two (2) of this section, the International Insurer or the International Insurer Holding Company that complies with Article 61.040 of the Insurance Code, shall not be bound to file the return of corporations, societies or insurance companies, according to Sections 1061.02, 1061.03 and 1061.12 of the Internal Revenue Code of Puerto Rico. An International Insurer or an International Insurer Holding Company that complies with Article 61.040 of the Insurance Code, which is organized as a corporation of individuals, pursuant to the Puerto Rico Internal Revenue Code, shall not be required to file the forms and reports that requires Section 1061.07 of the referred Internal Revenue Code. However,
(7) The provisions of Section 1062.08 of the Internal Revenue Code of Puerto Rico, which impose the obligation to deduct and withhold at source income taxes for payments made to Foreign Persons who are individuals, shall not apply to the amount of any benefits or interests received under a life or annuity insurance contract, or interest (including the origination discount, letters of credit and other financial guarantees), dividends, shares in corporate profits, distributions in total or partial liquidation, or other income items similar to these, received from an International Insurer or from an International Insurer Holding Company, as applicable, that complies with Article 61.040 of the Insurance Code,as long as these individuals do not engage in industry or business in Puerto Rico.
(8) The provisions of Section 1062.10 of the Internal Revenue Code of Puerto Rico that impose the obligation to deduct and withhold income taxes at the source for the shareholder's shareholding that is a Foreign Person in the income of a corporation as an individual, they will not be applicable with respect to the shareholding attributable to the shareholder, that is a Foreign Person of an International Insurer or of an International Insurer Holding Company that complies with Article 61.040 of the Insurance Code.
(9) The provisions of Section 1062.11 of the Puerto Rico Internal Revenue Code that impose the obligation to deduct and withhold income taxes at the source for payments made to foreign corporations or corporations not engaged in industry or business in Puerto Rico, do not they will be applicable to the amount of any benefits or interests received under a life or annuity insurance contract, or interest (including the origination discount, letters of credit and other financial guarantees), dividends, participations in the profits of companies, distribution in total or partial liquidation, or other income items similar to these, which are received from an International Insurer or from an International Insurer Holding Company that complies with Article 61.040 of the Insurance Code.
(10) The income derived from a Foreign Person that is an individual, not dedicated to industry or business in Puerto Rico for benefits or interests received under a life or annuity insurance contract, or interest (including the discount of origination, letters of credit and other financial guarantees), dividends, participations in the profits of companies or other income items similar to these, which are received from an International Insurer or from an International Insurer Holding Company that complies with Article 61.040 of the Insurance Code, will not be subject to the payment of the contributions imposed by Section 1091.01 of the Internal Revenue Code of Puerto Rico.
(11) The income derived from a foreign corporation, not dedicated to industry or business in Puerto Rico, for benefits or interest received under a life or annuity insurance contract, or interest, (including the discount by origination, letters of credit and other financial guarantees), dividends, participation in the profits of companies, or other income items similar to these, which are received from an International Insurer or an International Insurer Holding Company that complies with the Article 61.040 of the Insurance Code, will not be subject to the contributions imposed by Section 1092.01 of the Internal Revenue Code of Puerto Rico.
(12) The income derived from an International Insurer shall not be subject to the tax imposed by Section 1092.02 of the Internal Revenue Code of Puerto Rico.
(13) None of the provisions of this section shall be construed as a limitation on the powers of the Secretary of the Treasury to apply the provisions of Section 1040.09 of the Internal Revenue Code to an International Insurer or an International Insurer Holding Company that complies with the Article 61.040 of the Insurance Code.
(14) The provisions of Sections 1111.01 to 1111.11 of the Puerto Rico Internal Revenue Code shall not apply to International Insurers.
(b) Relic Flow and Donations–
(1) For the purpose of Sections 2010.01 et seq. of the Internal Revenue Code, the value of any amount payable by an International Insurer by reason of a life or annuity insurance contract to a Foreign Person who is an individual, shall be exempt from the contributions on relieved flows and on donations that they impose those sections. Any certificates of Shares or participations of a partner in an International Insurer or in an Holding Company of an International Insurer that complies with Article 61.040 of the Insurance Code that are owned by a Foreign Person that is an individual, and any bonds, promissory notes or other debt obligations of an International Insurer or an Holding Company of an International Insurer that complies with Article 61.
(c) Municipal Patents and Other Municipal Taxes–
(1) International Insurers or International Insurance Holding Companies that comply with Article 61.040 of the Insurance Code shall be one hundred percent (50%) exempt from the payment of municipal patents imposed by the “Municipal Patent Law”, as well as in any other type of contribution, tribute, right, license, arbitration and taxes, fees and rates, as provided by the "Autonomous Municipalities Law".
(d) Contribution on Real and Movable Property–
(1) The movable and immovable property belonging to an International Insurer or an International Insurer Holding Company that complies with Article 61.040 of the Insurance Code, shall be seventy-five percent (75%) exempt from the payment of taxes on the movable and immovable property imposed by the "Municipal Property Tax Law".
Section 2042.03- Private Equity Funds and Private Equity Funds of Puerto Rico
(a) Income Tax - The provisions applicable to the partners of a company, as provided in Chapter 7 of Subtitle A of the Internal Revenue Code of Puerto Rico, shall apply to the Accredited Investors of a Private Capital Fund and a Puerto Rico Private Equity Fund (including taxable Investors who have not contributed money or property in exchange for interests owning such funds and who have an interest in the earnings of such funds). Those provisions of the Puerto Rico Internal Revenue Code applicable to companies related to the information and tax withholding requirements will be extended to the Private Capital Fund and the Private Capital Fund of Puerto Rico.
(1) Private Capital Fund and a Private Capital Fund of Puerto Rico-
(i) Income- A Private Capital Fund and a Private Capital Fund of Puerto Rico, as the case may be, shall be treated as a company under the rules applicable to the companies in Chapter 7 of the Internal Revenue Code of Puerto Rico to tax purposes, in which case it will be understood that any reference made to taxable companies under Chapter 7 of the Internal Revenue Code of Puerto Rico includes the Private Equity Funds and the Private Capital Funds of Puerto Rico.
(2) Accredited Investors - Resident Accredited Investors of a Private Capital Fund will be responsible for the income tax attributable to their distributable share in the income of the Private Capital Fund or the Private Capital Fund of Puerto Rico, with the exception of Economic Development Bank, which will be exempt from taxation if so provided by its organic law. In the case of Accredited Investors that are not Resident Accredited Investors, the Private Capital Fund or the Private Capital Fund of Puerto Rico will retain the corresponding contribution at its source and remit it to the Department of the Treasury. In both cases the contribution will be paid according to the following rules:
(i) Distributable interest and dividend share- The distributable share of Accredited Investors in the interest and dividends accrued by the Private Capital Fund or the Private Capital Fund of Puerto Rico, will pay, instead of any other contribution imposed by the Income Code Inmates of Puerto Rico, including the alternate basic tax and the minimum alternative tax, which will not be applicable to Accredited Investors, an income tax that will be computed using a fixed rate of ten percent (10%). The exempt interest or dividends generated by the Private Capital Fund or the Private Capital Fund of Puerto Rico shall retain their exempt character in the hands of Accredited Investors. Likewise, Accredited Investors will pay taxes in Puerto Rico in accordance with the rate set forth herein, unless: (i) the rate applicable to such Investor under any other special law is lower than the one provided herein, or (ii) under the provisions of the Code of Puerto Rico Internal Revenue, these were not obliged to pay income tax in Puerto Rico. The operating expenses of the Private Capital Fund or of the Private Capital Fund of Puerto Rico (except capital gains) will be allocated to the different gross income classes of each class. they were not obliged to pay income tax in Puerto Rico. The operating expenses of the Private Capital Fund or of the Private Capital Fund of Puerto Rico (except capital gains) will be allocated to the different gross income classes of each class. they were not obliged to pay income tax in Puerto Rico. The operating expenses of the Private Capital Fund or of the Private Capital Fund of Puerto Rico (except capital gains) will be allocated to the different gross income classes of each class.
(ii) Distributable share in capital gains- The distributable share of Accredited Investors in capital gains that accrue from the Private Capital Fund or the Private Capital Fund of Puerto Rico, will be totally exempt from income tax and will not be subject to any other contribution imposed by the Puerto Rico Internal Revenue Code, including the alternate basic tax and the minimum alternative tax, which will not be applicable to the Accredited Investors of such funds. These will be reported separately to the Investor, pursuant to Section 1071.02 of the Puerto Rico Internal Revenue Code.
(iii) Sale of Proprietary Interest- Capital gains made by the Accredited Investors of the Private Capital Fund or the Private Capital Fund of Puerto Rico in the sale of their proprietary interest in such funds will be subject to income tax at a fixed rate of one five percent (5%) in the Tax Year in which the sale occurs or income is received in lieu of any other contribution provided by the Puerto Rico Internal Revenue Code. In those instances in which, within ninety (90) days from the sale, the Accredited Investor reinvests the total gross income generated in a Private Capital Fund of Puerto Rico, the capital gains made by the Accredited Investors of Such funds will not be subject to any income tax.
(iv) in accordance with the provisions of the Internal Revenue Code of Puerto Rico. Losses can only be used as follows:
(A) against income from other Private Equity Funds or Private Equity Funds of Puerto Rico to the extent that such losses are considered capital losses at the level of these funds;
(B) to reduce any capital gain generated by the Resident Accredited Investor from other sources, in accordance with the provisions of the Puerto Rico Internal Revenue Code;
(C) however, the loss that cannot be deducted may be carried forward indefinitely.
(3) Managing or General Partners-
(i) Distributable interest and dividend share- The distributable share of the Fund's Managing or General Partners in the interest and dividends accrued by the Private Capital Fund or the Private Capital Fund of Puerto Rico, will pay an income tax that is compute based on a fixed rate of five percent (5%) instead of any other tax imposed by the Puerto Rico Internal Revenue Code, including the basic alternate tax and the minimum alternative tax. The operating expenses of the Private Capital Fund or of the Private Capital Fund of Puerto Rico will be allocated to the different income classes of such funds (except capital gains) in proportion to the amount of gross income of each class.
(ii) Distributable share in capital gains- The distributable share of the Managing or General Partners of the Private Capital Fund or of the Private Capital Fund of Puerto Rico in the capital gains that accrue from such funds, will pay an income tax that will be computed at base of a fixed rate of two point five percent (2.5%) instead of any other tax imposed by the Internal Revenue Code of Puerto Rico, in the Tax Year in which the sale occurs, including the alternate basic tax and the contribution minimum alternative, which will not be applicable to Accredited Investors of the Private Capital Fund or the Private Capital Fund of Puerto Rico. These will be reported separately to the Investor, pursuant to Section 1071.02 of the Puerto Rico Internal Revenue Code.
(iii) The rules of sale of proprietary interest and net capital losses applicable to Accredited Investors, as described in subsections (iii) and (iv) of paragraph (2) of section (a) of this Section, shall apply to the Managing or General Partners.
(4) ADIR and ECP-
(i) Distributable interest and dividend share- The distributable share of the Fund's ADIR and ECP in the interest and dividends accrued by the Private Capital Fund or the Private Capital Fund of Puerto Rico will pay an income tax to be computed using a fixed rate of five percent (5%) instead of any other tax imposed by the Puerto Rico Internal Revenue Code, including the alternate basic tax and the minimum alternative tax. The operating expenses of the Private Capital Fund or the Private Capital Fund of Puerto Rico will be allocated to the different kinds of income of the Fund (except capital gains) in proportion to the amount of gross income of each class.
(ii) Distributable share in capital gains- The distributable share of the ADIRs and ECPs of the Private Capital Fund or of the Private Capital Fund of Puerto Rico in the capital gains accrued by the Fund will pay an income tax to be computed at a fixed rate of two point five percent (2.5%) instead of any other tax imposed, in the Tax Year in which such sale occurs, including the alternate basic tax and the minimum alternative tax, which will not be applicable to Accredited Investors of the Private Capital Fund or the Private Capital Fund of Puerto Rico. These will be reported separately to the Accredited Investor, pursuant to Section 1071.02 of the Puerto Rico Internal Revenue Code.
(iii) The rules of sale of proprietary interest and net capital losses applicable to Accredited Investors described in subsections (iii) and (iv) of paragraph (2) of section (a) of this Section shall apply to ADIR and ECP.
(b) Property contributions-
(1) The Private Equity Funds and Private Equity Funds of Puerto Rico shall be seventy-five percent (75%) exempt from the taxation of property taxes imposed by the “Municipal Property Tax Law”, including the movable and immovable property, tangible and intangible, that belong to them.
(2) The Private Equity Funds and the Private Equity Funds of Puerto Rico shall be exempt from the filing of the corresponding personal property tax return provided by Act 83-1991, as amended, known as the “Municipal Contribution Law on the Property of 1991 ”.
(c) Municipal contributions-
(1) The income received by the Private Equity Funds and the Private Capital Funds of Puerto Rico, as well as the distributions that such Entities make to their Accredited Investors, shall not be considered “gross income” nor shall they be included in the definition of “ turnover "for purposes of the" Municipal Patent Law ".
(2) The Private Equity Funds and the Private Equity Funds of Puerto Rico shall be exempt from the filing of the corresponding turnover form provided by the “Municipal Patent Law”.
(d) Special deductions-
(1) Since a Private Equity Fund or a Private Equity Fund of Puerto Rico has met the investment requirements provided in this Chapter, any Resident Accredited Investor who invests in:
(i) A Private Capital Fund may take a deduction up to a maximum of thirty percent (30%) of the adjusted base of its Private Capital Investment, as determined by such base adjusted under the Puerto Rico Internal Revenue Code. The Resident Accredited Investor may use the deduction in the Tax Year in which the Fund has invested in all or in part such investment and for the following ten (10) years. If the Fund partially invests Private Capital Investment, the ten (10) years related to such portion will be counted from the year in which it was invested. In cases where the investment is made after the end of a Taxable Year, but before filing the income tax return for said year, as provided by the Puerto Rico Internal Revenue Code, including any extension granted by the Secretary of the Treasury to render it, the Resident Accredited Investor may claim the deduction for such Tax Year. The maximum that a Resident Accredited Investor may deduct in a Tax Year shall not exceed fifteen percent (15%) of their net income before deduction.
(ii) A Private Capital Fund of Puerto Rico may take a deduction up to a maximum of sixty percent (60%) of the adjusted base of its Private Capital Investment, as determined by such base under the Puerto Rico Internal Revenue Code. The deduction will be available for use by the Resident Accredited Investor in the Tax Year in which the Fund has invested all or part of the investment and for the following fifteen (15) years. If the Fund partially invests Private Capital Investment, the fifteen (15) years in respect of such portion will be counted from the year in which it was invested. When the investment is made after the end of a Tax Year, but before filing the income tax return for said year, according to the Puerto Rico Internal Revenue Code, including any extension granted by the Secretary of the Treasury to render it, the Resident Accredited Investor may claim the deduction for that Tax Year. The maximum that a Resident Accredited Investor may deduct in a Tax Year shall not exceed thirty percent (30%) of their net income before deduction.
(two) Deduction for Private Capital Investment- The deduction for investment that a Resident Accredited Investor may claim under paragraph (1) of this section may be used, at the discretion of the Resident Accredited Investor, against any type of income for purposes to determine any type of contribution pursuant to Subtitle A of the Internal Revenue Code of Puerto Rico, including the alternate basic tax applicable to individuals and the minimum alternative tax applicable to corporations. In the case of spouses living together, file a joint return and avail themselves of the optional computation of the contribution provided by Section 1021.03 of the Internal Revenue Code of Puerto Rico, they may, at their discretion,
SUBCAPTER C- REQUIREMENTS FOR GRANTING EXEMPTION
Section 2043.01- Requirements for Decree Requests
(a) General Rule - Any person who has established or intends to establish an Eligible Business in Puerto Rico under this Chapter shall request the benefits of this Code by submitting a request for a Decree before the Secretary of the DDEC, in accordance with the provisions of the Subtitle F of this Code.
(b) Any person may request the benefits of this Chapter as long as it meets the eligibility requirements of Subchapter A of this Chapter, and with any other criteria established by the Secretary of the DDEC, through the Incentive Regulation, administrative order, letter circular or any other general communication, including as an evaluation criterion the contribution that such Eligible Business will make to the economic development of Puerto Rico.
Section 2043.02– Decree International Insurers and Holding Companies of International Insurers
(a) The International Insurer must obtain a Tax Exemption Decree in which all the tax treatment will be detailed, as provided in the Sections applicable to such businesses in this Chapter.
(b) As a requirement for the Decree, and in accordance with the Incentive Regulations, the Secretary of the DDEC, with the endorsement of the Commissioner of Insurance, may impose additional conditions on the International Insurer relevant to employment or economic activity. Tax exemption concessions so detailed, including the income tax rates set forth in section (a) of Section 2042.02 of this Chapter, shall be considered a contract between the International Insurer, its shareholders, partners or owners and the Government of Port Rich during the effectiveness of the Decree, and the contract will be law between the parties. The Decree shall be effective for a period of fifteen (15) years, beginning on the date of its issuance, unless prior to the expiration of that period the certificate of authority of the International Insurer is revoked,
(c) They must also have a valid authority certificate issued by the Insurance Commissioner, in accordance with Article 61.050 of the Insurance Code, in order to obtain a Decree under this Section.
(d) The Decree shall not be transferable, but shall not lose its effectiveness due to a change of control over the Shares of the International Insurer, or because of a merger or consolidation thereof, or because of the conversion of the International Insurer into one by Shares or mutual, as the case may be, as long as the change of control, the merger or consolidation or the conversion, as the case may be, receives the approval of the Secretary of the DDEC, pursuant to this Chapter.
SUBCHAPTER D- SPECIAL PROVISIONS
Section 2044.01- International Financial Institution
(a) An International Financial Institution shall comply with the provisions of the "International Financial Center Law", to the extent applicable, in order to obtain the benefits set forth in this Chapter.
(b) Confidentiality. The information provided to the Secretary of the DDEC in accordance with this Chapter and with the Incentive Regulations must be kept confidential, except:
(1) When the disclosure of information is required by law or court order;
(2) By formal requirement of a domestic or foreign government agency in the exercise of its supervisory function when the Secretary of DDEC understands that it is in the best public interest. In such a case, the information will be delivered under a mandatory agreement with the DDEC in order to maintain the confidentiality of such information. This exception shall not extend in any case to information about the clients of the International Financial Institution; or
(3) In any other case, as required by the “International Financial Center Law”.
(i) The Secretary of the DDEC may also disclose the information in those cases in which the disclosure is made with the purpose of assisting the Secretary of the DDEC, the Commissioner of Financial Institutions or another authority in the performance of its regulatory functions.
(4) In relation to this Section, the Incentive Regulations will be prepared in consultation with the Commissioner of Financial Institutions.
(5) The Secretary of the DDEC may delegate to the Commissioner of Financial Institutions that regulation, review of transactions and compliance with the provisions applicable to International Financial Entities in this Code, as any other responsibility established in this Chapter with respect to such entities, that the DDEC Secretary understands that the Commissioner of Financial Institutions has the necessary expertise to assume such functions.
Section 2044.02- International Insurers and Holding Companies of International Insurers
(a) An International Insurer shall, to the extent applicable, comply with the requirements set forth in Articles 61.050, 61.060, 61.070, 61.080, 61.090, 61.100, 61.110, 61.120, 61.130, 61.140, 61.160, 61.180, 61.190, 61.200 , 61.210, 61.220, and 61.230 of the Insurance Code, including obtaining the authorization certificate to operate as an International Insurer, in order to obtain the benefits set forth in this Chapter.
(b) An International Insurer Holding Company must comply with the requirements set forth in sections (3) through (8) of Article 61.040 of the Insurance Code in order to obtain the benefits set forth in this Chapter.
(c) Confidentiality - The information provided to the Secretary of the DDEC in accordance with this Chapter and with the Incentive Regulations, must be kept confidential, except:
(1) When the disclosure of information is required by law or court order; or
(2) By formal requirement of a domestic or foreign government agency in the exercise of its supervisory function when the Secretary of DDEC understands that it is in the best public interest. In such a case, the information will be delivered under a mandatory agreement with the DDEC in order to maintain the confidentiality of such information. This exception will not extend in any case to information about the clients of the International Insurer.
(3) The Secretary of the DDEC may also disclose the information in those cases in which the disclosure is made with the purpose of assisting the Secretary of the DDEC, the Commissioner of Insurance or another authority in the performance of its regulatory functions.
(d) In relation to this Section, the Incentive Regulations will be prepared in consultation with the Commissioner of Insurance.
Section 2044.03- Private Equity Funds and Private Equity Funds of Puerto Rico
(a) A Private Equity Fund is a fund that meets the following requirements:
(1) As a general rule, not later than four (4) years, counted from the date of your organization and at the end of each subsequent Fiscal Year, you must maintain a minimum of fifteen percent (15%) of the contributed capital to the Fund by its Accredited Investors (paid-in capital) (excluding from such capital the money that the fund maintains in bank accounts and other investments that are considered equivalent to cash) invested in one or more of the following:
(i) or (ii) a foreign entity that derives not less than eighty percent (80%) of its gross income during the last three (3) years for income from sources in Puerto Rico or related or treated income as actually related to the exploitation of an industry or business in Puerto Rico in accordance with the provisions of the Internal Revenue Code of Puerto Rico. For the purposes of this subsection (i), it will be understood that an Issuing Entity is actively engaged in industry or business if said industry or business is carried out by such Issuing Entity, or by an Entity controlled by the Issuing Entity. It will be understood that an Entity is a controlled Entity if fifty percent (50%) or more of the Capital Shares or the proprietary interests entitled to vote of such Entity are owned by the Issuing Entity.
(ii) promissory notes, bonds, notes, or other debt instruments issued by the Government of Puerto Rico, its instrumentalities, its agencies, its municipalities, or any other political subdivision.
(2) that its Investors are Accredited Investors;
(3) employ one or more than one ADIR, at least one of which shall:
(i) be a Domestic Person or Foreign Person;
(ii) establish and maintain a business office in Puerto Rico; Y
(iii) engage in industry or business in Puerto Rico in accordance with the provisions of the Internal Revenue Code of Puerto Rico and registered with the relevant regulatory entities including, but not limited to OCIF, SEC and SBA, as applicable.
An ADIR that meets all the requirements of this paragraph (3) may subcontract an investment advisor who does not meet those requirements. However, an ADIR that does not meet these requirements cannot subcontract an investment advisor.
(4) operate as a diversified investment entity whereby, not later than four (4) years, counted from the date of its organization and at the end of each subsequent Fiscal Year no more than fifty percent (50%) of its capital paid may be invested in the same business; provided, however, that fluctuations in the value of the fund's investments or the sale, liquidation or other provision of any of the Fund's Assets under its investment strategy or objective will not be taken into consideration in determining whether The Fund is in compliance with this requirement. To determine the limit of fifty percent (50%) of investment in a single business, a group of Affiliates, as defined in subsection (i) of this paragraph, shall be considered as a business. So, The amounts invested in one or more entities within a group of Affiliates, as defined in subsection (i) of this paragraph, must be added to determine if the fund has met its objective of investing no more than fifty percent ( 50%) of your capital in a single business. The foregoing limitation does not prevent a fund from investing more than fifty percent (50%) of its capital in entities operating in the same industry or engaged in the same type of business. Nor does it prevent a fund from acquiring all or a majority of the proprietary interests of an Entity in which it has invested or is investing its capital and, therefore, an Entity will not be deemed to become an Affiliate, as defined in the subsection (i) of this paragraph,
(i) For the purposes of this paragraph (4), the term “Affiliate” means, with respect to an Entity, any other person or Entity, excluding the fund, which directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with said Entity. The term "control" means owning or owning, directly or indirectly, fifty percent (50%) or more of the capital Shares or proprietary interests entitled to vote of said Entity.
(5) must have a minimum capital including legal commitments of capital contribution duly documented, although not paid, of ten million dollars ($ 10,000,000.00) before twenty-four (24) months from the first issuance of proprietary interests of the fund and subsequently ;
(6) must incorporate at least one of its Investors or limited partners to an advisory board, in which a forum for the evaluation of matters of interest and concern about the Fund by its class is established;
(7) in the case of a foreign company or foreign limited liability company, its Managing or General Partner or ADIR must be dedicated to industry or business in Puerto Rico and derive at least eighty percent (80%) of its income gross for income from sources in Puerto Rico or income related or treated as actually related to the exploitation of an industry or business in Puerto Rico, pursuant to the provisions of the Puerto Rico Internal Revenue Code.
(b) A Private Capital Fund shall be considered a Private Capital Fund of Puerto Rico provided that it complies with subsections (2) through (7) of section (a) of this Section and with the following eligibility requirements:
(1) Not later than four (4) years, counted from the date of your organization and at the end of each subsequent Fiscal Year, you must maintain a minimum of sixty percent (60%) of the capital contributed to the fund by your Paid Investors (paid-in capital ) (excluding from that capital the money that the fund maintains in bank accounts and other investments that are considered equivalent to cash) invested in any of the following:
(i) or (B) a foreign entity that derives not less than eighty percent (80%) of its gross income during the last three (3) years for income from sources in Puerto Rico or related or treated income as actually related to the exploitation of an industry or business in Puerto Rico in accordance with the provisions of the Internal Revenue Code of Puerto Rico. For the purposes of this subsection (i), it shall be understood that an Issuing Entity is actively engaged in industry or business if said industry or business is carried out by such Issuing Entity, or by a Entity controlled by the Issuing Entity. It will be understood that an Entity is a controlled Entity if fifty percent (50%) or more of the Capital Shares or of the proprietary interests entitled to vote of said Entity are owned by the Issuing Entity.
(ii) promissory notes, bonds, notes, or other debt instruments issued by the Government of Puerto Rico, its instrumentalities, its agencies, its municipalities, or any other political subdivision;
(iii) exempt investment trusts that qualify for Section 1112.02 of the Puerto Rico Internal Revenue Code;
(iv) promissory notes, bonds, Shares, notes (including loans generated or acquired with and without collateral and including said collateral), or any other value of a similar nature issued by entities directly or indirectly engaged in industry or business actively outside of Puerto Rico , that at the time of purchase, they are not quoted or traded on the public stock markets of the United States or foreign countries; provided that the Entity's operations are transferred to Puerto Rico within six (6) months from the date of acquisition of the promissory notes, bonds, Shares or notes (including loans generated or acquired with and without collateral and including said collateral) or other similar values, plus the additional period authorized by the Secretary of the Treasury, if there is reasonable cause for it,
(c) In the case of Private Equity Funds or Private Capital Funds of Puerto Rico, any Entity that meets the eligibility requirements set forth in this Chapter may request to be treated as a Private Capital Fund or a Private Capital Fund of Puerto Rico, by requesting a Decree in accordance with Section 2043.01; provided that in the case of a limited liability company organized by series, said limited liability company may choose to be treated as a single fund, regardless of the number of series, if the fund meets said eligibility requirements; in the alternative,
(d) Nothing in this Chapter applicable to the funds may be understood as a limitation to the tax treatment that may be obtained by Accredited Investors, Managing or General Partners, an ADIR, or an ECP under any other incentive provided in This Code, as long as the requirements and processes established in this Code are met.
(and) Compliance with the requirements of section (a) or (b) of this Section, as applicable, shall be determined for each Tax Year of the fund. For the purpose of determining the percentage of investment in an asset, its initial cost will be taken into consideration. Failure to comply with the eligibility requirements will prevent the Entity from qualifying as a Private Capital Fund or Private Capital Fund of Puerto Rico during the year of the breach and, therefore, said Entity will be subject to the applicable taxation in accordance with the Internal Revenue Code of Puerto Rico, the "Municipal Patent Law", and the "Municipal Property Tax Law". If, for a Taxable Year, the Entity is disqualified for non-compliance with the provisions of this Code, it must request the Secretary of the DDEC,
(f) The Funds are exempt from complying with the provisions of the "Puerto Rico Investment Companies Act" and the "Puerto Rico Investment Companies Act of 2013".
(g) Disclosure of information-
(1) Any offer of participation or investment in a Fund must be registered or notified in OCIF and comply with all the provisions of the Federal Securities Act of the United States and Puerto Rico, as applicable with respect to disclosure and including Registration if necessary.
(2) Every Fund shall:
(i) Inform its Investors of the results of its operation on a quarterly (unaudited) and annual basis audited by an Authorized Public Accounting firm licensed in Puerto Rico so that the Investor can determine that the Fund is managed in accordance with the policies , practices and agreements communicated during their training. The detail of the audited annual report should include: Internal Performance Calculation (IRR), Breakdown of Commissions and Expenditures of the Company, Summary of Requests for Capital Contributions (Capital Calls), Summary of Indebtedness and a Letter to Investors from the Managing Partner
(ii) The disclosure of the fund must contain:
(A) Explanations regarding the risks and opportunities in the fund as well as material events including, but not limited to: fraud, material breach of fiduciary duty, material breach of agreement, bad faith and gross negligence.
(B) Certificate of Compliance with the sworn fund by the chief executive officer with the provisions of this Code.
(iii) Convene annually an Annual General Meeting of Partners in which the General Partner shares information regarding the operation with its Investors or Limited Partners.
(iv) OCIF will be empowered to conduct examinations and inspections of the Private Equity Funds or Private Equity Funds of Puerto Rico to ensure that their operations and their financial results have been fully informed, comply with the obligation of loyalty to their Investors and meet the requirements of this Code. The fund will pay the cost determined by the OCIF through regulations to conduct such examinations and inspections. The OCIF may take the measures it deems necessary, in circumstances of default, including the liquidation of the fund and the stoppage of additional offers of its securities.
CHAPTER 5- VISITOR ECONOMY
SUBCHAPTER A- ELIGIBILITY
Section 2051.01- Companies Dedicated to Tourist Activities
(a) Eligible Businesses will be considered to qualify for the benefits of this Chapter any new or existing business dedicated to a Tourist Activity that is not covered by a resolution or Grant of tax exemption granted under the “Tourism Incentives Law”, Law No. 52 of June 2, 1983, as amended, the "Tourism Development Law of Puerto Rico", Law 78-1993, as amended, the "Tourism Development Law of Puerto Rico of 2010", Law 74-2010, as amended , or, that being covered, renounces said resolution or concession of exemption in favor of a concession under this Chapter.
(b) Tourist Activity means:
(1) the ownership or administration of:
(i) Hotels, including the operation of Casinos, Condohotels, Puerto Rican Paradores, Agrohospedajes, Guest House, Timeshare Plans and Vacation Clubs, the lodges belonging to the “Posadas de Puerto Rico” program, those certified as Bed and Breakfast ( B&B ) and any other that from time to time are part of programs promoted by the Tourist Office. Tourism ownership will not be considered the ownership of the Timeshare right or Vacation right or both by itself, unless the holder is a creator or successor developer, according to such terms are defined in Law 204-2016, known as “Law of Puerto Rico Vacation Property ”; or
(ii) provided that the Secretary of the DDEC determines that such operation is necessary and convenient for the development of tourism in Puerto Rico; or
(iii) The operation of a business dedicated to leasing an Exempt Business under this Chapter, of property dedicated to an activity covered by subsections (i) or (ii) of this paragraph, except that none of the provisions set forth herein shall apply to contracts called financial lease contracts. In the case of the lease of one or more vessels to an Exempt Business covered by this Chapter, the sail or motor vessel will have to be leased to the Exempt Business for a total period of not less than six (6) months during each calendar year.
(iv) The development and administration of sustainable tourism and ecotourism businesses, as provided in Law 254-2006, as amended, known as the "Public Policy Law for the Sustainable Development of Tourism in Puerto Rico", and the development and administration of useful natural resources as a source of active, passive or fun entertainment, including, but not limited to, caverns, forests and nature reserves, lakes and canyons, provided that the Secretary of the DDEC determines that such development and administration It is necessary and convenient for the development of tourism in Puerto Rico.
v) Activities of eSports and Fantasy Leagues.
SUBCHAPTER B- CONTRIBUTIVE BENEFITS
Section 2052.01- Income Tax
(a) Tourism Development Income derived by Exempt Businesses that have a Decree under this Chapter will be subject to a fixed preferential income tax rate of four percent (4%), instead of any other income tax, if any, provided by the Puerto Rico Internal Revenue Code or any other law.
(b) Distributions of profits and benefits-
(1) General Rule- Shareholders, partners or members of an Eligible Business that has a Decree granted pursuant to this Chapter shall not be subject to income tax on dividend distributions of profits and benefits from the Tourism Development Income of the Business Exempt. Subsequent distributions of the Tourism Development Income carried out by any Entity that is taxed as a corporation or any company will also be exempt from any taxation.
(2) The distributions described in paragraph (1) above will also be excluded from:
(i) alternate basic contribution of an individual, for purposes of the Internal Revenue Code of Puerto Rico;
(ii) the minimum alternative contribution of a corporation, for purposes of the Internal Revenue Code of Puerto Rico;
(iii) additional contribution to corporations and companies for purposes of the Internal Revenue Code of Puerto Rico
(iv) the adjusted net income, according to books of a corporation, for purposes of the Internal Revenue Code of Puerto Rico.
(3) Taxation of exempt distributions- The distribution of dividends or benefits that an Exempt Business that has a Decree granted under this Chapter, even after its Decree expires, will be considered made of its Tourism Development Income if at the date of the This distribution does not exceed the undistributed balance of the profits and benefits accrued from its Tourism Development Income, unless such Exempt Business, at the time of the declaration, chooses to distribute the dividend or benefit, totally or partially, of others utilities or benefits The amount,
(i) In the case of Entities that as of the date of operations as Exempt Businesses have accumulated profits or benefits, distributions of dividends or benefits that are made as of such date will be considered made from the undistributed balance of such profits or benefits, but once this is exhausted by virtue of such distributions, the provisions of this section will apply.
(4) The gains made in the sale, exchange or other provision of Entity Shares, interests in joint ventures or joint ventures or of substantially all the Assets of said corporations, partnerships or limited liability companies, or joint ventures or commons, which are or have been Exempt Businesses, and Shares of Entities, or joint or common companies that in some way own the entities described above, will be subject to the provisions of section (c) of this Section when such sale, exchange or other provision, and any subsequent distribution of earnings, either as a dividend or as a settlement in liquidation, will be exempt from additional taxation.
(c) Sale or exchange - If the sale or exchange of Entity Shares, participations in joint ventures or joint ventures or of substantially all the Assets dedicated to a Tourist Activity of an Exempt Business, and the property continues to be dedicated to a Tourist Activity after such sale for a period of at least twenty four (24) months:
(1) During the exemption period, the gain or loss resulting from such sale or exchange will be recognized in the same proportion as the Exempt Business Tourism Development Income that are subject to the payment of income taxes, and the basis of such Shares or Assets involved in the sale or exchange will be determined, for purposes of establishing gains or losses, in accordance with the applicable provisions of the Internal Revenue Code that is in force as of the date of sale or exchange.
(two) After the expiration date of the exemption, only gains or losses on the sale or exchange of Shares will be recognized in the manner provided by paragraph (1) of this section, but only up to the total value of the Shares in the books of the corporation, company or limited liability companies at the expiration date of the exemption (reduced by the amount of any exempt distribution received on the same Shares after that date) minus the base of the Shares. The remainder, if any, of the gains or losses will be recognized in accordance with the provisions of Subtitle A of the Internal Revenue Code of Puerto Rico.
(3) The requirement that the property continue to be dedicated to a Tourist Activity for a period of at least twenty-four (24) months shall not apply in those cases in which the sale or exchange is of the Shares of an Investor that does not He is neither a Developer nor exercises any Control over the Exempt Business.
(d) Flexible Tax Exemption - Exempt Businesses will have the right to choose that the Tourism Development Income for a specific Tax Year is not covered by the tax exemption provided in section (a) this Section, accompanying a notification to that effect. with its income tax return for that Tax Year based on or before the date provided by the Puerto Rico Internal Revenue Code to file the return, including any extension granted by the Secretary of the Treasury to file it. The exercise of such right by notification will be irrevocable and mandatory to the Exempt Business. However, the total number of years that an Exempt Business may enjoy exemption shall not exceed fifteen (15) years.
(e) Tourism Development Income will not be subject to the following income contributions:
(1) the minimum alternative tax established in Section 1022.03 of the Puerto Rico Internal Revenue Code;
(2) additional contribution to corporations and companies established in Section 1022.05 of the Puerto Rico Internal Revenue Code; Y
(3) the alternate basic tax of individuals established in Section 1021.02 of the Internal Revenue Code of Puerto Rico.
(f) Royalties, Royalties or Rights;
(1) Contribution and Retention of Royalties paid for an Exempt Business to Corporations, Societies or Companies of Limited Liability or Other Foreign Persons Not Dedicated to Industry or Business in Puerto Rico.
(i) It will be imposed, charged and paid for each Tax Year, instead of the tax imposed by the Internal Revenue Code of Puerto Rico, on the amount received for royalties, royalties or rights for use in Puerto Rico of Any Intangible Property related to the exempt activity under this Chapter, by any foreign corporation, foreign company or person not engaged in industry or business in Puerto Rico, coming exclusively from sources within Puerto Rico, a contribution of twelve percent (12%) .
(ii) Any Exempt Business that has the obligation to make payments of royalties, royalties or rights to a foreign corporation, foreign company or person not engaged in industry or business in Puerto Rico, for the use in Puerto Rico of Intangible Property related to the exempt activity under this Chapter, will deduct and withhold at the source a contribution equal to that imposed in subsection (i) of paragraph (1) of this section.
(2) The corresponding contribution must be withheld at source by an Exempt Business that makes payments for royalties, royalties or rights for the use in Puerto Rico of any Intangible Property related to the exempt activity under this Chapter and that are derived from sources In Puerto Rico.
(g) Exemption for individuals, successions, corporations, partnerships, limited liability companies and trusts with respect to interest paid or credited on bonds, promissory notes or other obligations of certain Exempt Businesses.
(one) Exemption - Any individual, succession, corporation, society, limited liability company or trust will be exempt from paying any tax imposed by the Puerto Rico Internal Revenue Code or by any other successor law; and patents imposed under the "Municipal Patent Law", as amended, on income from interest, charges and other credits received in respect of bonds, promissory notes or other obligations of an Exempt Business for the development, construction or rehabilitation of, or Improvements to an Exempt Business under this Chapter on the condition that the use of the funds be used in their entirety for the development, construction or rehabilitation of, or improvements to, an Exempt Business or the payment of existing Debts of the Exempt Business, as long as the funds from these existing debts were originally used for the development, construction or rehabilitation of, or improvements to the Exempt Business. The expenses incurred by a person making an investment described herein shall not be subject to Sections 1033.17 (a) (5), (10) and (f) of the Puerto Rico Internal Revenue Code regarding such investment, and income derived from it.
(2) The proceeds of the bond, promissory note or other obligation must be granted directly to an Exempt Business covered by this Chapter.
(h) Deduction and carry forward of net losses
(1) If an Exempt Business incurs a net loss that is not the operation of a Tourist Activity, the loss will be deductible and may only be used against income other than Tourism Development Income, and will be governed by the provisions of the Code of Puerto Rico Internal Revenue.
(2) If an Exempt Business incurs a net loss in the operation of a Tourist Activity, the loss may be deducted up to an amount equal to the percentage that its Tourism Development Income would have been taxable.
(3) A deduction will be granted for carry-over of losses incurred in previous years, as set forth below:
(i) The excess of deductible losses under paragraph (2) of this section may be carried forward against the taxable portion of the Tourism Development Income, as provided and subject to the limitations provided in that Section. Losses will be carried forward in the order in which they were incurred.
(ii) Any net loss incurred in a year in which the election of section (d) of this Section is in force may be carried forward only against Tourism Development Income generated by the Exempt Business in a year in which the election was made of section (d) of this Section. Losses will be carried in the order they were incurred.
(4) Nothing herein provided shall limit in any way the right, under the Internal Revenue Code of Puerto Rico, of the partners of a special partnership to take a deduction on their distributable part of the loss of the special partnership against income from other sources subject to the limitations of the Puerto Rico Internal Revenue Code.
(i) Base or adjusted base. For the purposes of this Code, with the exemption of section (d) of Section 3010.01, any reference to the term "base" or the phrase "adjusted basis" shall require the calculation thereof as set forth in Sections 1034.02, 1071.05 or 1114.17 of the Internal Revenue Code of Puerto Rico, prior to the adjustments incorporated in this Chapter.
Section 2052.02- Property Contributions
(a) The Property Dedicated to a Tourist Activity shall enjoy up to seventy-five percent (75%) of exemption from any municipal and state contribution on movable and immovable property.
(b) In cases of movable property consisting of equipment and furniture that will be used in an accommodation, excluding any commercial unit, and in cases of special timeshare rights, real-estate vacation rights or accommodation, as these terms are defined in the Law 204-2016, better known as the “Puerto Rico Vacation Property Law”, of a Timeshare or Vacation Club Law Plan licensed by the Tourist Office pursuant to the provisions of Law 204-2016, movable or immovable property shall enjoy of the exemption provided in this Section, regardless of who owns the equipment, furniture or real estate dedicated to a Tourist Activity. The exemption will last as long as the Exemption Concession for the Timeshare or Vacation Club plan remains in effect.
(c) Shares in an Entity that enjoys an Exemption Concession under this Chapter shall not be subject to the payment of property taxes.
Section 2052.03- Municipal contributions
(a) A New Exempt Business and an Existing Tourism Business that is an Exempt Business will enjoy up to fifty percent (50%) exemption of patents, taxes and other municipal contributions on its Tourism Development Income, transactions, events , or on the use, imposed by any ordinance of any municipality.
(b) With the exception of the provisions of the “Municipal Patent Law”, no municipality may impose a contribution, right, license, arbitration or other type of charge that is based on what is related to the stay of a person as a guest of a Exempt business.
Section 2052.04- Contributions on articles of use and consumption
(a) Exempt Businesses shall enjoy up to one hundred percent (100%) of exemption in the payment of contributions imposed under Subtitles C, D and DDD of the Puerto Rico Internal Revenue Code with respect to those items acquired and used by an Exempt Business in relation to a Tourist Activity.
(b) The exemption provided by this Section includes items purchased by a contractor or subcontractor to be used solely and exclusively by an Exempt Business in construction works related to a Tourism Activity of such Exempt Business.
(c) The exemption granted by this Section to those items or other properties of a nature that are properly part of the Exempt Business inventory under Section 3010.01 (a) (2) (B) of the Internal Revenue Code of Port shall not apply Rich, and representing property owned primarily for sale in the ordinary course of industry or business; nor to the hotel room occupancy tax imposed by Law 272-2003, as amended, known as the “Canon Tax Law for Room Occupancy”.
(d) The Secretary of the Treasury shall grant a credit or refund on any tax paid on the sale or on the introduction of items sold to Exempt Businesses for use in relation to a Tourist Activity in the manner and with the limitations prescribed in the Code of Puerto Rico Internal Revenue or any other successor law.
Section 2052.05- Municipal construction arbitrators
(a) Every Exempt Business and its contractors or subcontractors shall enjoy up to seventy-five percent (75%) of exemption from any contribution, tax, right, license, arbitration, fee or fee for the construction of works dedicated to a Tourist Activity in a municipality, imposed by any ordinance of any municipality, from the date set in its Decree.
(b) Only for the purposes of this exemption, any person in charge of executing the administrative and physical and intellectual work inherent to the construction activity of a work to be dedicated by a Business Exempt from a Tourist Activity and any intermediary or chain of intermediaries between it and the Exempt Business, will be considered as a contractor or subcontractor of the Exempt Business.
(c) In the case of a Condohotel, and only for the purposes of this exemption, any person in charge of carrying out the administrative and physical and intellectual work inherent to the construction activity of the Condohotel and any intermediary between it and the owner of A unit of the Condohotel, including the Developer of the Condohotel itself when the latter has contracted with the construction of the Condohotel, shall be considered as contractors of an Exempt Business for each unit of the Condohotel that meets all the requirements to enjoy the benefits available in This Chapter, including but not limited to the requirement of being dedicated to a lease program integrated for at least nine (9) months per year.
(d) Amount to be taken as an exemption in the case of Condohotels- The amount taken as an exemption in the case of a Condohotel due to this section will be divided and allocated for each unit of the Condohotel, according to the proportion of interest of each of them in the common elements of the regime, when all units of the Condohotel are dedicated to a single horizontal property regime or regime according to the "Puerto Rico Condohotels Law", or using any method of apportionment acceptable to the Secretary of the DDEC when the units are dedicated to more than one horizontal property regime.
(one) The exemption will be taken in full for the year in which it is required to satisfy the corresponding tax obligation for the construction. However, it will be understood that taxpayers will have the right to take as an exemption a hundredth part of the amount available as an exemption allocated on a pro rata basis in relation to each unit during each consecutive month that they are dedicated from its construction to an integrated leasing program.
(2) The amount taken due to the applicable exemption in relation to those units will be reduced annually:
(i) That they are acquired during said year of the Entity that developed or built them, have never been used before such acquisition for any purpose and that they are not engaged by the acquirer in an integrated leasing program, within the term limit provided by the Secretary of the DDEC during which the units must be dedicated to such purposes to enjoy the benefits of this Chapter; or
(ii) that during the particular year they have not fulfilled for the first time the requirement of being dedicated to a leasing program integrated for at least nine (9) months during said year.
(3) The equivalent to the reduction in the amount taken due to the exemption may be recovered annually from taxpayers by the municipality. The amount to be charged annually will be calculated as follows:
(i) First: It will be taken for each unit that during that year and that for the first time, has not fulfilled the requirement of being dedicated for at least nine (9) months to an integrated leasing program, the full portion of the exemption assigned according to this paragraph, and will be multiplied by a fraction, whose numerator will be equal to the subtraction of one hundred eighty (180) minus the number of consecutive months during which such unit met the requirement of being dedicated for at least nine (9) months, during each year to an integrated leasing program, and whose denominator will be one hundred eighty (180).
(ii) Second: The results obtained from the corresponding equations for each unit described in the preceding paragraph will be added, and the final result will be the amount of the exemption taken in excess and subject to recovery for said year. Under no circumstances will any type of charge, surcharge, penalty, interest or any other type of addition be imposed or charged with respect to any contribution, tax, right, license, arbitrary, rate or rate, the amount of which is required, in accordance with the provisions of this paragraph, for reasons arising before or at the time of determining that the exemption does not proceed in whole or in part.
(iii) When calculating the number of months that such unit was devoted during each year to an integrated lease program, the months fractions will be rounded to the previous month.
(4) As a condition of the exemption described here, any municipality, with the prior consent of the Secretary of the DDEC, may require any taxpayer regarding the tax, tax, right, license, arbitration, rate or fee on the construction of a Condohotel , or of those persons who have a proprietary interest in said taxpayers of being these Entities of any type, a guarantee or Deposit by means of which the payment of any amount to be owed as a contribution in accordance with this paragraph is ensured.
(5) The operator of the integrated leasing program of a Condohotel shall submit an annual report to the finance director of the municipality or municipalities where the Condohotel is located, of these impose any contribution, tax, right, license, arbitration, fee or fee for the construction of said Condohotel. The report must indicate the start dates of participation in the program of the participating units, as well as the date or dates on which one or more units withdrew from the program.
(6) For the purposes of this section, the fact that an Investor in a Condohotel ceases to comply with any requirement established in the Decree granted for such purposes or is revoked for any reason, shall be deemed to have ceased to devote the Condohotel unit (s) covered under such Concession to an integrated leasing program. The Secretary of the DDEC will notify the finance director of the corresponding municipality, in the event that an Investor has failed to comply with any requirement established in his Concession or if the Decree has been revoked.
(b) In the case of Condohotels, it is established that, in order to enjoy the exemption of municipal construction arbitrations, each Condohotel unit must be dedicated to a leasing program integrated for a period of fifteen (15) consecutive years, and for nine ( 9) months per year. Those cases in which Condohotel's use of the project and Condohotel units change are removed from the integrated leasing program before the term required by this Code, for these purposes, provided that the unit that is Exempt Business is immediately dedicated to another Tourist Activity that is Exempt Business under this Code, for no less than the time remaining from the period under the integrated leasing program. If this condition is not met, the subsequent purchaser of the unit will be responsible for any amount that has to be subsequently recovered for this excess contribution. In such a case, there will be no recovery for the years in which the unit was part of an integrated leasing program and other Tourist Activity that is Exempt Business under this Chapter.
Section 2052.06- Exemption for fuel used by an Exempt Business
(a) Petroleum derivatives (excluding residual No. 6 or bunker C) and any other mixture of hydrocarbons (including propane and natural gas) used as fuel by an Exempt Business under this Chapter in the generation of electrical energy or energy thermal used by the Exempt Business in relation to a Tourist Activity, will be totally exempt from taxes under Sections 3020.07 and 3020.07A of the Internal Revenue Code of Puerto Rico.
Section 2052.07- Setting dates for commencement of operations and exemption periods
(a) Start date of exemptions-
(1) Income tax- The exemptions of this Chapter will begin with respect to contributions on the Tourism Development Income of an Exempt Business, from the day on which your Tourist Activity begins, but never before the first day of the Taxable Year during which the proper filing of an application to benefit from the benefits of this Code and the corresponding payment of said application was completed.
(2) Contributions on movable and immovable property- The exemptions of this Chapter will begin with respect to contributions on movable and immovable property dedicated to a Tourist Activity of an existing business that is an Exempt Business, from the 1st. January of the Natural Year during which a request to benefit from the benefits of this Chapter has been duly filed, with the corresponding payment, with the Secretary of the DDEC or in relation to a New Tourism Business that is an Exempt Business, from of the 1st. January of the Natural Year in which your Tourist Activity begins.
(3) Patentes, arbitrios y otras contribuciones municipales- Las exenciones de este Capítulo comenzarán respecto a patentes, arbitrios y otras contribuciones municipales a partir del 1ro. de enero, o el 1ro. de julio más cercano, posterior a la fecha de la debida radicación de una solicitud, con el pago correspondiente, para acogerse a los beneficios de este Capítulo.
(4) Sales and use and arbitrary contributions- The exemptions of this Chapter shall begin with respect to sales and use and arbitrary contributions thirty (30) days after the filing of an application, with the corresponding payment, to avail the benefits of this Chapter, as long as a Deposit is deposited in accordance with the applicable provisions of the Internal Revenue Code of Puerto Rico, prior to the date selected for the beginning of this exemption, and the aforementioned application has not been denied. In case the exemption request is denied, the contributions mentioned in this paragraph must be paid within sixty (60) days from the notification of the denial.
(5) Municipal construction arbitrators- The exemptions of this Chapter shall begin with respect to municipal construction arbitrations from the date of filing an application to avail the benefits of this Chapter. In the case of Condohotels, contractors and subcontractors will begin to enjoy the exemption from the filing by the Developer of a request for a parent concession describing the nature of the project and that meets those additional requirements established for such purposes by the Secretary of the DDEC .
(b) An Exempt Business will have the option of postponing each of the aforementioned start dates, by notifying the Secretary of the DDEC for that purpose. The notifications must be filed on or before the date provided by regulations promulgated for this purpose. The start dates may not be postponed for a period greater than thirty-six (36) months following the dates established in this Section. The Secretary of the DDEC will issue an order to set the start dates of the exemption periods under this Code, in accordance with the Exempt Business application and in accordance with the regulations promulgated for these purposes.
(c) Nothing in this Section shall entitle the reimbursement of contributions assessed, imposed and paid prior to the dates established as the beginning of operations for purposes of the exemptions provided by this Chapter.
(1) The Secretary of the DDEC will follow the procedures described in this Chapter and determine if the exemption is essential for the development of the tourism industry, taking into account the facts presented, and in view of the nature of the physical facilities, the number of jobs, the entire payroll, the entire investment, the location of the project, its environmental impact, the reinvestment in the Exempt Business of part or all of the depreciation taken as a tax deduction, or other factors that, in its opinion, merit such determination.
SUBCAPTER C- REQUIREMENTS FOR GRANTING EXEMPTION
Section 2053.01- Requirements for Decree Requests
(a) Any person who has established or intends to establish an Eligible Business in Puerto Rico may request the benefits of this Chapter from the Secretary of the DDEC by submitting the application in accordance with the provisions of Subtitle F of this Code.
(b) Any person may request the benefits of this Chapter as long as it meets the eligibility requirements of Subchapter A of this Chapter, and with any other criteria established by the Secretary of the DDEC, through regulations, administrative order, circular letter or any other another general communication, including as an evaluation criterion the contribution that such Eligible Business makes to the economic development of Puerto Rico. In addition, the evaluation criteria should take into consideration the following:
(1) Jobs- Tourist Activity and Exempt Business encourage the creation of new jobs.
(2) Harmonious integration- The design and conceptual planning of the Tourist Activity and the Exempt Business will be carried out, primarily, taking into consideration the environmental, geographical, physical aspects, as well as the available and abundant materials and products of the place where it will be developed .
(3) Commitment to economic activity - The Exempt Business will acquire, to the extent possible, raw material and Products Manufactured in Puerto Rico for the construction, maintenance, renovation or expansion of its physical facilities. If the purchase of these products is not economically justified by taking into consideration criteria of quality, quantity, price or availability of these in Puerto Rico, the Secretary of the DDEC may exempt you from this requirement and issue a certificate of accreditation for these purposes.
(4) Commitment to agriculture- The Exempt Business will acquire, to the extent possible, agricultural products from Puerto Rico to be used in its operation. If the purchase of such products is not economically justified by taking into consideration criteria of quality, quantity, price or availability of these in Puerto Rico, the Secretary of the DDEC may exempt you from this requirement and issue a certificate of accreditation for these purposes.
(5) Transfer of knowledge - The Exempt Business must, as far as possible, acquire its services from professionals or companies with a presence in Puerto Rico. However, if this is not possible by criteria of availability, experience, specificity, skill or any other valid reason recognized by the Secretary of the DDEC, the Exempt Business may acquire such services through an intermediary with a presence in Puerto Rico, which You will contract directly with the service provider chosen by the Exempt Business, in order to provide the requested services.
"Services" means, notwithstanding that the Secretary of the DDEC may include others by regulation, the contracting of works of:
(A) surveying, production of construction plans, as well as engineering, architecture and related services designs;
(B) construction and everything related to this sector;
(C) economic, environmental, technological, scientific, managerial, marketing, human resources, computer and audit consulting;
(D) advertising, public relations, commercial art and graphic services; Y
(E) security or maintenance of its facilities.
(6) Financial commitment - The Exempt Business must demonstrate that they deposit a considerable amount of the income from their economic activity and use the services of banking or cooperative institutions with a presence in Puerto Rico.
(7) The Secretary of the DDEC shall be the sole official responsible for verifying and guaranteeing compliance of Exempt Businesses with the eligibility requirements set forth in this Section and this Chapter. If the Exempt Business partially complies with the requirements set forth in this Section, it will be up to the Secretary of the DDEC to establish a formula that allows quantifying the aforementioned factors and subtracts the unmet requirement of the total percentage of the specific tax credit, in order to obtain the figure exact percent of the benefit in question.
SUBCHAPTER D- SPECIAL PROVISIONS
Section 2054.01- Exempt Business Transfer
(to) General rule- The transfer of the Concession obtained under this Chapter, or of the Shares or majority ownership of an Exempt Business to another person who, in turn, will continue to devote himself to the Tourist Activity to which the Exempt Business was previously dedicated in a manner substantially similar, it will require the prior approval of the Secretary of DDEC. If the transfer is made without prior approval, the Concession will be void at the time of the transfer. Notwithstanding the foregoing, the Secretary of the DDEC may approve any transfer made without its approval with retroactive effect when, in his opinion, the circumstances of the case merit such approval, taking into account the best interests of Puerto Rico and the tourism development purposes of this code. Any transfer request under this Section must be approved or denied within sixty (60) days following its filing. Any transfer request that is not approved or denied within this period will be considered approved. The denial of a transfer request must be made in writing and will detail the reasons why it is denied.
(b) Exceptions— The following transfers will be authorized without prior consent:
(1) The transfer of the assets of a decedent to his estate or the transfer by legacy or inheritance;
(2) The transfer of Shares of the Exempt Business when said transfer does not directly or indirectly result in a change in the domain or Control of the Exempt Business;
(3) The pledge or mortgage granted in the ordinary course of business for the purpose of providing a guarantee of a bona fide debt . Any transfer of Control, title or interest by virtue of said contract will be subject to the provisions of section (a) of this Section.
(4) The transfer by operation of law, by order of a court or a bankruptcy judge to a trustee. Any subsequent transfer to a third person that is not the same debtor or bankrupt above will be subject to the provisions of section (a) of this Section.
(5) Any transfer that has been included as part of the exceptions to this Section shall be reported by the Exempt Business to the Secretary of the DDEC within thirty (30) days of being made.
Section 2054.02- Interrelation with other laws
(a) The provisions of this Chapter may not be used in conjunction with other incentives provided by this Code, except those provided in Sections 3010.01 and 5010.01, or any economic or tax incentive law, such that the result of the use of the laws as a whole be the obtaining of tax benefits, or of any other nature, that exceed the benefits to which one would be entitled under any of the laws individually.
(b) Notwithstanding the foregoing, the following situations shall be exempted from this prohibition:
(1) a real estate investment trust with a valid election under Subchapter B of Chapter 8 of Subtitle A of the Puerto Rico Internal Revenue Code, or any other prior or subsequent similar law, or any corporation, limited liability company , society, special partnership or legal Entity wholly owned, directly or indirectly, by the real estate investment trust, may benefit from the provisions of this Chapter, with the exception of the benefits provided in section (a) Section 2052.01 of this Code.
(2) An Exempt Business that benefits from tax incentives under Chapter 6 of Subtitle B of this Code and that has a Decree may choose to benefit, alternatively, by the provisions of this Chapter on the portion dedicated to the generation and sale of energy produced through the use of alternative energy sources, such as wind, sunlight, water and biomass, among others, for the consumption of an Exempt Business.
Section 2054.03- Relay and other exemptions
(a) The requirement of a lease of movable property, as defined by Act No. 20 of May 8, 1973, as amended, known as the Law of Leasing Institutions of Movable Property, is relieved of those landlords with respect to to leases of personal property to Exempt Businesses.
(b) Exemption of collection of duties and tariffs for public or private instruments.
(one) Any deed, instance or document, judicial, public or private, related to the registration, entry, cancellation, release, restriction, constitution, modification, extension, rectification, limitation, creation or renewal of any real or contractual right that has access to the Registry of the Property and that relates to a real property covered under this Chapter, shall be exempt from ninety percent (90%) of the payment of: (i) internal income stamps, legal assistance or any other required by law or regulation for its granting, issuance of any certified, partial or total copy of the document, its presentation, registration and any other operations in the Property Registry; and (ii) tariffs, taxes, contributions and rights for submission, registration and any other operations in the Property Registry. This exemption is subject to the prior approval of the Secretary of the DDEC, and will be evidenced by certification issued by him for such purposes. A certified copy of the certification must be submitted to any notary public, Registrar, Court or any other Entity to which the benefits of this exemption are claimed, and will be attached to any document that is presented in the Property Registry. The persons before whom such certification is presented may rely on the reliability of the certification, which shall be presumed to be correct and final for all relevant legal effects. and it will be evidenced by certification issued by him for this purpose. A certified copy of the certification must be submitted to any notary public, Registrar, Court or any other Entity to which the benefits of this exemption are claimed, and will be attached to any document that is presented in the Property Registry. The persons before whom such certification is presented may rely on the reliability of the certification, which shall be presumed to be correct and final for all relevant legal effects. and it will be evidenced by certification issued by him for this purpose. A certified copy of the certification must be submitted to any notary public, Registrar, Court or any other Entity to which the benefits of this exemption are claimed, and will be attached to any document that is presented in the Property Registry. The persons before whom such certification is presented may rely on the reliability of the certification, which shall be presumed to be correct and final for all relevant legal effects. and will be attached to any document that is presented in the Property Registry. The persons before whom such certification is presented may rely on the reliability of the certification, which shall be presumed to be correct and final for all relevant legal effects. and will be attached to any document that is presented in the Property Registry. The persons before whom such certification is presented may rely on the reliability of the certification, which shall be presumed to be correct and final for all relevant legal effects.
(2) The term “real or contractual right that has access to the Property Registry”, as used in the previous paragraph, includes all real or personal rights that by way of exception have access to the Property Registry, recognized at present or that may be recognized in the future, and include, but not limited to, any way:
(i) easements, whether legal, fair, property or personal;
(ii) constitution of the horizontal property, Timeshare or Vacation Club, and Condohotel regimes;
(iii) surface and building rights, and any building or certification of completion of works by means of which the registration of a building or improvement is requested;
(iv) leases;
(v) mortgages;
(vi) mortgage cancellations;
(vii) sales;
(viii) swaps;
(ix) donations;
(x) score, withdrawal and censuses;
(xi) private domain waters;
(xii) administrative concessions;
(xiii) purchase option; Y
(xiv) restrictions of use.
Section 2054.04- Limited Liability
(to) Notwithstanding the provisions of the Civil Code, referring to the obligations of the partners to third parties, those partners or shareholders that make up a company or any other legal entity organized under the laws of Puerto Rico or any other jurisdiction that enjoys a Concession under This Chapter shall not be liable with their personal assets, beyond their contribution to the concessionary Entity, for their debts and obligations, in the event that the Entity's equity is not enough to cover them. The limited liability will benefit the partners or shareholders regarding all the activities of the Legal Entity, including, but not limited to: (i) claims arising from the tourist activities object of the mentioned Concession; (ii) activities related to the liquidation and termination of said activity; (iii) activities related to the disposition and transfer of the assets used therein; and (iv) activities related to the operation of any Casino that operates under a franchise granted under the "Game of Chance Act". The limited liability benefit provided here will begin on the date of filing a waiver request under this Code, and will apply to any cause of action arising from events that occurred, before the Legal Entity is dissolved.
CHAPTER 6- MANUFACTURE
SUBCHAPTER A- ELIGIBILITY
Section 2061.01-Manufacturing Companies
(a) It is provided so that an established business, or that will be established, in Puerto Rico by a Person, may request the Incentive Concession from the Secretary of the DDEC when the Person is established in Puerto Rico to engage in one of the following eligible activities :
(1) Any Industrial Unit that is established on a permanent basis for the Production on a Commercial Scale of any Manufactured Product.
(2) Notwithstanding the provisions of paragraph (1) of this section, any Industrial Unit that is established on a permanent basis for the Production on a Commercial Scale of any Manufactured Product that is not eligible under paragraph 1, or similar provisions under Laws In Previous Incentives, with the exception of the manufacture of boxes, containers and containers produced of corrugated cardboard, you will enjoy the benefits provided by this Chapter as soon as these Manufactured Products are sold abroad, and in turn, subject to the limitations regarding the determination of Industrial Development Income and base period income, established in sections (f) and (g) of Section 2062.01 of this Code.
(3) Any Industrial Unit that would normally be considered as an Eligible Business under this Chapter, but which, due to competition from other jurisdictions due to low production costs, among other factors, is not economically viable to carry out the entire manufacturing operation in Puerto Rico , so it is required that you carry out part of the process or production of the product outside of Puerto Rico. For the purposes of this paragraph, the Secretary of the DDEC, prior endorsement by the Secretary of the Treasury, may determine that such Industrial Unit may be considered as an Eligible Business under this Chapter, in consideration of the nature of its facilities, of investment in property, machinery and equipment, of the number of jobs to be created in Puerto Rico,
(4) Any bona fide office, business or establishment with its equipment and machinery, with the capacity and expertise necessary to carry out a service on a commercial scale, provided that it meets one of the following modalities:
(i) The provision in Puerto Rico of Fundamental Services to Business Conglomerates.
(ii) The provision in Puerto Rico of Key Supplier Services, according to said term is defined in this Code.
(5) Property Dedicated to Industrial Development.
(6) Animal husbandry for experimental uses in scientific research laboratories, medicine and similar uses.
(7) Any company that engages in scientific or industrial research and development to develop new products, or develop new services or industrial processes through basic or applied experimentation.
(i) The term "research and development" means for the purposes of this Chapter any activity that is carried out with the objective of advancing knowledge or capacity in a field of science or technology, through the resolution of scientific or technological uncertainty. The new knowledge that results from research and development must be useful for creating new products, improving them, or creating new services or processes of commercial value.
(ii) Excluded, for purposes of the Tax Credits provided in Sections 3030.01 and 3000.02, respectively, of this Code, research and development to improve industrial processes ( continuous improvement ), as well as research and development processes carried out by contract for any company for the benefit of a third party (contract research).
(8) Any of the recycling activities defined below:
(i) Partial Recycling Activities. - Recycling activities that carry out at least two or more of the following processes: collection, distribution, reconditioning, compaction, crushing, spraying, or other physical or chemical process that transform items from recyclable materials or recyclable materials, as defined in the Article 2 (O) of Law 70-1992, as amended, known as the "Law for the Reduction and Recycling of Solid Waste in Puerto Rico" and recovered in Puerto Rico, in raw material, aggregates for the preparation of a product , prepare the material or product for sale or local use or export, and sell or use locally or export the processed material or product for further use or recycling.
(ii) Total Recycling Activities - The transformation into articles of commerce of recyclable materials that have been recovered mainly in Puerto Rico, subject to such activity contributing to the objective of promoting the recycling industry in Puerto Rico.
(9) Plantings and crops vertically integrated with value-added processes, such as the process of nutrition (hydroponics), as well as the intensive cultivation of mollusks, crustaceans, fish or other aquatic organisms through the aquaculture process, the milk pasteurization process and Agricultural Biotechnology processes, provided that these operations are carried out in accordance with the standards and practices approved by the Department of Agriculture, as well as any other agro-industrial or agricultural operation, including those operations exclusively dedicated to packaging, packaging , preservation, classification or processing of agricultural products.
(10) Value-added activities related to the operation of the Port of the Americas, the port located in the former Roosevelt Roads Base, and the ports of Mayagüez, Yabucoa, San Juan, Guayama and any other port designated by the Secretary of the DDEC through regulation or other official communication such as: storage, consolidation of merchandise and dispatch thereof, repacking of consolidated products for shipment from such ports, the termination of semi-processed products for shipment to regional markets, and any other commercial or related service activity with the administration and management of finished, semi-processed or manufactured goods or products that are associated with, are part of, or run through such ports.
(11) Development of licensed or patented programs or applications (software), which can be reproduced on a commercial scale and have the following attributes: (i) The user interacts with the program to perform specific tasks of value and (ii) the models of Businesses may involve: (A) the distribution of physical form, on the cyber network or by cloud computing or as part of a blockchain (blockchain) and (B) the revenue comes from licensing, program subscriptions and / or service charges
(i) The following tasks are considered ineligible:
(A) Company of content publications in the cyber network and its search device.
(B) Company that uses technology to provide a service and does not have the human resources to develop new products.
(C) Company where the primary income is from advertising and marketing of the Puerto Rico market.
(D) The program does not contain a methodology to perform a valuable task.
(E) Programs that include gambling where entry is a bet.
(12) Research, development, manufacturing, transportation, launch, operation from Puerto Rico of satellites and development services centers for data processing and storage, excluding telephony, broadcasting and broadcasting operations.
(13) The licensing of Intangible Property, developed or acquired by the Exempt Business that has a Decree under this Code.
(14) The repair, maintenance and general conditioning of aircrafts and maritime vessels, as well as their parts and components.
(15) The development of video games that can be reproduced on a commercial scale
(b) Except as provided in Subtitle F of this Code, on renegotiations and conversions, any applicant who receives benefits or tax incentives under any other special law of the Government of Puerto Rico that are similar to those provided in this Code, as determined the Secretary of the DDEC may not be considered as an Eligible Business under this Chapter, with respect to the activity for which he enjoys such benefits or tax incentives.
SUBCHAPTER B- CONTRIBUTIVE BENEFITS
Section 2062.01- Income Tax
(a) Fixed Income Tax Rate - Exempt Businesses that have a Decree under this Chapter will be subject to a fixed rate of contribution on their Industrial Development Income during the entire exemption period, as of the date of commencement of operations , instead of any other income tax, if any, as provided in the Puerto Rico Internal Revenue Code.
(1) In General- Exempt Businesses, which have a Decree under this Chapter, will be subject to a preferential fixed rate of income tax on their Industrial Development Income of four percent (4%), excluding Eligible Investment Income , which will be subject to what is provided in section (c) of this Section.
(2) Alternate Taxation - Exempt Businesses whose royalty payments for the use or privilege of use of Intangible Property in Puerto Rico to Foreign Persons, not engaged in industry or business in Puerto Rico, who are subject to the tax rate on Income provided in paragraph (2) of section (b) of this Section shall be subject to a fixed rate of income tax on their Industrial Development Income of eight percent (8%), excluding Eligible Investment Income, which will be subject to what is provided in section (c) of this Section.
(b) Royalties, Income or Royalties and License Rights - Notwithstanding, the provisions of the Internal Revenue Code of Puerto Rico, in the case of payments made by Exempt Businesses that have a Decree under this Chapter, to Foreign Persons, not engaged in industry or business in Puerto Rico, for the use or privilege of use in Puerto Rico of Intangible Property related to the operation declared exempt under this Chapter, and subject to such payments being considered entirely from sources within Puerto Rico, will be subject to the following rules:
(1) In General- It will be imposed, charged and paid, in lieu of any other contribution imposed by the Internal Revenue Code, on the amount of such payments received or implicitly received, by any Foreign Person, not engaged in industry or business in Puerto Rico, originating exclusively from sources within Puerto Rico, a rate of twelve percent (12%) in the case of Exempt Businesses that are subject to the income tax provided in paragraph (1) of paragraph (a) of this section.
(2) Alternate Taxation - The Secretary of the DDEC may authorize the payments described in this section (b) of this Section to be subject to a rate of two percent (2%), instead of the rate imposed by the paragraph (1) above.
i. The alternate taxation imposed by this paragraph (2) will be established prior to the effective date of the Decree, will be irrevocable during the term of said Decree, and will be documented as part of the terms and conditions agreed in the Decree.
(3) Any Exempt Business that has the obligation to make payments to Foreign Persons for the use or privilege of use in Puerto Rico of Intangible Property related to the operation declared exempt under this Chapter, will deduct and withhold at the origin a contribution equal to that imposed in paragraphs (1) and (2) of this section, as the case may be.
(c) Taxation of Eligible Investment Income - An Exempt Business that has a Decree granted under this Chapter shall enjoy a total exemption on Eligible Investment Income. The expiration, renegotiation or conversion of the Decree or other Concession of the investing Entity or the issuing Entity, as the case may be, shall not prevent the income accrued from the investment from being treated as Eligible Investment Income under this Code during the remaining period of the investment.
(d) Sale or Exchange of Shares or Assets
(1) The gains made in the sale, exchange or other provision of Entity Shares that are or have been exempt businesses; stakes in joint ventures and similar ventures and similar entities made up of several corporations, partnerships, individuals or combinations thereof, which are or have been Exempt Businesses under this Chapter, and Shares of Entities that somehow own the entities described above, will be subject to the provisions contained in paragraph (2) of this section when said sale, exchange or other provision is made, and any subsequent distribution of said profits, either as a dividend or as a distribution in liquidation, shall be exempt from additional taxation.
(2) Sale or Exchange of Shares or Assets-
(i) In the case of sales or swaps of Shares during the exemption period, the gain on the sale or exchange of Entities Shares or substantially all the assets of an Exempt Business that has a Decree granted under this Chapter that is made during its exemption period and that would have been subject to income tax under the Puerto Rico Internal Revenue Code, will be subject to a contribution of four percent (4%) on the amount of the gain made, if any, instead of Any other contribution imposed by the Puerto Rico Internal Revenue Code. Any loss in the sale or exchange of such Shares or assets will be recognized in accordance with the provisions of the Internal Revenue Code of Puerto Rico.
(ii) After the Termination Date of the Exemption Period.- The gain in the event that said sale or exchange is made after the termination date of the exemption will be subject to the tax provided in subsection (i) above, but only up to the amount of the value of the Shares or of substantially all the assets in the books of the corporation at the end of the exemption period reduced by the amount of exempt distributions received on the same Shares after said date, less the basis of such Shares or substantially all assets. Any remainder of the gain or any loss, if any, will be recognized in accordance with the provisions of the Puerto Rico Internal Revenue Code in force as of the date of the sale or exchange.
(iii) Exempt swaps - The swaps of Shares that do not result in taxable events as they are exempt reorganizations will be treated in accordance with the provisions of the Puerto Rico Internal Revenue Code in force as of the date of the swap.
(iv) Determination of Bases for Sale or Exchange of Shares- The basis of the Exempt Business Shares or assets under this Chapter in the sale or exchange will be determined in accordance with the applicable provisions of the Puerto Rico Internal Revenue Code that is in force at the time of the sale or exchange, increased by the amount of Industrial Development Income accumulated under this Chapter.
(v) For the purposes of this paragraph (2), the term "substantially all assets" shall mean those assets of the Exempt Business that represent not less than eighty percent (80%) of the book value of the Exempt Business at the time of sale. .
(vi) The Secretary of the DDEC, in consultation with the Secretary of the Treasury, will make the provisions of this section (d) effective through the Incentive Regulations.
(e) Liquidation-
(1) General Rule- No income tax will be imposed or collected on the transferor or the assignee regarding the total liquidation of an Exempt Business that has obtained a Decree under this Chapter, on or before the expiration of its Decree, provided that the following requirements are met:
(i) All property distributed in liquidation was received by the assignee in accordance with a liquidation plan on or before the expiration date of the Decree; Y
(ii) The distribution in liquidation by the transferor, once or from time to time, was made by the transferor in cancellation or in full redemption of all its share capital.
The assignee's base on the property that is received in liquidation will be equal to the adjusted basis of the Exempt Business on such property immediately before the liquidation. In addition, and for the purposes of this Section, a corporation or company participating in a company that is an Exempt Business shall, in turn, be considered an Exempt Business.
(2) Liquidation of Assignors with Revoked Decrees- If the Decree of the assignor were revoked prior to its expiration in accordance with the provisions of Section 6020.09 of Subtitle F of this Code in relation to the permissible revocation, the accumulated surplus of Income from Industrial Development as of the effective date of revocation may be transferred to the assignee at any later time, subject to the provisions of paragraph (1) of this section. In cases of mandatory revocation, the accumulated surplus will be subject to taxation in accordance with the Puerto Rico Internal Revenue Code.
(3) Liquidations Subsequent to the expiration of the Decree.- After expiration of the Decree of the transferor, the latter may transfer to the assignee the accumulated surplus of Industrial Development Income accrued during the term of the Decree, subject to the provisions of the paragraph (1) of this section.
(4) Liquidation of Assignors with Exempt and Non-Exempt Activities.- In the event that the assignor carries out exempt and non-exempt activities, it may transfer to the assignee the surplus of Industrial Development Income accumulated under this Chapter and the Dedicated Property a Industrial Development under this Chapter as part of its total settlement, subject to the provisions of paragraph (1) of this section. The accumulated surplus that is not of Industrial Development Income and the property that is not dedicated to industrial development will be distributed in accordance with the provisions of the Internal Revenue Code of Puerto Rico.
(f) Ineligible Businesses Under Previous Incentive Laws–
(1) During the first four (4) years of effectiveness of this Code, in the case of Exempt Businesses under paragraph (2) of section (a) of Section 2061.01 of this Code dedicated to the production of Manufactured Products to be sold abroad that have not been eligible for the Granting of Incentives under this Chapter, or Previous Incentive Laws, the fixed income tax rates set forth in this Section will be partially applicable to the Industrial Development Income, as set forth below:
(i) Twenty-five percent (25%) of the Industrial Development Income generated in the first Tax Year of the Exempt Business shall be subject to the applicable fixed income tax rate set forth in this Section, and the remaining seventy-five percent (75%) of Industrial Development Income will be subject to taxation in accordance with the rules and rates applicable under the Puerto Rico Internal Revenue Code.
(ii) Fifty percent (50%) of the Industrial Development Income generated in the second Tax Year of the Exempt Business will be subject to the applicable fixed income tax rate set forth in this Section and the remaining fifty percent (50% ) of the Industrial Development Income will be subject to taxation in accordance with the rules and rates applicable under the Puerto Rico Internal Revenue Code.
(iii) Seventy-five percent (75%) of the Industrial Development Income, generated in the third Tax Year of the Exempt Business, will be subject to the applicable fixed income tax rate, set forth in this Section, and the remaining twenty-five Percent (25%) of the Industrial Development Income will be subject to taxation in accordance with the rules and rates applicable under the Puerto Rico Internal Revenue Code.
(iv) For the fourth Tax Year of the Exempt Business, all of your Industrial Development Income will be subject to the applicable fixed income tax rate, as provided in this Section.
(g) Limitation of Benefits-
(1) In the event that at the date of your request for incentives, in accordance with the provisions of this Code, an Eligible Business was dedicated to the activity for which the benefits of this Chapter are granted, the Eligible Business may enjoy the fixed rate of contribution on Industrial Development Income provided by this Section, only in terms of the increase in the net income of said activity that it generates over the average net income of the last three (3) Tax Years prior to the date of submitting the application, which is referred to as "base period income" for the purposes of this paragraph.
(2) For the purpose of determining the base period, the production and sale of any business prior to the requesting business will be taken into account. For these purposes, “predecessor business” shall include any business related to the requesting business, even if it had not been previously exempt, and without considering whether it was in operations under another legal name, or under other owners.
(3) The income attributable to the base period will be subject to the income tax rates provided by the Puerto Rico Internal Revenue Code.
(4) The base period income will be adjusted, reducing said amount by twenty-five percent (25%) annually, until it is reduced to zero (0) for the fourth Tax Year applicable to the terms of the Exempt Business Decree under this code. For these purposes, those years for which the Exempt Business has made an election under Section 2011.05 of this Code will be taken into consideration.
(h) Credit for Technology Transfer Investments.-
(1) Exempt Businesses that have a Decree under this Chapter and that are subject to the income tax rate provided in paragraph (1) of section (a) of this Section, may take a credit against the tax on income attributed to the net income of its Industrial Development Income, equal to the rate provided in paragraph (1) of section (b) of this Section with respect to payments made to Foreign Persons, not dedicated to industry or business in Puerto Rico, for the use or privilege of use in Puerto Rico of Intangible Property in its operation declared exempt under this Chapter, provided that the income from such payments is entirely from sources in Puerto Rico.
(2) In the case of Exempt Businesses that are subject to the alternate taxation provided in paragraph (2) of section (a) of this Section, the applicable percentage for purposes of paragraph (1) above shall be that which is provided in paragraph (2) of section (b) of this Section.
(3) The tax credit established in this paragraph will not be transferable, but may be carried over until it is exhausted. However, said carryover shall never exceed the period of eight (8) tax years counted as of the close of the Tax Year in which the credit originated. This drag will never result in a minor contribution from that provided in subsection (3) of section (g) of this Section. This credit will not be refunded.
(i) Application of Credit and Minimum Tax.- The application of credit established in section (h) of this Section shall be subject to the following rules:
(1) Tentative Contribution.- The Exempt Business will initially compute its tax liability according to the fixed rate of income tax provided in paragraphs (1) and (2) of section (a) of this Section, as the case may be. .
(2) Credit Application.- The total amount of credit granted in section (h) of this Section, subject to the limitations applicable to such credit, and that the Exempt Business claims, will be reduced from the tax obligation computed in paragraph (1) of this section (i).
(3) Minimum Contribution.- The tax determined on the Industrial Development Income computed after applying the credit pursuant to paragraph (2) of this section, will never be less than that amount which, added to the amounts deposited under section (b ) of this Section regarding the taxable year, result in:
i. In the case of an Exempt Business that generates an average gross income, including the gross income of members of its controlled group, or of the group of related entities, according to such terms is defined in Sections 1010.04 and 1010.05 of the Internal Revenue Code, of less than ten million (10,000,000.00) dollars during the three (3) previous taxable years, one percent (1%) of the Industrial Development Income of the Exempt Business;
ii. In the case of a local investment business, three percent (3%) of the Industrial Development Income of the Exempt Business; For purposes of this section, a local investment business means any Exempt Business that belongs directly to at least fifty percent (50%) to Resident Individuals of Puerto Rico;
iii. In all other cases, the fixed income tax rates set forth in paragraphs (1) and (2) of section (a) of this Section, as the case may be, multiplied by the net income attributed to the Income of Industrial Development, excluding Eligible Investment Income.
(4) The Exempt Business that has a decree granted under this Chapter shall pay what is greater than paragraph (2) or paragraph (3) of this section.
(5) In the cases described in subsections (i) and (ii) of paragraph (3) of this section, the minimum contribution provided therein shall cease to apply and apply subsection (ii) or (iii), as the case may be. the case, for Tax Years in which the Exempt Business does not comply with the provisions of subsection (i) or (ii), as the case may be.
Section 2062.02- Tax on Movable and Real Property
(a) In General-
(1) The movable property of an Exempt Business that has a Decree granted under this Chapter, which has been used in the development, organization, construction, establishment or operation of the activity covered under the Decree, shall enjoy seventy-five ( 75%) exemption on municipal and state contributions on personal property during the exemption period.
(2) The real property of the Exempt Business that has a Decree granted under this Chapter, which has been used in its development, organization, construction, establishment or operation, shall enjoy a seventy-five (75%) exemption on municipal contributions and state ownership over the exemption period.
(b) Construction Period- The real property of an Exempt Business that has a Decree granted under this Chapter shall be seventy-five percent (75%) exempt during the period authorized by the Decree to carry out the construction or establishment of such Exempt Business and during the first Fiscal Year of the Government in which the Exempt Business had been subject to property taxes for having been in operations at the 1st. January prior to the beginning of such Fiscal Year, except for the exemption provided here. Likewise, the real property of the Exempt Business that is directly related to any expansion of the Exempt Business will be totally exempt from property tax during the period authorized by the Decree to carry out the expansion.
(c) Eligible Investments will be totally exempt from the payment of the property tax.
(d) Optional Auto Appraisal Method-
(1) An Exempt Business under this Chapter may use the self-appraisal method set forth in this paragraph to determine the classification and contribution on real property on property that has not been assessed under Law 83-1991. In such cases, the Exempt Business shall comply with the procedures established in Law 83-1991, provided that it has complied with the notification requirements established in said law or in the Decree.
(2) The self-appraisal method set forth in this paragraph may be used exclusively for that property that is properly considered as real property because of the use and location to which it is intended and that is used in the development, organization, construction, establishment or operation of the eligible activity. The method established herein may not be used to appraise land or structures, including real property permanently adhered to a structure and that exclusively serves said structure, such as lighting equipment.
(3) The appraised value of the property classified as real estate by the Exempt Business to be appraised under this paragraph shall be equal to thirty-five percent (35%) of the depreciated value in the Exempt Business books. The appraised value will not be less than determined percent of the cost, calculated based on the useful life of the property, as set forth below:
Useful life
cost
2-5 years
25%
6-10 years
17%
11-15 years
fifteen%
16 years or older
10%
(4) The Exempt Business will also enjoy the exemption established in section (a) of this Section on the value assessed in accordance with the provisions of paragraph (3) of this section. The provisions of the "Municipal Property Tax Law" shall apply as regards the rate, date and method of payment of this contribution as if it were a tax assessed under said law.
(5) Any Exempt Business that has chosen to use the self-appraisal method provided in this section will submit a tax return on self-assessed real estate no later than May 15 of each year, in which it will identify the property to be considered. as property and will determine its obligation to pay real estate tax for the Government Fiscal Year in accordance with the provisions of paragraph (3) of this section. Once an Exempt Business adopts the appraisal method set forth in this section, it will pay and pay at the date of filing the first return, in addition to the tax corresponding to the current Fiscal Year, the tax corresponding to the four (4) fiscal years previous, or for the number of years you have operated, whichever is less. The Exempt Business may make the payment corresponding to its tax liability for the previous four (4) fiscal years, or the corresponding number of years, as previously provided, in two (2) installments. The first of said payments will be made upon filing the corresponding return and the second payment must be made within six (6) months following the submission of the first return to which this method has been chosen. Within ten (10) working days after the Exempt Business files the form provided in this paragraph, the CRIM will notify the municipalities concerned about the choice of the Exempt Business to use the optional self-appraisal method. in two (2) installments. The first of said payments will be made upon filing the corresponding return and the second payment must be made within six (6) months following the submission of the first return to which this method has been chosen. Within ten (10) working days after the Exempt Business files the form provided in this paragraph, the CRIM will notify the municipalities concerned about the choice of the Exempt Business to use the optional self-appraisal method. in two (2) installments. The first of said payments will be made upon filing the corresponding return and the second payment must be made within six (6) months following the submission of the first return to which this method has been chosen. Within ten (10) working days after the Exempt Business files the form provided in this paragraph, the CRIM will notify the municipalities concerned about the choice of the Exempt Business to use the optional self-appraisal method.
(6) Once the property classified and appraised under the optional method provided in this section is classified and appraised by the CRIM in accordance with the provisions of the “Municipal Property Tax Law” and the review procedures established in said law are exhausted, the Property value of the Exempt Business shall be that established by the CRIM instead of the value determined under the self-assessment method set forth in this section. In such cases, the Exempt Business will comply with the procedures established in the “Municipal Property Tax Law”. The classification and appraisal carried out by the CRIM in accordance with the aforementioned law will have a prospective effect only, for all legal purposes,
Section 2062.03- Municipal Patents and other Municipal Taxes
(a) Exempt Businesses that have a Decree granted under this Chapter shall enjoy a fifty percent (50%) exemption on municipal patents, municipal arbitration and other municipal contributions imposed by any municipal ordinance, during the periods provided in the Section 2011.04 of this Code.
(b) The Exempt Business that has a Decree granted under this Chapter shall enjoy full exemption on municipal contributions or municipal patents applicable to the turnover of such Exempt Business during the semester of the Government Fiscal Year in which the Exempt Business begins operations in any municipality, according to the provisions of the "Municipal Patent Law". In addition, the Exempt Business that has a Decree granted under this Chapter will be totally exempt from municipal contributions or patents on the volume of business attributable to said municipality during the two (2) semesters of the Fiscal Year or fiscal years of the Government following the semester in which began operations in the municipality.
(c) Exempt Businesses that have a Decree granted under this Chapter, and their contractors and subcontractors, will be totally exempt from any contribution, tax, right, license, arbitration, fee or fee imposed by any municipal ordinance on the construction of works to be used by said Exempt Business within a municipality, without it being understood that such contributions include the municipal patent imposed on the turnover of the Exempt Business contractor or subcontractor, during the term authorized by the Tax Exemption Decree.
(d) Eligible Investment Income, as defined in section (a), paragraph (3) of Section 1020.06 of this Code, shall be totally exempt from municipal patents, municipal arbitration and other municipal contributions.
(e) Any Exempt Business under this Chapter or Previous Incentive Laws may waive the benefit of the five percent (5%) discount for prompt payment, as provided in Section 11 of the "Municipal Patent Law", and make full payment of your municipal patent on the date provided by said law. In the case of Exempt Businesses who choose to make prompt payment and waive the discount, the statute of limitations for the valuation and collection of the patent imposed under the “Municipal Patent Law” will be three (3) years from the date of date on which the Declaration on the Volume of Businesses is rendered, instead of the terms set forth in sections (a) and (b) of Section 19 of the “Municipal Patent Law”.
Section 2062.04- State Arbitration and Sales and Use Tax
(a) In addition to any other exemption from arbitration or the sales and use tax granted under Subtitles C and D, respectively, of the Puerto Rico Internal Revenue Code, the following will be totally exempt from such taxes during the exemption period, items introduced or acquired directly or indirectly by an Exempt Business that has a Decree granted under this Chapter.
(1) Any raw material for use in Puerto Rico in the production of finished products, excluding hydraulic cement, crude oil, partially processed products and finished petroleum products and any other hydrocarbon mixture. Provided, however, that natural gas or propane gas used for the generation of distributed electrical and / or thermal energy shall be considered as raw material for the purposes of this Code. For the purposes of this section and the provisions of Subtitles C and D of the Puerto Rico Internal Revenue Code that apply, the term “raw material” shall include:
(i) any product in its natural form derived from agriculture or extractive industries;
(ii) any by-product, residual product or partially processed product or finished product; Y
(iii) sugar in bulk or in units of fifty (50) pounds or more, to be used exclusively in the manufacture of products.
(two) The machinery, equipment and accessories of these that are used exclusively in the manufacturing process, or in the construction, or repair of vessels, inside or outside the premises of a manufacturing plant, machinery, trucks, or forklifts that are used exclusively and permanently in the conduction of raw material within the circuit of the Exempt Business, machinery, equipment and accessories used to carry out the manufacturing process, or that the Exempt Business is required to acquire as a requirement of law, or federal, or state regulation to the operation of an Industrial Unit. Notwithstanding the foregoing, the exemption will not cover machinery, devices, equipment, or vehicles that are used in whole or in part, in the administrative or commercial phase of the Exempt Business,
(3) All machinery and equipment that an Exempt Business, which has a Decree granted under this Chapter, acquires directly and indirectly and has to use to comply with environmental, safety and health requirements, shall be totally exempt from the payment of state arbitrations, so as of the sales and use tax.
(4) The machinery, materials, equipment, parts and accessories used (i) in experimental or reference laboratories including, but not limited to, those used for any research and development activity of science and technology , and (ii) in projects of technological research and research of Renewable Energy, within the District of Science, Technology and Research of Puerto Rico established by Law 214-2004, as amended.
(5) The machinery, equipment, parts and accessories used in the preliminary phase of exploration of regions with a view to the mineralogical development of Puerto Rico, and the dock and shipyard docks for the construction or repair of vessels.
(6) The fuel used by the Exempt Business, under this Chapter, in the generation of electrical energy and / or thermal energy for its own use or its Affiliates.
(7) Chemical materials used by an Exempt Business in wastewater treatment.
(b) Exceptions- The following articles of use and consumption used by the Exempt Business that has a Decree granted under this Chapter regardless of the area or property where they are located or their use, shall not be considered as raw material, machinery or equipment for purposes of paragraphs (1), (2), (3) and (4) of section (a) of this Section;
(1) all construction materials and prefabricated buildings;
(2) all electrical equipment and water pipes embedded in buildings;
(3) lubricants, greases, waxes and paints not related to the manufacturing process;
(4) lighting poles and luminaires installed in parking areas; Y
(5) treatment plants and electrical sub-stations.
Section 2062.05- Tax Exemption Periods
(a) Exemption - An Exempt Business that has a Decree granted under this Chapter shall enjoy a tax exemption for a period of fifteen (15) years.
(b) Provisions Applicable to Tax Exemption for Property Businesses Dedicated to Industrial Development-
(1) The period during which a Property Dedicated to Industrial Development belonged to any political subdivision, agency or instrumentality of the Government, shall not be deducted from the period referred to in section (a) of this Section. In such cases the property will be considered, for the purposes of this Code, as if it had not been previously dedicated to industrial development.
(two) When the Exempt Business that has a Decree granted under this Code, is one of Property Dedicated to Industrial Development, the period referred to in section (a) of this Section shall not cover those periods in which the Property Dedicated to Development Industrial is on the market to be leased to an Exempt Business, or is unoccupied, or is leased to a non-exempt business, except as provided below. The periods shall be computed based on the total period during which the property was available to an Exempt Business, provided that the total number of years is not greater than that provided under section (a) of this Section, and the Exempt Business that qualifies as Property Dedicated to Industrial Development notify in writing to the Secretary of the DDEC the date on which the property is first leased to an Exempt Business, and the date on which the property is vacated and reoccupied by Other Exempt Business. In the event that the Exemption of the Exempt Business that has a Decree as Property Dedicated to Industrial Development expires while it is being used under lease for a Manufacturing Exempt Business, the Exempt Business of Property Dedicated to Industrial Development, may enjoy fifty percent ( 50%) exemption on the property tax, while the Exempt Manufacturing Business continues to use the property under lease. and the date the property is vacated and reoccupied by another Exempt Business. In the event that the Exemption of the Exempt Business that has a Decree as Property Dedicated to Industrial Development expires while it is being used under lease for a Manufacturing Exempt Business, the Exempt Business of Property Dedicated to Industrial Development, may enjoy fifty percent ( 50%) exemption on the property tax, while the Exempt Manufacturing Business continues to use the property under lease. and the date the property is vacated and reoccupied by another Exempt Business. In the event that the Exemption of the Exempt Business that has a Decree as Property Dedicated to Industrial Development expires while it is being used under lease for a Manufacturing Exempt Business, the Exempt Business of Property Dedicated to Industrial Development, may enjoy fifty percent ( 50%) exemption on the property tax, while the Exempt Manufacturing Business continues to use the property under lease.
(3) When the Exempt Business that has a Decree granted under this Chapter is one of Property Dedicated to Industrial Development, the period referred to in section (a) of this Section will continue its normal course, even if the Decree of Exemption of the Exempt Business that is using the mentioned property, as a result of the termination of its normal period or by revocation of its Decree, expires before the period of exemption of the Property Dedicated to Industrial Development, unless in the case of revocation, it is proved that at the time that such property came available to the Exempt Business, its owners were aware of the facts that later motivated the revocation.
(c) Establishment of Operations in Other Municipalities- An Exempt Business, which has a Decree granted under this Chapter may establish additional industrial units as part of the operations covered by a current Exemption Decree, in the same municipality where the main office is established , or in any other municipality of Puerto Rico, without having to request a new Exemption Decree, provided that it notifies the Incentive Office within thirty (30) days of the start of operations of the additional Industrial Unit. The additional Industrial Unit will enjoy the exemptions and benefits provided by this Code for the remainder of the exemption period of the current Decree.
(d) Interruption of the Exemption Period - When Exempt Business that has a Decree granted under this Chapter has ceased operations and subsequently wishes to resume them, the time it was not in operation will not be deducted from the corresponding exemption period that corresponds to it, and may enjoy of the remaining exemption period while its tax exemption Decree is in force, provided that the Secretary of the DDEC determines that the cessation of operations was for justified reasons and that the reopening of the Exempt Business will result in the best social and economic interests of Puerto Rico.
(e) Setting of the Start-up Dates and Exemption Periods-
(1) El Negocio Exento que posea un Decreto otorgado bajo este Capítulo podrá elegir la fecha de comienzo de operaciones para fines de la Sección 2062.01 de este Capítulo mediante la radicación de una declaración jurada ante la Oficina de Incentivos en la que exprese la aceptación incondicional de la Concesión aprobada al Negocio Exento al amparo de este Código. La fecha de comienzo de operaciones para fines de la Sección 2062.01 de este Código podrá ser la fecha de la primera nómina para adiestramiento, o producción del Negocio Exento que posea un Decreto otorgado bajo este Capítulo, o la fecha de comienzo de la construcción del proyecto o cualquier fecha dentro de un período de dos (2) años posterior a la fecha de la primera nómina.
(2) The Exempt Business that has a Decree granted under this Chapter may postpone the application of the fixed tax rate provided in Section 2062.01 of this Code for a period not exceeding two (2) years from the date of commencement of operations set forth in paragraph (1) of section (e) of this Section. During the postponement period, the Exempt Business shall be subject to the tax rate applicable under Subtitle A of the Internal Revenue Code of Puerto Rico.
(3) The exemption period provided in section (b) of Section 2062.02 of this Chapter for the exemption on movable and immovable property shall commence on January 1 of the year in which the Eligible Business begins the activities covered by the Decree, but never before the first of January of the year in which the filing of a request to receive the benefits of this Chapter occurs.
(4) In the case of Exempt Businesses that have a Decree granted under this Chapter and that have been operating on a commercial scale before applying for the benefits of this Chapter, the date of commencement of operations for purposes of the fixed contribution rate on income provided in section (a) of Section 2062.01 of this Code will be the filing date of an application in the Incentives Office, but the start date may be postponed for a period not exceeding two (2) years from of that date.
(5) The Exempt Business that has a Decree granted under this Chapter shall begin operations on a commercial scale within one (1) year from the date of the signing of the Concession. This term may be extended at the request of the business for just cause, but no extensions will be granted that extend the date of commencement of operations for a term greater than five (5) years from the date of approval of the Concession.
Section 2062.06- Special Deduction for Investment in Buildings, Structures, Machinery and Equipment
(a) All Exempt Businesses that have a Decree granted under this Chapter shall be granted the election to deduct in the taxable year in which they are incurred, instead of any capitalization of expenses required by the Puerto Rico Internal Revenue Code, the expenses totals incurred after the effective date of this Code in the purchase, acquisition or construction of buildings, structures, machinery and equipment, provided that such buildings, structures, machinery and equipment:
1. have not been previously used or depreciated by any other business or person in Puerto Rico; Y
2. used to manufacture the products or provide the services for which the benefits provided under this Chapter were granted.
(b) The deduction provided in this Section shall not be additional to any other deduction granted by law, but merely an acceleration of the deduction of the expenses described above. Provided, that in the case of machinery and equipment previously used outside of Puerto Rico previously, but not previously used or depreciated in Puerto Rico, the investment in such machinery and equipment shall qualify for the special deduction provided in this section (b) only if to the machinery and the equipment, at the date of its acquisition by the Exempt Business, there is at least fifty percent (50%) of its useful life, determined in accordance with the Puerto Rico Internal Revenue Code.
(c) The Exempt Business that has a Decree granted under this Chapter may deduct, in the Tax Year in which it incurs them, the total expenses incurred after the effective date of this Code in the remodeling or repair of buildings, structures , machinery and equipment, instead of any capitalization of expenses required by the Internal Revenue Code of Puerto Rico, both in the event that such buildings, structures, machinery and equipment have been acquired or constructed before or after the effective date of this Code, as well as in the case that these have been or not used or depreciated by another business or person prior to their acquisition by the Exempt Business that has a Decree granted under this Chapter or under Previous Incentive Laws.
(d) The amount of the Manufacturing Investment for the special deduction provided in this Section in excess of the Industrial Development Income of the Exempt Business that has a Decree granted under this Chapter in the year of the investment, may be claimed as a deduction in the Subsequent Tax Years until the excess is exhausted. A deduction under this section will not be allowed in relation to the portion of the investment in buildings, structures, machinery and equipment on which the Exempt Business receives or has received Tax Credit in accordance with Subtitle C of this Code.
(e) The Exempt Business may also claim the special deduction provided in this Section in any year in which it chooses to select the flexible tax exemption benefit provided in Section 2011.04 of this Code.
SUBCAPTER C- REQUIREMENTS FOR GRANTING EXEMPTION
Section 2063.01- Requirements for Decree Requests
(a) Any person who has established or intends to establish an Eligible Business in Puerto Rico under this Chapter may request the benefits of this Code by submitting a request to the Secretary of the DDEC in accordance with the provisions of Subtitle F of this Code .
(b) Any person may request the benefits of this Chapter, provided that it meets the eligibility requirements of Subchapter A of this Chapter, and with any other criteria established by the Secretary of the DDEC through regulations, administrative order, circular letter or any other another general communication, including as an evaluation criterion the contribution that the Eligible Business will make to the economic development of Puerto Rico.
SUBCHAPTER D- SPECIAL PROVISIONS
Section 2064.01- Manufacturing Successor Business
(a) A Successor Manufacturing Business may avail itself of the provisions of this Chapter as long as:
(1) the Exempt Manufacturing Precedent Business has not ceased operations for more than six (6) consecutive months prior to the filing of the exemption request of the Manufacturing Successor Business, nor during the exemption period of the Manufacturing Successor Business, to unless such fact obeys Extraordinary Circumstances.
(2) the Exempt Manufacturing Business Exempt maintains its average annual employment for the three (3) Tax Years ending with the closing of its Tax Year prior to the filing of the request for exemption of the Manufacturing Successor Business, or the applicable part of such period, while the Decree issued under the provisions of this Chapter of the Manufacturing Successor Business is in force, unless for Extraordinary Circumstances the average cannot be maintained.
(3) the employment of the Successor Manufacturing Business, after its first year of operations, is greater than twenty-five percent (25%) of the average annual employment of the predecessor business referred to in paragraph (2) above;
(4) the Successor Manufacturing Business does not use physical facilities, including land, buildings, machinery, equipment, inventory, supplies, trademarks, patents, distribution facilities (marketing outlets) worth fifty thousand dollars ($ 50,000.00) or more and have been previously used by a Exempt Business Manufacturing Precedent. The foregoing shall not apply to the additions to the Property Dedicated to Industrial Development, even if these constitute physical facilities that have a value of fifty thousand dollars ($ 50,000.00) or more and are being, or have been used by the main unit or the Exempt Business Manufacturing predecessor. Notwithstanding the foregoing, the Secretary of the DDEC may determine, upon recommendation of the agencies that report on tax exemption,
(b) Exceptions- Notwithstanding the provisions of section (a) of this Section, the above conditions shall be deemed fulfilled, provided that:
(one) The Successor Manufacturing Business assigns the Exempt Manufacturing Business the part of its annual employment that is necessary for the annual employment of the Exempt Manufacturing Exempt Business to be maintained, or equals the annual employment that the Exempt Manufacturing Priority Business must maintain . The allocation set forth herein will not be covered by the Decree of the Successor Business, but this will enjoy, with respect to the assigned part, the benefits provided by this Chapter, if any, that the Exempt Executing Manufacturing Business would enjoy over it, as if it had been its Own annual production. If the exemption period of the Exempt Manufacturing Precedent Business has ended, the Successor Business will pay the corresponding contributions on the part of its annual production that it allocates to the Exempt Manufacturing Exempt Business;
(two) The Successor Business declares, as not covered by its Decree, for the purposes of the property tax, that part of its facilities that is necessary for the investment in physical facilities of the Exempt Manufacturing Exempt Business to be maintained or equal to the total investment in physical facilities at the close of the Tax Year of such Exempt Business Manufacturing Precedent prior to the filing of the request for exemption of the Manufacturing Successful Business, less depreciation and less any decrease in investment in physical facilities that has occurred to date in that the provisions of this paragraph be used as a result of an authorization to use them under the provisions of paragraph (4) of section (a) of this Section.In cases where the exemption period of the Exempt Manufacturing Precedent Business is not over, the Manufacturing Successor Business will enjoy the benefits provided by this Chapter that the Exempt Manufacturing Exempt Business would have enjoyed, with respect to the part of its investment in the physical facilities that for the purposes of this paragraph declare as not covered by its Decree, if such facilities would have been used to produce its Industrial Development Income;if such facilities had been used to produce their Industrial Development Income;if such facilities had been used to produce their Industrial Development Income;
(3) The Secretary of the DDEC determines that the operation of the Manufacturing Successor Business results in the best economic and social interests of Puerto Rico, in view of the nature of the physical facilities, the number of jobs, the amount of the payroll, the investment, the location of the project, or any other factors that, in its opinion, merit such determination, including the economic situation that the Exempt Business in particular is going through, and dispenses with total or partial compliance, with the provisions of section (a ) of this Section, and could condition the operations, as convenient and necessary for the best interests of Puerto Rico.
CHAPTER 7- INFRASTRUCTURE AND GREEN ENERGY
SUBCHAPTER A- ELIGIBILITY
Section 2071.01- Companies Dedicated to Infrastructure and Green Energy
It is provided so that a business established, or that will be established, in Puerto Rico by a Person, organized or not under a common name, may request the Secretary of DDEC the Granting of Incentives when the Entity is established in Puerto Rico to engage in one of the following eligible activities:
(1) Perform improvements, restoration or reconstruction of existing buildings, or restructuring or new construction in vacant lots in the Historic Areas of Puerto Rico, and the rents of such buildings located in such areas once they have been improved, restored , rebuilt, restructured or constructed, as the case may be;
(2) Construction or rehabilitation of Social Interest Housing for sale or lease to Low or Moderate Income Families and Middle Class Homes;
(3) Persons dedicated to the construction, rental or lease of properties to the Elderly who do not have their own home and whose income is within the established limits may be equal or more liberal but never more restrictive than those established by the Government Federal;
(4) Social Interest Housing Developers approved and totally or partially subsidized by the Government of Puerto Rico;
(5) Developers of Assisted Housing for the Elderly in Puerto Rico;
(6) Any business dedicated to the production or sale of Green Energy on a commercial scale for consumption in Puerto Rico, either as the owner or direct operator of the Production Unit or as the owner of a Production Unit that is being operated by another person, in which case, both owner and operator will be considered Eligible Businesses under this Chapter.
The term “production or sale of Green Energy on a commercial scale” includes the production or sale of Green Energy to one or more persons who carry out an industry or business in Puerto Rico;
(7) Alternate Renewable Energy Producer and Sustainable Renewable Energy Producer, as defined in Section 1020.07 of this Code, for consumption in Puerto Rico, provided that this is its principal business;
(8) Assembly of equipment for Green Energy generation, including the installation of the equipment in the facilities of the Green Energy user to be generated by said equipment;
(9) Property Dedicated to the Production of Green Energy;
(10) During the first five (5) years counted from the effective date of this Code, a business established, or that will be established, in Puerto Rico by a Person, organized or not under a common name, may request a Decree to carry out the following eligible activities:
(i) Highly Efficient Energy Producer dedicated to the production, sale or operation on a commercial scale for consumption in Puerto Rico, either as the owner and direct operator, or as the owner of a system that is operated by a third party, or as operator of a system that is owned by a third party, in which case both will be considered as Eligible Businesses under this Chapter;
(ii) Equipment assembly, including its installation, for Highly Efficient Generation Systems;
(iii) Property dedicated to the production of Highly Efficient Energy;
(iv) Any contractor under Act 120-2018, as amended, known as the “Law to Transform the Puerto Rico Electric System”, will be eligible for the granting of a Decree under this subsection and / or the tax treatment provided under Section (a) of Article 12 of Law 29-2009, as amended, known as the “Public Private Partnerships Law”.
SUBCHAPTER B- CONTRIBUTIVE BENEFITS
Section 2072.01- Income Tax
(a) Preferential fixed rate of four percent (4%) - The income generated by an Eligible Business for the eligible activities described below will be subject to a fixed preferential income tax rate of four percent (4%) ), instead of any other contribution imposed by the Puerto Rico Internal Revenue Code, or any other law provided that they meet the requirements applicable to their eligible activity:
(1) Income received from rental of buildings in Historic Areas of Puerto Rico, provided that the requirements of Act No. 7 of March 4, 1955, as amended, known as the “Tax Exemption of Historic Areas” are met;
(2) Income from the sale of properties of social interest, as indicated in paragraph (2) of Section 2071.01 of this Code, subject to the limits established in Section 2073.04.
(3) Rental income received by an owner of a Multifamily Project of social interest, as indicated in paragraph (2) of Section 2071.01 of this Code, subject to the limits established in Section 2073.02 of this Code;
(4) Income from the sale of residences to the Elderly or Persons with Disabilities;
(5) Income from Housing projects under the “Assisted Living” Housing Project, for the Elderly, and meeting the qualification criteria developed by this Code consistent with the definition of “Assisted Living”. When, due to medical necessity and in the interest of your safety, the latter needs personal or medical care other than the provisions of this Law, it will not be covered by the provisions of this Code and therefore, the residence may not cover said person under the protection of this Law. The residence will take this determination in those cases in which the security, The person's well-being or comfort may be adversely affected by the fact that they cannot adequately meet their specific needs because they are not in accordance with the conceptual framework of “Assisted Living” or manage to deal fully with the limitations they suffer. This determination must comply with the guiding criteria developed through regulations to be established by the Secretary of the DDEC for these purposes.
(b) Preferential fixed rate of four percent (4%) - The income generated by a Business Exempt from activities described below will be subject to a fixed preferential income tax rate of four percent (4%), in lieu of any other contribution imposed by the Puerto Rico Internal Revenue Code, or any other law, provided that they meet the requirements applicable to their eligible activity:
(1) Income from rental of properties leased to the Elderly;
(2) Income from the construction of Rental Housing for the Elderly.
(c) Income from the sale of CERs- For tax purposes the purchase, sale, assignment or transfer of CERs will have the following effects:
(1) Tax base - The tax base of each CER for a business dedicated to the production of Green Energy that generates CERs of its operation in Puerto Rico, will be equal to its emission and processing costs, pursuant to Section 2074.01 of this code. The CERs base will not include Green Energy production costs that are generated in the operation related to such CERs.
(2) Ordinary income - Any income or profit derived from a business dedicated to the production of Green Energy in the sale of CERs, coming from its operation in Puerto Rico, will be considered ordinary income derived from the operation in Puerto Rico, and will be treated as Green Energy Income for all purposes of this Code, except that said income or gain will be exempt from patents or other municipal taxes.
(3) Capital gain - A CER will be excluded from the definition of capital asset, as provided in Section 1034.01 of the Internal Revenue Code. However:
(i) It will be treated as capital gain, and the corresponding provisions of the Internal Revenue Code of Puerto Rico will apply regarding the disposition of a capital asset, including applicable tax rate, base and period of possession of the CER, among others, the profit derived from the sale of a CER by a person who acquired such CER through purchase, and subsequently has it in exchange for cash or property.
(ii) The income derived from the provision of a CER by a person who acquired the CER, by purchase, and subsequently disposes of it will be exempt from patents or other municipal taxes.
Any person dedicated to the industry or business of the purchase and resale of CERs will be excluded from this treatment.
(4) Withdrawal and cancellation of CERs - Any person who, in the exercise of an industry or business, to comply with Renewable Energy portfolio requirements acquires CERs through purchase, assignment or transfer in order to encourage the development of sources of Energy Verde may take as a deduction against its ordinary income the cost of acquiring the CER or the base acquired in the transfer or transfer thereof. This deduction will not be available until the CER is withdrawn or canceled.
(5) Source income within Puerto Rico- The gain in the sale or disposal outside of Puerto Rico of a CER, generated from the operation of a Green Energy project located in Puerto Rico made by Foreign Persons not engaged in industry or business In Puerto Rico, income from sources in Puerto Rico shall not be considered.
(d) Businesses dedicated to the Green Energy industry - Exempt Businesses whose activities are described in paragraphs (6), (7), (8), (9) and (10) of Section 2071.01 will be subject to the following :
(1) Preferential fixed rate of four percent (4%) - The businesses described above will be subject to a fixed preferential rate of income tax of four percent (4%) on their Green Energy Income during the corresponding exemption period , instead of any other income tax, if any, provided by the Puerto Rico Internal Revenue Code or any other law .
(2) Royalties, Revenue or Royalties and License Rights - Notwithstanding the provisions of the Internal Revenue Code of Puerto Rico, in the case of payments made by Exempt Businesses that have a Decree under this Chapter, to Foreign Persons , not dedicated to industry or business in Puerto Rico, for the use or privilege of use in Puerto Rico of Intangible Property related to the operation declared exempt under this Chapter, and subject to such payments being considered entirely from sources within Puerto Rico , the following rules will be observed:
(i) Contribution to Foreign Persons Not Dedicated to Industry or Business in Puerto Rico- Taxation of Taxation- A tax of twelve percent (12%) will be imposed, charged and paid for each Taxable Year, instead of the tax imposed by Sections 1091.01 and 1091.02 of the Internal Revenue Code of Puerto Rico, on the amount of such payments received or implicitly received, by any foreign corporation or corporation not engaged in industry or business in Puerto Rico, originating exclusively from sources within Puerto Rico.
(ii) Withholding at the Origin of the Tax in the Case of Foreign Persons that are Entities Not Dedicated to Industry or Business in Puerto Rico - Any Exempt Business that has the obligation to make payments to non-residents for use in Puerto Rico of Intangible Property related to the exempt operation under this Chapter, will deduct and withhold at the source a contribution equal to that imposed in subsection (i) above.
(3) Distributions, Sale or Exchange of Asset Shares-
(i) The gains made in the sale, exchange or other provision of Entity Shares that are or have been Exempt Businesses under this Chapter; stakes in joint ventures and similar ventures and similar entities made up of several corporations, partnerships, individuals or combinations thereof, which are or have been exempt businesses; and Shares of Entities that somehow own the entities described above, will be subject to the provisions of subsection (ii) of this paragraph (3) when the sale, exchange or other provision, and any subsequent distribution of such Earnings, either as a dividend or as a settlement in liquidation, will be exempt from additional taxation.
(ii) Sale or Exchange of Shares or Assets-
A. During the exemption period- The gain on the sale or exchange of Shares in an Entity, or of substantially all the assets of an Exempt Business, that is made during its exemption period and that would have been subject to tax on income under The Puerto Rico Internal Revenue Code will be subject to a contribution of four percent (4%) on the amount of the gain made, if any, in lieu of any other contribution imposed by the Puerto Rico Internal Revenue Code or any other law Any loss in the sale or exchange of such Shares or assets will be recognized in accordance with the provisions of the Internal Revenue Code of Puerto Rico.
B. After the termination date of the exemption period - When the sale or exchange is made after the expiration date of the exemption, the gain will be subject to the tax provided in clause (A) above, but only until amount of the value of the Entity's Shares, or of substantially all the assets in the books of the corporation or company, at the date of termination of the exemption period, reduced by the amount of exempt distributions received on these Shares of the Entity afterwards of said date, less the basis of such Shares, or of substantially all assets. Any remainder of the gain or any loss, if any, will be recognized in accordance with the provisions of the Puerto Rico Internal Revenue Code that is in effect as of the date of the sale or exchange.
C. Exempted swaps - The swaps of Entity Shares that do not result in taxable events as they are exempt reorganizations will be treated in accordance with the provisions of the Puerto Rico Internal Revenue Code in force as of the date of the swap.
(iii) Determination of bases for sale or exchange- The base of Shares or Exempt Business assets under this Section in the sale or exchange, shall be determined in accordance with the applicable provisions of the Internal Revenue Code of Puerto Rico in force at the time of the sale or exchange, increased by the amount of the Green Energy Income accumulated under this Code.
(iv) For the purposes of this paragraph (3), the term "substantially all assets" shall mean those assets of the Exempt Business that represent not less than eighty percent (80%) of the carrying amount of the Exempt Business at the time of sale. .
(v) The Secretary of the DDEC, in consultation with the Secretary of the Treasury, shall establish the regulations necessary to enforce the provisions of this paragraph.
(4) Liquidation-
i. No income tax will be imposed or charged to the transferor or the assignee regarding the total liquidation of an Exempt Business that has obtained a Decree under the provisions of this Chapter and that is dedicated or dedicated to the activities described in the paragraphs (6), (7), (8), (9) and (10) of Section 2071.01, on or before the expiration of its Decree, provided that the following requirements are met:
A. All property distributed in liquidation was received by the assignee in accordance with a liquidation plan on or before the expiration date of the Decree, and
B. the distribution in liquidation by the transferor, once or from time to time, was made by the transferor in cancellation or in full redemption of all its share capital.
The assignee's base on the property received in liquidation shall be equal to the adjusted basis of said Exempt Business on such property immediately prior to liquidation. In addition, and for the purposes of this paragraph (4), a corporation or company participating in a company that is an Exempt Business shall, in turn, be considered an Exempt Business.
ii. Liquidation of assignors with revoked Decrees- If the Decree of the transferor is revoked prior to its expiration in accordance with the provisions of this Code regarding the permissible revocation, the accumulated surplus of the Green Energy Income at the date on which the revocation is effective may be transferred to the assignee at any later time, subject to the provisions of subsection (i) of this paragraph (4). In cases of mandatory revocation, the accumulated surplus will be subject to taxation in accordance with the Puerto Rico Internal Revenue Code.
iii. Liquidations subsequent to the expiration of the Decree- After the Decree of the transferor has expired, it may transfer to the assignee the accumulated surplus of its Green Energy Income accrued during the term of the Decree, subject to the provisions of subsection (i) of this paragraph (4).
iv. Liquidation of assignors with exempt and non-exempt activities- In the event that the assignor carries out exempt and non-exempt activities, the transferor may transfer to the assignee the surplus of their Green Energy Income accumulated under this Code and the property dedicated to the activity eligible under this Code as part of its total settlement, subject to the provisions of subsection (i) of this paragraph (4). The accumulated surplus that is not of your Green Energy Income and the property that is not dedicated to the eligible activity will be distributed in accordance with the provisions of the Puerto Rico Internal Revenue Code.
(e) The shareholders or partners of an Exempt Business that has a Decree under the provisions of this Chapter that are dedicated to the activities described in paragraphs (1) to (5) of section (a) of Section 2071.01 of This Code shall be subject to the income tax provided in the Internal Revenue Code of Puerto Rico on the distributions of dividends or profits from the net income of such Exempt Business.
Section 2072.02- Tax on Movable and Real Property
(a) Properties in Historic Areas- Eligible property, as described in paragraph (1) of Section 2071.01 of this Code, which is intended to improve, restructure, build, restore or rebuild, and the site where it is located, is declare by the Director of the CRIM totally exempt for the period described in section (a) of Section 2072.04 of this Code.
(b) Properties of social interest dedicated to rent-
(1) In General- The housing units of Multifamily Projects that are rented to Low or Moderate Income Families, according to such eligible activity described in the paragraph (2) of Section 2071.01, during the exemption period set forth in section (b) of Section 2072.04, subject to:
(i) The requirements established in section (a) of Section 2073.02 of this Code are met.
(ii) The lease fee of each Housing unit reflects a reduction equal to the total amount of the property tax that the owner would be required to pay, if the tax exemption provided here is not applied.
(c) Properties leased to Low-Income Elderly People- In General- Any owner who builds or rehabilitates a real estate property to be leased to a Low-Income Elderly Person, will be exempt by one hundred percent (100%) of the payment of taxes on movable and immovable property, provided that they comply with the requirements established in Section 2073.03 of this Code.
(d) Ownership of housing projects under the “Assisted Living” Housing Project - Any housing project under the “Assisted Living” Housing Project may benefit from the exemptions provided in section (c) of Section 2072.03 of this code.
(e) Exemption from CERs - CERs will be exempt from seventy-five percent (75%) of municipal or state property taxes.
(f) Movable and immovable property of Eligible Businesses under paragraphs (6), (7), (8), (9) and (10) of section (a) of Section 2071.01-
(1) In General- The movable and immovable property used in the development, organization, construction, establishment or operation of the eligible activity covered by the Decree shall enjoy seventy-five percent (75%) of exemption on municipal contributions and state over movable and immovable property during the exemption period.
Section 2072.03- Municipal Contributions
(a) Construction or Rehabilitation of Social Interest Housing - In General- Multifamily Project housing units that are rented to low or moderate income families, will be exempt from ninety percent (90%) of the payment of municipal patents provided that comply with the requirements set forth in Section 2073.02 of this Code. It will also apply an exemption of ninety percent (90%) of the payment of any tax or municipal law that may apply.
(b) Rental Housing Construction for Low-Income Elderly People- Income generated by the construction or rehabilitation of Housing projects that are going to be leased to Low-Income Elderly People will be exempt from ninety percent (90 %) payment of the municipal patent, provided that they comply with the requirements established in Section 2073.07 of this Code. It will also apply ninety percent (90%) of exemption from payment to any other contribution or municipal law that may apply to such projects, with the exception of construction arbitrations that will not enjoy any exemption.
(c) Income of housing projects under the “Assisted Living” Housing Project - Any housing project under the “Assisted Living” Housing Project may benefit from the exemptions provided in section (a) of this Section.
(d) Exempt Businesses described in paragraphs (6), (7), (8), (9) and (10) of Section 2071.01 shall enjoy a fifty percent (50%) exemption on patents municipal, municipal arbitration and other municipal contributions imposed by any municipal ordinance, during the periods covered in the Decree as established in section (e) of Section 2072.04, independently of any subsequent amendment made to the Decree to cover Business operations Exempt in one or several municipalities.
(e) Exempt Businesses and their contractors and subcontractors shall be seventy-five percent (75%) exempt from any contribution, tax, right, license, arbitrary, fee or fee imposed by any municipal ordinance on the construction of works to be used. by said Exempt Business within a municipality, without it being understood that such contributions include the municipal patent imposed on the turnover of the Exempt Business contractor or subcontractor, during the term authorized by the Decree.
Section 2072.04- Exemption Period
(a) The exemption period for persons with eligible activities as indicated in paragraph (1) of Section 2071.01 of this Code, shall be as described below, provided that the requirements are met:
(1) Five (5) years: when the restoration work is partial, but having, among others, restored the facades, and by the main architectural elements, such as entrance hall and the main staircase, if any.
(2) Five (5) years, non-renewable: when a facade restructuring is carried out in a building devoid of historical or architectural value to adapt it to the surroundings of the Historic Zone where it is located.
(3) Ten (10) years: when a total restoration of the building has been carried out.
(4) Ten (10) years: when a total restructuring occurs in which more than fifty percent (50%) of new construction elements are incorporated into buildings that lack historical or architectural value to adapt them to their traditional and in cases of new building in vacant lots or where ruins lie.
(5) The Secretary of the DDEC may, in any of the cases indicated above, upon expiration of the term of ten (10) years of tax exemption of a property, extend the exemption for an additional ten (10) years, provided that the Institute of Puerto Rican Culture certify that such property (1) has not undergone substantial alterations in its original design, (2) deserves to be conserved as part of our cultural heritage for its historical or architectural value, and (3) will remain, upon completion of the work in in accordance with the requirements of the Institute of Puerto Rican Culture, in the same or better state than it presented when its first total restoration was carried out.
(b) The tax benefit provided in paragraph (2) and (3) of section (a) of Section 2072.01, and section (a) of Section 2072.03 of this Code shall be in effect while the Housing units on which it is claimed that they are occupied by Low or Moderate Income Families, but may not exceed a term greater than fifteen (15) years, beginning on January 1 of the year following the date of occupation of the Housing unit by a Family of Low or Moderate Income.
(c) The tax exemption granted in paragraph (1) of section (b) of Section 2072.01 of this Code, and in section (b) of Section 2072.03 of this Code shall be in effect while the Housing units on those claimed are occupied by the Elderly, but may not exceed a term greater than fifteen (15) years, from January 1 of the year following the date of occupation of the Housing Unit by a Person of Advanced age.
(d) The tax exemption granted in paragraph (5) section (a) of Section 2072.01, and in section (c) of Section 2072.03 of this Code shall be in effect while the “Assisted Living” Housing Project comply with all the requirements established in this Code and in the provisions established in the Incentive Regulations, but may not exceed fifteen (15) years, from January 1 of the year following the date of certification as Eligible Business for “Assisted Living” Housing Project.
(e) Tax exemption periods for Green Energy businesses- The tax exemption periods applicable to Entities whose Eligible Businesses are covered under paragraphs (6), (7), (8), (9) and (10) of the Section 2071.01 of this Code is described below.
(1) Exemption - An Exempt Business that has a Decree granted under this Chapter will enjoy a tax exemption for a period of fifteen (15) years.
(2) Flexible Tax Exemption - Exempt Businesses will have the option of choosing the specific tax years that will be covered by their Decrees regarding their Green Energy Income, as long as they notify the Secretary of the DDEC and the Secretary of the Treasury, not later of the date set forth by the Internal Revenue Code of Puerto Rico to file its income tax return for said Tax Year, including the extensions granted for this purpose. Once the Exempt Business opts for this benefit, its exemption period will be extended by the number of taxable years that it has not enjoyed under the Exemption Decree.
(3) Provisions applicable to tax exemption of businesses of Property Dedicated to the Production of Green Energy-
(i) The period during which a Property Dedicated to the Production of Renewable Energy belonged to any political subdivision, agency or instrumentality of the Government of Puerto Rico, shall not be deducted from the period referred to in paragraph (1) of this section. In such cases, the property will be considered for the purposes of this Chapter as if it had not been previously dedicated to Green Energy Production.
(ii) When the Exempt Business is one of Property Dedicated to the Production of Green Energy, the period referred to in paragraph (1) of this section shall not cover those periods in which the Property Dedicated to the Production of Green Energy is in the market to lease an Exempt Business, or is unoccupied, or leased to a non-exempt business, except as provided below. The periods shall be computed based on the total period during which the property was available to an Exempt Business, provided that the total number of years is not greater than that provided in paragraph (1) of this section, and the Exempt Business that Qualify as Property Dedicated to Green Energy Production,
(iii) If the Exemption of the Exempt Business that has a Decree as a Property Dedicated to the Production of Green Energy expires while it is being used under lease for an Exempt Business, the Exempt Business of Property Dedicated to the Production of Green Energy, You can enjoy a fifty percent (50%) exemption on the property tax, while the Exempt Business continues to use the property under lease.
(iv) When the Exempt Business is a Property business Dedicated to the Production of Green Energy, the period referred to in paragraph (1) of this section will continue its normal course, even when the Exemption Decree of the other Business Exempt that you are using the aforementioned property, as a result of the termination of its normal period or by revocation of its Decree, expires before the period of exemption of the Property Dedicated to the Production of Green Energy, unless in case of revocation, it prove that at the time such property was made available to the Exempt Business, its owners were aware of the facts that later motivated the revocation.
(4) Period of the tax exemption during construction - The real property of the Exempt Businesses to which the exemption included in section (f) of Section 2062.02 applies will be fully exempt during the period authorized by the Decree to carry out the construction or establishment of the Exempt Business and during the first Fiscal Year of the Government in which the Exempt Business had been subject to property taxes for having been in operation on January 1 prior to the beginning of said Fiscal Year, except for the exemption provided here. Likewise, the real property of the Exempt Business that is directly related to any expansion of the Exempt Business will be totally exempt from property tax during the period authorized by the Decree to carry out the expansion.
(5) Municipal Exemption and Establishment of operations in other municipalities-
(i) The period of the tax exemption granted in this section. The Exempt Business of Green Energy that has a Decree granted under this Chapter shall enjoy a total exemption on municipal contributions or municipal patents applicable to the turnover of the Exempt Business during the semester of the Government Fiscal Year in which the Exempt Business begins operations in any municipality, in accordance with the provisions of the "Municipal Patent Law". In addition, the Exempt Business shall be totally exempt from municipal contributions or patents on the volume of business attributable to said municipality during the two (2) semesters of the Fiscal Year or Fiscal Years of the Government following the semester in which it began operations in the municipality.
(ii) An Exempt Business may establish additional operations or facilities as part of the operations covered by an exemption Decree in force in the same municipality where the main office is established, or in any other municipality of Puerto Rico, without having to request a new Exemption decree or amend the current Decree, as long as you notify the Incentives Office within thirty (30) days of the start of the additional operation or installation. By virtue of such notification, the additional unit, operation or installation shall be deemed included in the Exemption Decree and shall enjoy the exemptions and benefits provided in this Code for the remainder of the exemption period of the current Decree.
(6) Interruption of the exemption period - In the case of an Exempt Business that has ceased operations and subsequently wishes to resume them, the time it was without operating will not be deducted from the corresponding exemption period, and may enjoy the remainder of its Exemption period while its Tax Exemption Decree is in force, provided that the Secretary of the DDEC determines that the cessation of operations was for justified reasons and that the reopening of said Exempt Business will result in the best social and economic interests of Puerto Rico.
(7) Fixing the dates of commencement of operations and exemption periods-
(i) The Exempt Business that has a Decree granted under paragraphs (6), (7), (8), (9) or (10) of Section 2071.01 of this Code may choose the date of commencement of operations for purposes of this Code by submitting an affidavit before the Incentives Office, with a copy to the Secretary of the Treasury, in which it expresses the unconditional acceptance of the Concession approved to the Exempt Business under this Chapter. The date of commencement of operations for the purposes of this Chapter may be the date of the first payroll for training or production of the Exempt Business, or any date within a period of two (2) years after the date of the first payroll.
(ii) The Exempt Business may postpone the application of the fixed tax rate provided in this Code and established by Decree for a period not exceeding two (2) years from the date of commencement of operations established under subsection (i) of this paragraph. During the postponement period, the Exempt Business shall be subject to the tax rate applicable under Subtitle A of the Internal Revenue Code of Puerto Rico.
(iii) The exemption period provided in this section for the exemption on movable and immovable property will begin on July 1, subsequent to the last Fiscal Year in which the Exempt Business was totally exempt, in accordance with the provisions of this Code. The partial exemption for said Fiscal Year will correspond to the property tax owned by the Exempt Business on January 1 prior to the beginning of said Fiscal Year.
(iv) The period of partial exemption provided in this Code, for purposes of exemption from municipal patents and any other municipal contribution, shall begin on the first day of the first half of the Fiscal Year of the Government of Puerto Rico subsequent to the expiration of the period of total exemption provided in said subsection. In the case of Exempt Businesses that have been operating before applying for the benefits of this Code, the date of commencement of operations for the purposes of municipal patents will begin on the first day of the semester following the filing date of the tax exemption application. .
(v) In the case of exempt businesses that have a Decree granted under this Code or Previous Incentive Laws, and that have been operating before applying for the benefits of this Code, the date of commencement of operations for the purpose of the rate fixed income tax provided in section (d) of Section 2072.01 of this Code will be the date of filing an application with the Incentives Office, but the start date may be postponed for a period not exceeding two (2) years from that date.
(vi) The Exempt Business shall begin operations within a term of one (1) year from the date of the signing of the Decree, whose term may be extended at the request of said business for cause justified, but no extensions shall be granted that extend the date of commencement of operations for a term greater than five (5) years from the date of approval of the Decree.
Section 2072.05- State Arbitration and Sales and Use Tax
(a) Businesses dedicated to Green Energy, as described in paragraphs (6), (7), (8), (9) and (10) of Section 2071.01-
(1) In addition to any other exemption from arbitration or the sales and use tax that is granted under Subtitle D of the Puerto Rico Internal Revenue Code, they will be totally exempt from said taxes, during the exemption period provided in this Chapter, the following articles introduced or acquired directly or indirectly by a business that has a Decree granted under this Chapter:
(i) Any raw material to be used in Puerto Rico in the production of Green Energy, for the purposes of this section and the provisions of Subtitles C or D of the Puerto Rico Internal Revenue Code that apply, the term "Raw material" will include:
(A) any product in its natural form derived from agriculture or extractive industries (including natural gas or propane gas), and
(B) any byproduct, residual product or partially processed or finished product.
(ii) The machinery, equipment, and accessories thereof that are used exclusively and permanently in the conduction of raw material within the circuit of the Exempt Business, machinery, equipment and accessories that have been used to carry out the Green Energy production, or that the Exempt Business is required to acquire as a requirement of law, or federal or state regulation for the operation of the eligible activity.
(iii) All machinery and equipment that an Exempt Business has to use to comply with environmental, safety and health requirements, will be totally exempt from the payment of state taxes, as well as the sales and use tax.
(iv) Chemical materials used by an Exempt Business in wastewater treatment.
(v) Energy efficient equipment certified by the Secretary of the DDEC in accordance with the provisions of the Incentive Regulations.
(vi) The electrical sub-stations.
(2) Exceptions-
The following articles of use and consumption used by the Exempt Business that has a Decree granted under this Chapter, regardless of the area or property where they are located or their use, shall not be considered as raw material, machinery or equipment for the purposes of paragraph (1) of this section:
(i) All construction material and prefabricated buildings;
(ii) all electrical equipment and water pipes embedded in buildings;
(iii) lubricants, greases, waxes and paints not related to the energy production process;
(iv) lighting posts and luminaires installed in parking areas, and
(v) treatment plants.
Section 2072.06- Special Deduction for Investment in Buildings, Structures, Machinery and Equipment for Green Energy
(a) It shall be granted to any Exempt Business that has a Decree granted under this Chapter, the election to deduct in the taxable year in which it incurs them, instead of any capitalization of expenses required by the Internal Revenue Code of Puerto Rico, the Total expenses incurred after the effective date of this Code in the purchase, acquisition or construction of buildings, structures, machinery and equipment, provided that such buildings, structures, machinery and equipment:
(1) They have not been previously used or depreciated by any other business or Person in Puerto Rico, and
(2) be used exclusively in the activities described in paragraphs (6), (7), (8), (9) and (10) of Section 2071.01 of this Code, for which the benefits were granted provided under this Code.
(b) The deduction provided in this Section shall not be additional to any other deduction provided by law but merely an acceleration of the deduction of the expenses described above. Provided that, in the case of machinery and equipment previously used outside of Puerto Rico, but not previously used or depreciated in Puerto Rico, the investment in said machinery and equipment shall qualify for the special deduction provided in this Section only if said machinery and equipment At least fifty percent (50%) of its useful life determined in accordance with the Puerto Rico Internal Revenue Code is subtracted from the date of its acquisition by the Exempt Business.
(c) The Exempt Business that complies with the provisions of section (a) of this Section, may deduct, in the taxable year incurred, the total expenses incurred after the effective date of this Code in the remodeling or repair of buildings, structures, machinery and equipment, instead of any capitalization of expenses required by the Puerto Rico Internal Revenue Code, both in the event that such buildings, structures, machinery and equipment have been acquired or constructed before or after the effective date of this Code, as well as in the case that they were or were not used or depreciated by another business or person before their acquisition by the Exempt Business that has a Decree granted under this Code.
(d) The amount of the Green Energy Investment described in sections (a) and (c) of this Section for the special deduction provided in this section in excess of the Green Energy Income of the Exempt Business in the year of the investment, It may be claimed as a deduction in subsequent taxable years until the excess is exhausted.
(e) The Exempt Business that complies with the provisions of section (a) of this Section, may claim the deduction provided in this Section in any year in which it chooses to select the flexible tax exemption benefit, as provided in this Code.
SUBCAPTER C- REQUIREMENTS FOR GRANTING EXEMPTION
Section 2073.01- Requirement for Decree Requests
(a) Any person who has established or intends to establish an Eligible Business in Puerto Rico under this Chapter may request the benefits of this Chapter from the Secretary of the DDEC by submitting an application, in accordance with the provisions of Subtitle F of this Code.
(b) Any person may request the benefits of this Chapter, provided that it meets the eligibility requirements of Subchapter A of this Chapter, and with any other criteria established by the Secretary of the DDEC, through the Incentive Regulations, administrative order, circular letter or any other general communication, including as an evaluation criterion the contribution that the Eligible Business makes to the economic development of Puerto Rico. In addition, the evaluation criteria should take into consideration the following guiding principles:
(1) Jobs- The Infrastructure or Green Energy Activity and the Exempt Business encourage the creation of new jobs. In addition, consideration will be given if the Exempt Business pays its employees above the federal minimum wage level set by the “Fair Labor Standards Act”.
(2) Harmonious integration- The design and conceptual planning of the Infrastructure or Green Energy Activity and the Exempt Business shall be carried out, primarily, taking into consideration the environmental, geographical, physical aspects, as well as the materials and products available and abundant from the place where it will be developed. Safe development will be ensured to prevent catastrophic damage from probable natural disasters.
(3) Commitment to economic activity - The Exempt Business will acquire, to the extent possible, raw material and Products Manufactured in Puerto Rico for the construction, maintenance, renovation or expansion of its physical facilities. If the purchase of these products is not economically justified by taking into consideration criteria of quality, quantity, price or availability of these in Puerto Rico, the Secretary of the DDEC may exempt you from this requirement and issue a certificate of accreditation for these purposes.
(4) Commitment to agriculture- The Exempt Business will acquire, to the extent possible, agricultural products from Puerto Rico to be used in its operation. If the purchase of such products is not economically justified by taking into consideration criteria of quality, quantity, price or availability of these in Puerto Rico, the Secretary of the DDEC may exempt you from this requirement and issue a certificate of accreditation for these purposes.
(5) Transfer of knowledge - The Exempt Business must, as far as possible, acquire its services from professionals or companies with a presence in Puerto Rico. However, if this is not possible by criteria of availability, experience, specificity, skill or any other valid reason recognized by the Secretary of the DDEC, the Exempt Business may acquire such services through an intermediary with a presence in Puerto Rico, which You will contract directly with the service provider chosen by the Exempt Business, in order to provide the requested services.
(ii) "Services" means, notwithstanding that the Secretary of the DDEC may include others by regulation, the hiring of works of:
(A) surveying, production of construction plans, as well as engineering, architecture and related services designs;
(B) construction and everything related to this sector;
(C) economic, environmental, technological, scientific, managerial, marketing, human resources, computer and audit consulting;
(D) advertising, public relations, commercial art and graphic services; Y
(E) security or maintenance of its facilities.
(6) Financial commitment - The Exempt Business must demonstrate that they deposit a considerable amount of the income from their economic activity and use the services of banking or cooperative institutions with a presence in Puerto Rico.
(7) Certificate of compliance of the Puerto Rico Energy Bureau - Exempt Businesses dedicated to the eligible activities of paragraphs (6), (7), (8), (9) and (10) of Section 2071.01 of this Code, they will have to comply with the indispensable requirement of presenting, together with their application, a Certificate of Compliance with Law 17-2019, known as Public Energy Policy, and with the Integrated Resource Plan. Said certificate will be issued by the Puerto Rico Energy Bureau.
(8) The Secretary of DDEC shall be the official in charge of verifying and guaranteeing compliance with Exempt Businesses with the eligibility requirements set forth in this Section and this Chapter related to the eligible activities of paragraphs (6), (7), (8), (9) and (10) of Section 2071.01 of this Code, provided that for those cases related to the eligible activities of subsections (1), (2), (3), (4) and (5) of Section 2071.01 of this Code , the Secretary of the DDEC will act in consultation with the Secretary of Housing. If the Exempt Business partially complies with the requirements set forth in this Section, it shall be the responsibility of the Secretary of the DDEC to establish a formula that allows quantifying the aforementioned factors and subtracts the unmet requirement from the total percentage of the specific incentive, in order to obtain the exact percentage of the benefit in question. However, the latter shall not apply to those requests related to the eligible activities of paragraphs (6), (7), (8), (9) and (10) of Section 2071.01 of this Code, which do not comply with the indispensable requirement of the Certificate of Compliance with Law 17-2019, known as the Energy Public Policy Law, and the Integrated Resource Plan issued by the Energy Bureau.
Section 2073.02- Requirement for Exemption on Income from Leasing of Social Interest Properties
(a) In General- A person may receive the benefits provided in paragraph (3) of section (a) of Section 2072.01, section (b) of Section 2072.02, section (a) of Section 2072.03 , section (b) of Section 2072.04 of this Code, provided that it submits to the Secretary a request for exemption and meets the following requirements:
(1) Demonstrate by presenting the documents and records that the regulations require that the capital invested in the construction or rehabilitation of the Multifamily Project, as the case may be, is the product of a bona fide transaction .
(2) The lease fee for rented Housing units does not exceed the amount that the Secretary of the DDEC, in consultation with the Secretary of Housing, determines is appropriate for the owner of the Housing units to cover the administrative expenses and maintenance of the rented property, receive a return on your capital investment and cover your other obligations as an owner, according to the parameters established by regulation.
(3) The income on which tax exemption is claimed is derived from the lease fee paid by Low or Moderate Income Families.
(4) The unit rented within the Multifamily Housing Project or the family that occupies said unit does not receive a direct subsidy for the payment of the rental fee from the Government of Puerto Rico or the Government of the United States of America.
(5) The construction or rehabilitation of the Housing units to which income is attributed, for rent, which has begun after the approval of this Code.
Section 2073.03- Requirements- Exemption for Lease of Housing for the Elderly
(a) In General- A person may receive the benefits provided in paragraph (1) of section (b) of Section 2072.01, section (c) of Section 2072.02, section (b) of Section 2072.03 , section (c) of Section 2072.04 of this Code, provided that:
(1) The construction or rehabilitation of the Housing units for the lease has begun after the effective date of this Code.
(2) The lease fee for the leased Housing units does not exceed the amount that the Secretary of the DDEC, in consultation with the Secretary of Housing, determines as appropriate for the owner of the Housing units to cover the administrative expenses and maintenance of the leased property, receive a return on your capital investment and cover your other obligations as an owner, according to the parameters established in the Incentive Regulation.
(3) The income on which tax exemption is claimed is derived from the lease fee paid by the Elderly.
Section 2073.04- Requirement- Exemption on Income for sale of Social Interest properties
(a) In General- A person may receive the benefits provided in paragraph (2) of section (a) of Section 2072.01 of this Code, provided that:
(1) The construction or rehabilitation of the Housing units for sale has begun after the effective date of this Law.
(2) Submit a breakdown by cost item approved by the Secretary of the DDEC prior to the start of construction or rehabilitation works.
(3) The buyer of the Housing unit is a Low or Moderate Income Family or a Middle Class Family, as defined in this Code, and is certified as eligible by the mortgagee that originates the permanent mortgage financing of the Living place.
(4) As a general rule, in the case of Social and Middle Class Housing, for sale or rent, the income on which the tax exemption (exempt income) is claimed is the result of earnings that do not exceed a maximum of fifteen percent (15%) on the sale price of each unit, in cases of housing for sale and on the fair market value in the case of housing for rent per unit of Housing, derived from the sale of Housing units of Social Interest and / or Middle Class, and that such earnings are directly related exclusively to the Social Interest and / or Middle Class Housing project to which such income is attributed. As a special rule, it is provided that, subject to the provisions of this Code, when a Housing project is developedof Social Interest and Middle Class, for sale or rent, in an urban center or when it can be proved that an Investment in Housing Infrastructure or Infrastructure of Regional or Municipal Impact is being carried out, the income on which the tax exemption (exempt income) is the product of earnings that do not exceed a maximum of twenty percent (20%) on the sale price of each unit, in cases of housing for sale and on the fair market value in the case of housing for rent per unit of Housing, derived from the sale of Social Interest and / or Middle Class Housing units, and that such gains are directly related exclusively to the Social and / or Middle Class Housing Project to which such income is attributed. For the purposes of calculating the exemption provided under this Code, only that extraordinary investment in Housing Infrastructure or Regional or Municipal Impact Infrastructure, as approved by the Secretary of the DDEC, shall be considered in consultation with the Department of Housing.
5) The owner demonstrates, to the satisfaction of the Secretary of the DDEC and the Secretary of the Treasury, that at the time of formalizing the sale the Housing unit to which the income is attributed had no tax or tax burden.
Section 2073.05- Requirement - Income from Housing projects under the Assisted Living Housing Project
(a) In General- A person may receive the benefits provided by paragraph (5) of section (a) of Section 2072.01, section (d) of Section 2072.02, section (c) of Section 2072.03, and Section (d) of Section 2072.04 of this Code, provided that:
(1) Submit a request for certification as an Eligible Business based on the criteria issued by the Secretary of the DDEC, together with the Secretary of Housing, through the Incentive Regulations established.
(2) If any person or Entity wishes to promote any “Assisted Living” Housing project and a certification has not been issued to operate as an Eligible Business for said project, the promoter or applicant must inform the Secretary of the DDEC with a copy to the Secretary of Written housing of your intention to request the required certification and indicate in promotional or advertising materials that the promoted project has not completed the certification process by the Secretary of DDEC.
(3) The Secretary of the DDEC, together with the Secretary of Housing, will determine by means of the Incentive Regulations all that additional information or procedure that is necessary for the certification of “Assisted Living” Housing Projects.
Section 2073.06- Additional requirements to Sections 2073.02 and 2073.04
(a) In General - Any owner who builds or rehabilitates Social interest housing for sale or lease to Low or Moderate Income Families and Middle class homes for sale to middle class people, and who wishes to qualify for exemptions established in this Code, as applicable, you must submit to the Secretary of the DDEC a waiver request accompanied by the following information:
(1) the name of your business or company;
(2) the cadastre number of the property or properties related to the business;
(3) merchant registration number;
(4) Employer Social Security;
(5) the information required by Law 216-2014, better known as the “Law on the Control of Fiscal Information and Permits”; Y
(6) Any other requirement provided in the Incentive Regulations.
Section 2073.07- Exemption Requirements for Housing Construction for Rental to the Elderly
(a) In General- A person may receive the benefits provided in paragraph (2) of section (b) of Section 2072.01, section (b) of Section 2072.03, section (b) of Section 2072.04 of this Code, applicable to such businesses, provided that:
(1) The construction or rehabilitation of the Housing units for rent begins after the effective date of this Code;
(2) The owner submits a breakdown by cost item approved by the Secretary of the DDEC prior to the start of construction or rehabilitation works;
(3) The lessee of the Housing unit is an Elderly Person and certified as eligible based on the criteria issued by the Secretary of the DDEC through the Incentive Regulations; Y
(4) The owner submits to the Secretary of the DDEC a CRIM certification that, at the time of completion of the project, the Housing units had no tax or tax burden.
Section 2073.08- Requirement- Developers of Social Interest Housing subsidized by the Government of Puerto Rico
a) In Social Interest Housing projects approved and totally or partially subsidized by the Government of Puerto Rico, its Developer must reserve five percent (5%) of the total Housing in order to allocate them as residences for the Elderly or People with Disabilities who qualify to acquire them. If, at the end of the Housing project, these units have not been sold, the Developer will be authorized to sell them in the free market.
SUBCHAPTER D- SPECIAL PROVISIONS
Section 2074.01- Processing of CERs by the DDEC
The DDEC may establish a reasonable processing cost for each CER, which must be paid by the CER holder. This cost may be included in the value of each CER that is processed. Any income obtained through the processing costs imposed will be used for administrative expenses to guarantee the achievement of the purposes and objectives of this Chapter.
Section 2074.02- Successor Green Energy Business
(a) General Rule-
A Successor Green Energy Business may benefit from the provisions of this Chapter, provided that:
(1) The Exempt Green Energy Exempt Business has not ceased operations for more than six (6) consecutive months prior to the submission of the request for exemption from the Green Energy Successor Business, or during the exemption period of the Green Energy Successor Business, unless such fact obeys Force Majeure.
(2) The Green Energy Exempt Exempt Business maintains its average annual employment for the three (3) taxable years ending with the closing of its Tax Year prior to the submission of the Green Energy Successor Business Exemption application, or the applicable part of such period, while the Decree of the Green Energy Successor Business is in force, unless by force majeure the average cannot be maintained.
(3) The employment of the Successor Green Energy Business, after its first year of operations, is greater than twenty-five percent (25%) of the average annual employment of the Exempt Infrastructure Exempt Business referred to in paragraph (2) of this section.
(4) The Successor Green Energy Business does not use physical facilities, including land, buildings, machinery, equipment, inventory, supplies, trademarks, patents, distribution facilities (marketing outlets) worth fifty thousand dollars ($ 50,000.00) or more and have been previously used by a Green Energy Exempt Exempt Business. The foregoing shall not apply to additions to Property Dedicated to the Production of Green Energy, even if they constitute physical facilities that have a value of fifty thousand dollars ($ 50,000.00) or more, and are being or have been used by the main unit or the Business Exempt Green Energy predecessor. Notwithstanding the foregoing, the Secretary of the DDEC may determine, upon the recommendation of the agencies that report on tax exemption,
(b) Exceptions-
Notwithstanding the provisions of section (a) of this Section, the conditions shall be considered fulfilled, provided that:
(one) The Green Energy Successor Business allocates to the Exempt Business of Green Energy that part of its annual employment that is necessary for the annual employment of the Exempt Business of Green Energy to be maintained, or equals the annual employment that the Exempt Business Previous predecessor of Green Energy must maintain. The allocation set forth herein will not be covered by the Decree of the Successor Green Energy Business, but this will enjoy, with respect to the assigned part, the benefits provided by this Chapter, if any, that the Exempt Business of Green Energy would enjoy as if there were been its own annual production. If the exemption period of the Exempt Business of Green Energy Exemption had ended,
(two) The Successor Green Energy Business declares as not covered by its Decree, for the purposes of the property tax, that part of its facilities that is necessary for the investment in physical facilities of the Exempt Green Energy Exempt Business to be maintained or amounted to the total investment in physical facilities at the close of the Taxable Year of such Exempt Business of Green Energy Prior to the presentation of the request for exemption of the Successor Business of Green Energy, less depreciation and less any decrease in investment in physical facilities that may exist occurred on the date the provisions of this paragraph are used, as a result of an authorization to use them in accordance with the provisions of paragraph (4) of paragraph (a) of this Section.In the cases in which the exemption period of the Green Energy Exempt Exempt Business has not ended, the Green Energy Successor Business will enjoy the benefits provided by this Code that the Green Energy Exempt Exempt Business would have enjoyed with respect to the part of its investment in said physical facilities that for the purposes of this paragraph declares as not covered by its Decree, if the facilities would have used them to produce their Green Energy Income.if the facilities had been used to produce your Green Energy Income.if the facilities had been used to produce your Green Energy Income.
(3) The Secretary of the DDEC determines that the operation of the Green Energy Successor Business results in the best economic and social interests of Puerto Rico, in view of the nature of the physical facilities, the number of jobs, the amount of the payroll, of the investment, of the location of the project, or of any other factors that in its opinion merit such determination, including the economic situation that the Exempt Business is going through in particular, and dispenses with total or partial compliance, with the provisions of the section (a) of this Section, and may condition the operations, as convenient and necessary for the best interests of Puerto Rico.
Section 2074.03- Sale of Energy to the Electric Power Authority
Eligible Businesses that carry out any of the eligible activities set forth in paragraphs (6), (7), (8), (9) and (10) of Section 2071.01 and that are totally disconnected from the Authority's electrical system of Puerto Rico Electric Power, they will not be obliged to sell the energy produced to it to obtain or maintain a Decree under this Code, regardless of any other legal provision to the contrary.
CHAPTER 8 AGROINDUSTRIES
SUBCHAPTER A- ELIGIBILITY
Section 2081.01- Companies Dedicated to Agriculture , Livestock Industries and Agribusiness
(a) It is provided so that a business established or established in Puerto Rico by any Person, or a combination of the different types of Persons, organized or not under a common name, may request the Secretary of DDEC, through technical recommendation of the Secretary of Agriculture, an Incentive Concession when such Person is established in Puerto Rico to perform or fulfill one of the following eligible activities:
(1) Activities of the Dairy Industry of Puerto Rico, Inc.
(2) Agricultural or agroindustrial businesses dedicated to the operation or exploitation in Puerto Rico of one or more of the following businesses:
(i) Tillage or cultivation of the land for the production of fruits and vegetables, species for condiments, seeds and all kinds of food for humans or animals, or raw materials for other industries;
(ii) The raising of animals for the production of meat, milk or eggs, among others, used for human food, or raw materials for other industries;
(iii) The breeding of thoroughbred racehorses, the breeding of fine-step horses and the breeding of ride horses.
(iv) Agro-industrial or agricultural operations that buy the raw material produced in Puerto Rico, provided that it is available.
(v) Producers, processors or sterilizers of milk and their agents, provided that the milk used is extracted from the milking done in Puerto Rico.
(vi) Operations dedicated to the packaging, packaging or classification of agricultural products grown in Puerto Rico that are part of the same agro-industrial business. Operations that are exclusively for packaging, packaging or classification of agricultural products will not in themselves constitute an agribusiness business.
(vii) Mariculture, commercial fishing and aquaculture.
(viii) Commercial production of flowers, plants and ornamental grasses for the local and export market, not including professional landscape services.
(ix) The cultivation of vegetables by hydroponic methods, the booths and other equipment used for these purposes.
(x) The processing of grains for the consumption of livestock companies by associations composed of Farmers Bona Fide .
(xi) The raising of fighting cocks and for the reproduction of spurs.
(xii) Any other business that, upon recommendation of eligibility of the Secretary of Agriculture, the Secretary of the DDEC through the Incentive Regulations and in consultation with the Secretary of Agriculture, considers it as an agricultural or agro-industrial business, provided that it does not go against the purpose of this Code.
SUBCHAPTER B- CONTRIBUTIVE BENEFITS
Section 2082.01- Tax Exemptions- Dairy Industry of Puerto Rico, Inc.
(a) In General- The Dairy Industry of Puerto Rico, Inc. is exempted from the payment of income taxes, municipal patents, property taxes, taxes, duties and any other type of import or purchase tax on its machinery.
(b) For the purposes of the exemption provided in this Section, the requirements set forth in Section 2083.02 of this Code shall be met.
Section 2082.02- Bona Fide Farmers Income Tax
(a) In General- Bona Fide Farmers are exempted from paying income taxes on ninety percent (90%) of their income that comes directly from the agricultural or agribusiness business. This exemption does not extend to income from interest, dividends, royalties or profits derived from the sale of assets, including the assets used in the agricultural business, or any other income derived from the agricultural or agribusiness businesses of Farmers Bona Fide and that does not come directly from the agricultural or agroindustrial activity, as defined and established in paragraph two (2) of section (a) of Section 2081.01 of this Code.
(b) All interest on bonds, promissory notes and other debt instruments issued as of January 1, 1996, by Farmers Bona Fide and any Financial Institution as defined by the term in Act No. 4 of October 11, 1985, as amended, known as the "Law of the Commissioner of Financial Institutions", or issued in transactions authorized by the Commissioner of Financial Institutions, related to the financing of agricultural or agro-industrial businesses.
(c) The shareholders or partners of an Exempt Business that has a Decree under the provisions of this Chapter and that are dedicated to the activities described in paragraph (2) of section (a) of Section 2081.01 of this Code, they will be subject to the income tax provided in the Puerto Rico Internal Revenue Code on the distribution of dividends or profits from the net income of such Exempt Business.
Section 2082.03- Contributions on movable and immovable property
Bona Fide Farmers who dedicate themselves to the activities set forth in paragraph (2) of section (a) of Section 2080.01 of this Code, and which in turn have a Decree granted under this Code, shall be exempt from taxation. of property taxes imposed by the "Municipal Property Tax Law", including tangible and intangible movable and immovable property, such as land, buildings, equipment, accessories and vehicles, provided they are owned or they have them under lease or usufruct, and that they are used in thirty-five percent (35%) or more in such activities covered by the Decree.
Section 2082.04- Municipal Contributions
Bona Fide Farmers who dedicate themselves to the activities set forth in paragraph (2) of section (a) of Section 2080.01 of this Code, and which in turn have a Decree granted under this Code, shall be exempt from the payment of municipal patents imposed by the "Municipal Patent Law" on such activities covered by theDecree.
Section 2082.05- Exemption from the Payment of Arbitration and Sales and Use Tax
(a) Every Bona Fide Farmer is exempted from the activities set forth in paragraph (2) of section (a) of Section 2080.01 of this Code, and which in turn has a Decree granted under this Code of the payment of taxes and sales and use tax, if applicable, as provided in Subtitles C, D and DDD of the Internal Revenue Code of Puerto Rico, provided that they comply with the requirements set forth in Section 2083.05 of this Code, on the following articles when they are introduced or acquired directly or indirectly by them for use in such activities:
(1) Incubators and breeders of chickens or other animals; articles for raising and developing bees or cattle;
(2) Milkers, including electric milkers, silos fillers and tanks for use by farmers in the conservation of milk on farms or livestock;
(3) Electric power generating plants;
(4) Equipment, artifacts or objects whose operation depends solely on solar, wind, hydraulic or any other type of energy, excluding the energy produced by oil and its derivatives;
(5) Equipment used by coffee growers to process the grain once it has been cultivated until it is ready for roasting; equipment and devices used in the production, processing, pasteurization or processing of milk or its derived products;
(6) Equipment for mixing food on farms and food distribution systems for animals or bees on farms; treated posts and wire fences on farms;
(7) Equipment and artefacts used in chicken raising and egg production, and semen for raising cattle;
(8) Equipment, artifacts or objects used by Bona Fide Farmersin its business of production and cultivation of vegetables seeds, coffee, mango, legumes, cane, flowers and ornamental plants, grass or grass food for livestock, farinaceous, fruits, loafers and pineapple, livestock, horticulture, cuniculture, pig farming, poultry farming , beekeeping, aquaculture and fishing; of raising cows or goats for meat or milk; of production, processing, pasteurization or sterilization of milk or its derived products; for raising local ride horses, native thoroughbred horses and pure fine-step horses of Puerto Rico, raising fighting cocks and spur production, and any other activity than the Secretary of the DDEC, upon recommendation of the Secretary of Agriculture, determine;
(9) Honey or molasses that constitutes feed for livestock, any other feed for cattle, rabbits, goats or sheep;
(10) Spare parts including, but not limited to, tires, tubes for airplanes used in the agro-industrial activity;
(11) Any kind of vehicle that is not a car for use in the agricultural activity.
(i) The exemption set forth in this paragraph shall also apply to replacements of such vehicles provided that the motor vehicle that is replaced has been owned by a Bona Fide Farmerfor use of the agribusiness business for a period of not less than four (4) years. However, when the vehicle that is replaced has lost its usefulness due to fortuitous causes not attributable to the negligence of its owner, the replacement exemption will apply. When the owner of a vehicle that is enjoying this exemption sells it, transfers or in any other way dispossesses it, for a price not exceeding five thousand seven hundred sixty-nine dollars ($ 5,769.00) the new acquirer will be obliged to pay, before to take possession of it, a minimum discretion of two hundred and fifty dollars ($ 250.00). If the price exceeds five thousand seven hundred sixty-nine dollars ($ 5,769.00), the new acquirer shall be obliged to pay the arbitration resulting from applying the table of Section 3020.08 of the Internal Revenue Code of Puerto Rico.
(ii) The amount of the arbitration will be calculated based on the tax price on which the exemption was granted minus depreciation. It will be the duty of the exempt person to demand proof of the new purchaser of the payment of the arbitration before delivering the vehicle. When the new acquirer is another Bona Fide Farmer , he may avail himself of the benefits of this paragraph for the term remaining until completing the four (4) years of the exemption originally granted.
(12) Gas oil or diesel oil for exclusive use in the operation of machinery and agricultural vehicles, livestock, poultry or for the breeding of native thoroughbred horses or pure fine-pass horses of Puerto Rico, or in the operation of machinery or vehicles of producers, processors, pasteurizers or sterilizers of milk or its derived products, as well as other equipment used in other agribusiness or agricultural operations;
(13) Tractors, plows, rakes, weed mowers, seeders and any other accessory equipment to the tractor including parts for them, which are for the use of Bona Fide Farmers in their agribusiness businesses;
(14) Herbicides, insecticides, fumigant pesticides and fertilizers, including equipment for their application;
(15) Drip irrigation systems, aerial irrigation systems (sprinklers), including but not limited to pumps, pipelines, valves, irrigation controls (timers), filters, injectors, chemistry suppliers, umbrellas for steel, aluminum packaging o wood, shipping materials, materials for propagation benches, propagation materials, pots, baskets and trays, plant support materials (wooden or bamboo stakes), plastic covers (plastic mulch or ground cover), steel nurseries, aluminum or treated wood, polyethylene sarán (shade cloth) or fiberglass (fiberglass) plastic for roofing nurseries;
(16) Equipment, machinery and materials used in the treatment of mango for export through the hot water process;
(17) Systems, equipment and materials used for environmental control required by regulatory agencies for the operation of their businesses;
(18) Structures, umbrellas and other equipment used for the cultivation of vegetables by hydroponic methods; Y
(19) The parts, accessories and replacements for or of any of the items described in paragraphs one (1) to eighteen (18) of this section as provided in Subtitle D of the Internal Revenue Code.
(b) To acquire the items exempt from the sales and use tax indicated in paragraph (a) of this Section, the Bona Fide Farmer shall submit to the seller merchant, in each purchase transaction, the Certificate of Exempt Purchases.
SUBCAPTER C- REQUIREMENTS FOR GRANTING EXEMPTION
Section 2083.01- Requirements for Decree Requests
(a) Any person who has established or proposes to establish an Eligible Business in Puerto Rico under the provisions of this Chapter, may request to the Secretary of the DDEC, upon prior recommendation of the Secretary of Agriculture, the benefits of this Chapter by submitting the application in accordance with the provisions of Subtitle F of this Code.
(b) Any person may request the benefits of this Chapter as long as it meets the eligibility requirements of Subchapter A of this Chapter, and with any other criteria established by the Secretary of the DDEC, through the Incentive Regulation, administrative order, letter circular or any other general communication, including as an evaluation criterion the contribution that said Eligible Business makes to the economic development of Puerto Rico.
Section 2083.02- Requirements for the Tax Exemption of the Dairy Industry of Puerto Rico, Inc.
(a) In General- The Dairy Industry of Puerto Rico, Inc. may obtain the benefits of this Chapter as long as the total Capital Shares of the corporation belong to the Fund for the Promotion of the Dairy Industry created by Act No. 34 June 11, 1957.
(b) When all or part of the Shares pass into the domain of private persons, the tax exemption granted shall be without effect and, as of that date, the properties and income of the corporation shall be taxed in the same manner as the properties and the income of any private corporation under the Puerto Rico Internal Revenue Code, as well as any other taxes to which the corporation was exempted.
Section 2083.03- Requirements for Tax Exemption for Farmers Bona Fide
(a) An agricultural or agribusiness business shall be deemed to comply with eligibility for the purposes of this Chapter if it derives fifty-one percent (51%) or more of its gross income from one or more of the eligible activities described in the paragraph. two (2) of section (a) of Section 2081.01 of this Code.
(b) New agribusinesses - In the case of new farmers or agribusinesses, for whom certification of Bona Fide Farmer is not possible , the Secretary of the DDEC, in consultation with the Secretary of Agriculture, will establish by means of the Incentive Regulation or other regulation especially the requirements and procedures to benefit from the benefits of this Chapter.
Section 2083.04- Requirements for Exemption on Debt Instruments
(a) To enjoy the exemption on interest provided in section (b) of Section 2082.02 of this Code, the lender must grant the loan directly to the Bona Fide Farmer . If the financing is granted to an intermediary who in turn lends, or otherwise contributes, the proceeds of financing to an agribusiness business, the loan to the intermediary will not constitute an eligible loan for purposes of this exemption. The term “intermediary” includes, but is not limited to, related persons according to the criteria established in Sections 1010.04 and 1010.05 of the Internal Revenue Code of Puerto Rico.
(b) In the event that the agribusiness business is disqualified as such, the interest generated by the debt instruments shall not be considered eligible for the exemption provided in Section 2082.02 of this Code.
(c) The term “financing” does not include debt refinancing to the extent that the product is used to settle existing debts of either the agribusiness or other business. Therefore, the income tax exemption on interest on bonds, promissory notes and other debt instruments does not apply to refinancing.
Section 2083.05- Requirement for Exemption from State Arbitration and Sales and Use Taxes (IVU)
(a) The Bona Fide Farmer who wishes to qualify for the exemptions listed in Section 2082.05 of this Code shall comply with the provisions of Bona Fide Farmer established by the Secretary of Agriculture in accordance with the provisions of this Code and accredit, through the mechanisms to be established by the Secretary of the DDEC, in consultation with the Secretary of Agriculture who is engaged in the operation or operation of an agribusiness business, and who will use the article on which he claims the exemption in the operation and in the development of the business.
SUBCHAPTER D- SPECIAL PROVISIONS
Section 2084.01- Incentives for Agricultural Research
(a) The Department of Agriculture will be called to promote highly technical agriculture, as well as the development of a research plan to quickly meet the needs of local businesses, in light of our status as a tropical island, and promote increase in the production and export of agricultural products.
(b) The Department of Agriculture will annually identify the priorities for the granting of funds to the best proposals in the areas of research according to government public policy and will establish the mechanisms and regulations necessary to channel requests for research proposals that are received .
(c) The Department of Agriculture shall submit to the DDEC a formal request through the Economic Incentives Fund for those agricultural investigations that it has identified as a priority, subject to the budgetary limitations that from time to time are established by the Legislative Assembly of Puerto Rico.
SUBCAPTER E- GENERAL PROVISIONS
Section 2085.01- Documents and Property Registry of Puerto Rico, exemption
The Bona Fide Farmer is exempted from the payment of Internal Revenue stamps and registration fees in the granting of documents and registration in the Property Registry of Puerto Rico, including, but not limited to, options, segregations, sale, transfer, exchange , donation, usufruct or lease of movable or immovable property for the use of your agribusiness business, as well as the assignment, constitution, extension, modification, release or cancellation of liens on movable or immovable property, for the financing of your agribusiness business, or to jointly and severally guarantee the financing of the agribusiness business of another Farmer Bona Fideregardless of the bank or credit institution that you use for these purposes. The notary authorizer must comply with establishing the capacity of the appearing as a Bona Fide Farmer taking as reference the certification issued by the Secretary of Agriculture. In addition, in the granting, the appearing Bona Fide Farmer must declare under oath that the perfected legal business is for the use of his agribusiness business, or to jointly and severally guarantee the financing of another agribusiness business, as defined in this Chapter.
CHAPTER 9- CREATIVE INDUSTRIES
SUBCHAPTER A- ELIGIBILITY
Section 2091.01- Companies dedicated to Creative Industries
(a) It is provided so that a business established, or that will be established, in Puerto Rico by a Person, or combination thereof, organized or not under a common name, may request the Secretary of the DDEC to grant economic incentives when the Entity It is established in Puerto Rico to engage in one of the following eligible activities:
(1) Film Projects - A Person may obtain a Decree in relation to a Film Project, provided that:
(i) the production or postproduction of the Film Project is carried out in Puerto Rico, partially or totally;
(ii) the Film Project is for commercial guidelines, distribution or exhibition to the general public outside of Puerto Rico by any means, except for the Film Projects listed in clauses (A), (B) and (C) of subsection (iv) of this paragraph one (1), below, which may be for pattern, distribution or commercial display to the general public in Puerto Rico. In those cases of the Film Projects that are not contemplated in clauses (A), (B) and (C) of subsection (iv) of this paragraph (1), whose pattern, distribution or display outside of Puerto Rico is considered incidental and minimum or that the Film Project is for consumption in Puerto Rico, the Secretary of the DDEC will determine that it fails to comply with the terms of this paragraph; Y
(iii) Puerto Rico Production Expenses are at least fifty thousand dollars ($ 50,000.00), provided that in the case of a Film Project described in (B) and (C) of subsection (iv) of this paragraph (1) ), the Production Expenses of Puerto Rico shall be at least twenty-five thousand dollars ($ 25,000.00).
(iv) For purposes of this Code, the term "Film Project" means:
(A) Feature films
(B) Short film
(C) Documentaries
(D) Series in episodes, mini-series and television programs of a similar nature, including pilots and those produced for digital distribution. Provided, in addition, that for all these instances, the pattern, distribution or display outside of Puerto Rico cannot be considered incidental and minimal .
(E) Ads that are displayed outside our jurisdiction, including campaigns made up of several ads, as long as all campaign ads are accumulated in a single contract or purchase order with aggregate Puerto Rico Production Expenses of at least one hundred thousand dollars ($ 100,000.00), that individually meet the other requirements established in this Subchapter, except for the minimum expense set forth in subsection (iii) of paragraph one (1) of this section, and comply with any other requirements established by the Secretary of the DDEC through the Incentive Regulation or circular letter.
(F) Video games
(G) Television projects, including but not limited to, tele-reality programs, known in English as reality shows , interviews, news, game shows, entertainment, comedy and those aimed at children, and variety.
(H) The postproduction of one or several Film Projects indicated above provided that all Film Projects accumulate in a single contract or purchase order with aggregate Puerto Rico Production Expenses of at least one hundred thousand dollars ($ 100,000.00), which individually meet with the other requirements established in this Code, except for the minimum expenditure set forth in subsection (iii) of paragraph one (1) of this section, and comply with any other requirements established by the Secretary of the DDEC through the Incentive Regulation or letter circular.
(I) Film Festivals
(J) Music Videos
(K) A Film Project does not include any of the following:
1. A production that consists primarily of religious or political propaganda;
2. a production that includes pornographic material;
3. a radio program;
4. a production that serves primarily to market a product or service that is not an advertisement in accordance with clause (E) of subsection (iv) of this paragraph (1);
5. a production whose primary purpose is to raise funds;
6. a production whose main purpose is to train employees or do internal corporate advertising or any other similar production; or
7. Any other project determined by the Secretary of the DDEC through the Incentive Regulations or circular letter.
(v) A Film Project may:
(A) Use real images as a source, as well as animation or electronically generated images;
(B) use for its production any means currently available or that may be developed in the future, such as, but not limited to: celluloid, tape, disc or paper. The medium may be magnetic, optical, ink or any other that develops in the future. The way of recording and reproducing images and sound may be analogous, digital or any other form that is developed in the future; or
(C) be disseminated in any medium, including electronic means of information transmission.
(2) Operators of Postproduction Studies or Studies that directly or through an endorsed concessionaire, according to the definition provided, properly operate a Postproduction Study or Studio, as well as the required components in order to provide the necessary services to respond to commercial needs of the Film Projects.
(i) Any bona fide office, business or establishment , as well as its equipment and machinery, which has the capacity and skills necessary to provide the Commercial Operator with a commercial scale service, shall be considered a strategic supplier, provided that the services : (i) are directly related to the business of development, preproduction, production, postproduction or distribution of a Film Project; (ii) are indispensable for the Study Operator to fulfill its obligations under paragraph (2) of section (a) of this Section; and (iii) are provided to the Study Operator, on a recurring and exclusive basis. The Person who provides services to the Study Operator sporadically will not be considered a strategic supplier.
(3) Strategic suppliers or Concessionaires endorsed by the Secretary of the DDEC that comply with the requirements established in subsection (i) of paragraph (2) of this section.
(i) This supplier or Concessionaire who has an endorsement will enjoy the same benefits that the Study Operator enjoys under his Decree as a Concessionaire that carries out the activity directly.
(4) Infrastructure Projects that include a substantial development or expansion in Puerto Rico of Studies, laboratories, facilities for the international transmission of television images or other media, or other permanent facilities to carry out Film Projects, regardless of whether such projects are eligible for the provisions of this Code, whose direct cost budgets, known in English as hard costs , exceed, as certified by the Auditor, five hundred thousand dollars ($ 500,000).
SUBCHAPTER B- CONTRIBUTIVE BENEFITS
Section 2092.01- Income Tax
(a) In General- The Concessionaire's net income derived directly from the exploitation of the activities eligible under this Chapter and covered in the Decree, will be subject to a preferential fixed tax rate of four percent (4%) instead of any other contribution, if any, provided by the Internal Revenue Code of Puerto Rico or any other law of Puerto Rico.
(b) Study Operators - A Study Operator will be subject to a preferential fixed tax rate on their net income derived from the exploitation of the activities covered by the Decree of four percent (4%) provided in section ( a) of this Section.
(c) Movable Property Income. Notwithstanding the provisions of the Internal Revenue Code of Puerto Rico, this Code or any other law of Puerto Rico, shall not be subject to income taxes, withholding of income taxes at source or sales and use tax, payments made after July 1, 2019 by a Concessionaire, with Decrees issued under this Code or under Previous Incentive Lawsto non-resident individuals, corporations, foreign companies or other foreign persons not engaged in an industry or business in Puerto Rico for income from movable property located in Puerto Rico or any interest in said property, including income from using movable property in Puerto Rico, as long as said property is used directly or indirectly in eligible activities under this Chapter. Provided, however, that in order to enjoy the exemption granted in this section, the Concessionaire must submit to the Department of the Treasury and the Secretary of the DDEC for approval a certification proving that the movable property was not available in Puerto Rico to be used for directly or indirectly in eligible activities under this Chapter.
(d) Special Contribution for Foreign Person- A special contribution of twenty percent (20%) will be levied, collected and paid in lieu of any other tax imposed on the total amount received for any Individual Foreign Person or by an Entity that hires the services of a Foreign Person to provide services in Puerto Rico, in relation to a Film Project, which represents salaries, marginal benefits, allowances or fees. In the event that this twenty percent (20%) applies to an Entity that hires the services of a Qualified Non-Resident, the portion of the payment received by the Entity that is subject to this special contribution will not be subject to the contribution. special twenty percent (20%),
(one) Obligation of Discounting and Withholding - Any Person who has control, receipt, custody, disposition or payment of the amounts of remuneration described in section (c) of this Section, will deduct and withhold the contribution of twenty percent (20%) and pay the amount of such contribution discounted and withheld at the Internal Revenue Collection of the Department of the Treasury, or will be deposited in any banking institution designated as a depository of public funds authorized by the Secretary to receive the contribution. The contribution must be paid or deposited on or before the fifteenth (15) day of the month following the date on which the payment was made, subject to the withholding of twenty percent (20%) imposed by this section.
(two) Non-compliance with the Obligation to Withhold- If the withholding agent, in contravention of the provisions of paragraph (1) of section (c) of this Section, does not withhold the contribution of twenty percent (20%) imposed by section (c) of this Section, the amount that should have been deducted and withheld, except if the person receiving the income has satisfied their tax liability with the Secretary of the Treasury, will be charged to the withholding agent, following the same procedure that would be used if it were a contribution due by the withholding agent. The Person who receives the payment must pay the non-withheld tax by submitting a return within the term set forth in Section 1061. 16 of the Puerto Rico Internal Revenue Code and the payment of the tax pursuant to the provisions of Section 1061.17 of the Puerto Rico Internal Revenue Code. Although the person receiving the payment pays the corresponding contribution, the withholding agent will be subject to the penalties set forth in paragraph (5) of this section.
(3) Tax Responsibility - Any Person obliged to deduct and withhold the contribution of twenty percent (20%) imposed by section (c) of this Section, shall respond to the Secretary of the Treasury for the payment of said contribution and shall not have to respond to any other person for the amount of any payment thereof.
(4) Return - Any person obliged to deduct and withhold the contribution of twenty percent (20%) imposed by section (c) of this Section, must submit a return in relation to it, on or before February 28 from the year following the year the payment was made. The form must be submitted to the Secretary of the Treasury and will contain the information and will be prepared in the manner established by the Secretary of the Treasury, through regulations. Any person who submits the return required by this subsection shall not have the obligation to submit the declaration required by subsection (j) of Section 1062.08 of the Internal Revenue Code of Puerto Rico.
(5) Penalties - For provisions on penalties and additions to the contribution, see Section 6041.01 of Subtitle F of the Internal Revenue Code of Puerto Rico.
(e) Tax exemption on distributions in liquidation- The distributions made by an Exempt Business that has a Decree granted under this Chapter to its shareholders or partners in total or partial liquidation of such Exempt Business and that are attributed to the income derived from the exploitation of the activities covered under the Decree, they will be totally exempt from the payment of income taxes, including the minimum alternative tax and the alternate basic tax provided by the Puerto Rico Internal Revenue Code.
Section 2092.02- Special Deductions to Businesses Dedicated to the Film Industry
(a) Donations from private persons to non-profit entities duly authorized for the production of Feature Films Projects, short films, documentaries , film festivals or educational activities aimed at training and development of the film industry.
(1) To enjoy this special deduction, donations may not exceed one hundred thousand dollars ($ 100,000.00) per Film Project. Donations may be deducted on the payroll of private persons up to twenty-five percent (25%) of their total tax liability in Puerto Rico. Donors may not be linked to the Film Project or receive any benefit for its production. The Secretary of Economic Development and Commerce shall establish additional conditions of the program through regulations.
Section 2092.03- Tax on Movable and Real Property
Movable or immovable property dedicated to film activities covered by a Decree that would usually be subject to taxes, will be entitled to an exemption of seventy-five percent (75%) of all taxes on movable and immovable property, municipal and state. Contributions on movable or immovable property shall be fixed, imposed, notified and administered in accordance with the provisions of Law 83-1991, as amended, known as the "Municipal Property Tax Law" , or any subsequent statute in force to date. in which the contribution is fixed and imposed.
Section 2092.04- Municipal Patents and other Municipal Taxes
(a) No Concessionaire shall be subject to the payment of contributions for municipal patents, arbitrations and other contributions on municipal income imposed by municipal ordinance at the effective date of the Decree.
(b) Every Concessionaire, as well as its contractors or subcontractors, shall enjoy an exemption of seventy-five percent (75%) of the payment of any tax, lien, license, arbitration, fee or fee for the construction of works to be used in activities covered by the Decree in a municipality, imposed by any ordinance of any municipality on the effective date of the Decree. Contractors or subcontractors working for a Concessionaire will determine their turnover for purposes of municipal patent contributions, discounting the payments that are required to be made to subcontractors under the main contract with the Concessionaire. Subcontractors that in turn use other subcontractors within the same project, They will also deduct the corresponding payments in determining their turnover. A contractor or subcontractor may deduct the payments described in the previous paragraph of their respective business volumes, only if the contractor or subcontractor certifies, by affidavit, that he did not include in the contract granted for works or services to be provided, in relation to the Dealer, an item equal to the contribution for the concept of the municipal patent resulting from the turnover discounted under this Section.
Section 2092.05- State Arbitration and Sales and Use Tax
(a) The articles of use and consumption introduced or acquired directly by a Concessionaire to be used exclusively in film industry activities covered under a Decree are exempt from the payment of taxes imposed by Subtitle D of the Puerto Rico Internal Revenue Code, in the extent to which they remain in Puerto Rico only temporarily.
Section 2092.06- Tax Exemption Periods
(a) Beginning of the exemption - The tax benefits granted in this Subchapter will enter into force on the date established in the Decree.
(b) Decrees issued in relation to Film Projects may have an effective date prior to the filing of a decree request, and will have a term equivalent to the duration of the project, including its exploitation, as determined by the Secretary of the DDEC through the Incentive Regulation. Decrees issued to Study Operators will have a term of fifteen (15) years.
(c) A Study Operator who has a Decree will have the option of choosing the specific tax years to be covered in terms of their income tax, patent or property tax when notified by the Secretary of the Treasury, the Municipality or the CRIM, as appropriate, and the Secretary of the DDEC, not later than the date set forth by law to file its income tax return for such Taxable Year, statement of turnover or tax return on personal property, including extensions granted for this purpose. In the case of a property tax, the CRIM shall be notified sixty (60) days before the first (1st) of January of the Economic Year for which the option is to be exercised. Once the Study Operator opts for this benefit,
(d) Decrees issued under the provisions of this Chapter shall be transferable, subject to prior authorization by the Secretary of the DDEC.
Section 2092.07- Tax Base
The tax base of an investment made by a Concessionaire will be determined in accordance with the provisions of the Puerto Rico Internal Revenue Code, except that such base will be reduced dollar by dollar, but never less than zero, by the amount of the Tax Credit that the Dealer receive.
Section 2092.08- Other Tax Benefits
(to) the issuance of any partial or complete certified copy, the presentation, registration or any other operation in the Property Registry of Puerto Rico. The exemption will be subject to the prior approval of the DDEC Secretary in each case. The approval of the Secretary of the DDEC will be evidenced by a certification issued by him, a copy of which (i) must be sent to the Notary, the Property Registrar of Puerto Rico, the Court of Justice or any other Entity to which they are claimed the exemptions set forth herein; and (ii) accompany any public deed or document presented in the Property Registry of Puerto Rico. The persons and entities included in this paragraph are hereby authorized to rely on the certification issued by the Secretary of DDEC,
(b) The term “real or contractual right that has access to the Property Registry of Puerto Rico,” as used in section (a) of this Section, includes all real or personal rights that have, currently or in the future, access to the Land Registry of Puerto Rico; including, but not limited to, (A) legal, real or personal easements or equity easements; (B) constitution of horizontal property, timeshare, vacation club or Condohotel regimes; (C) surface or construction rights, and any other construction recognition or certificate of completion of construction or improvement, the registration of which is requested in the Property Registry of Puerto Rico; (D) leases; (E) mortgages; (F) sales; (G) swaps; (H) donations; (I) rights of first refusal, withdrawal and retroventa and censuses; (J) private water rights; (K) administrative concessions; (L) purchase options; and (M) conditions and restrictions of use.
SUBCAPTER C- REQUIREMENTS FOR GRANTING EXEMPTION
Section 2093.01- Requirements for Decree Requests
(a) Any person who has established or proposes to establish an Eligible Business in Puerto Rico under this Chapter may request the benefits of this Chapter by submitting an application to the Secretary of the DDEC, in accordance with the provisions of Subtitle F of this Code.
(b) Any person may request the benefits of this Code as long as it meets the eligibility requirements of Subchapter A of this Chapter, and with any other criteria established by the Secretary of the DDEC, through the Incentive Regulations, administrative order, letter circular or any other general communication, including as an evaluation criterion the contribution that the Eligible Business will make to the economic development of Puerto Rico.
SUBCHAPTER D- SPECIAL PROVISIONS
Section 2094.01- Establishment of Creative Industries Development Districts
(a) The Secretary of the DDEC will designate land plots (contiguous or not) as “Creative Industries Development Districts”. Such geographical areas will consist of property or real estate dedicated to the development, construction and operation of Studies and other developments related to the purposes and provisions of this Code, regardless of who owns it. In those cases in which the ownership of the plot or plots of land is of a private person or a municipality, it can only be designated as a Creative Industries Development District, with the consent of the owner or municipality.
(b) Plots of land designated or to be designated as part of the Creative Industries Development Districts that are owned by the Government of Puerto Rico may be transferred for the sum and in accordance with the terms and conditions established by the owner of the plots and the Secretary of the DDEC. Notwithstanding the foregoing, the Transfer of ownership may not be a requirement for the designation of Creative Industry Development Districts. Any law, rule, regulation, policy, norm or guideline that restricts the terms or conditions of the Transfer of said plots beyond those terms or conditions that would ordinarily be applicable to transactions between Private Persons, will not apply to the Transfers contemplated in this paragraph. and foster the purposes of this Code.
(c) Once the Creative Industries Development Districts have been designated, the Secretary of the DDEC, with the President of the Puerto Rico Planning Board, in accordance with the “Organic Law of the Puerto Rico Planning Board”, Act No. 75 of June 24, 1975, as amended, and Act 81-1991, as amended, known as the "Puerto Rico Autonomous Municipalities Act of 1991", shall promulgate and adopt a joint zoning regulation that will apply to development, zoning and the use of the plots designated by the Secretary of DDEC as the Creative Industries Development Districts. All development, zoning and use of the parcels designated as the Creative Industries Development Districts shall be governed solely by this joint zoning regulation and shall not be subject to any other law,
(d) Plots that constitute all or part of the Creative Industries Development Districts may be taxed for any restrictive condition, government regime, rule or regulation, and any architecture, design and construction directive that the Secretary of the DDEC, of from time to time and any of these restrictive conditions, government regime, rules, regulations and guidelines may be amended, canceled or modified at any time and, from time to time, by the approval of the Secretary of the DDEC.
(e) The Secretary of the DDEC shall have the power to: (i) set regular, general or special charges, quotas or spills on any or any parcels in the Creative Industries Development Districts; e (ii) impose and charge charges on the Transfer of any interest in real estate in the Creative Industries Development Districts or on the construction of any improvement in the Creative Industries Development Districts, to pay for the construction of improvements and infrastructure in common areas, the maintenance and repair of common areas, landscaping, security, signage, lighting and the provision of common services, without it being understood that such charges, fees or spills constitute a taxation. This section will not apply to properties whose ownership is of a Municipality.
(F) Hereby, a legal lien is created to guarantee the collection of taxes and fixed charges or taxes on parcels in the Creative Industries Development Districts. Said lien will have priority over any other lien, except the lien that guarantees tax debts assigned pending payment, in accordance with the provisions of Law 21-1997, as amended, known as the “Law on the Sale of Tax Debts”; the lien in favor of the CRIM that guarantees the collection of taxes on real property; the lien that guarantees the collection of contributions under Act 207-1998, known as the "Tourism Improvement Districts Act of 1998", as amended; the lien that guarantees the collection of the special tax on properties located within a commercial improvement district or a residential improvement zone, authorized by Law 81-1991, as amended, known as the “Puerto Rico Autonomous Municipalities Act of 1991 ”; and any other lien that guarantees the payment of contributions used to finance public infrastructure. After the first Transfer of any plot of land in the Creative Industries Development Districts, a voluntary assignee will be jointly and severally liable for any tax or charge pending at that time. The voluntary assignee will have the right to be reimbursed by the seller for any amount he has paid to satisfy any tax or charge pending payment up to and including the closing day of the Transfer in question. This section will not apply to properties whose ownership is of a Municipality.
(g) The Secretary of the DDEC may grant contracts for the development and operation of the Creative Industries Development Districts with any Person and may impose any condition that he considers consistent with the purposes of advancing the development, construction, expansion or operation of the Creative Industries Development Districts and advance the purposes of this Code.
(h) The Secretary of the DDEC shall have the power to certify compliance with any Transfer with the rules, requirements or obligations of this Section.
CHAPTER 10- ENTERPRISE
Section 2100.01-Young Entrepreneurs
(a) Eligibility - It is provided so that every Young Entrepreneur who signs a Special Agreement for the Creation of Companies, as defined in this Code, with the Secretary of the DDEC can enjoy the economic benefits described in this Section.
(b) Tax benefits-
(1) Income tax- New businesses as required in subsections (i) through (iii) of paragraph (1) of section (c) of this Section, operating under a Young Business agreement with the Secretary of DDEC shall be exempt from income tax in the first five hundred thousand dollars ($ 500,000) of your net income subject to tax. Any net income generated by new businesses in excess of five hundred thousand dollars ($ 500,000) will be subject to the ordinary rates established in the Internal Revenue Code of Puerto Rico.
i. Shareholders of an Exempt Business that has a Decree under the provisions of section (a) of this Section, will be subject to the income tax provided in the Puerto Rico Internal Revenue Code on the distribution of dividends or income benefits net of such Exempt Business.
(2) Tax on personal property - New businesses operating under this Section will enjoy a total exemption on the tax on personal property of the new business during the exemption period described in this Section.
(3) Municipal contributions - New businesses that operate under this Section will be exempt from paying municipal taxes during the exemption period provided in this Section.
(4) Exemption Period - New businesses will enjoy the tax exemption provided in this Chapter for a period of three (3) years from the date of commencement of operations, as established in the Tax Exemption Decree.
(5) Tax exemptions granted to Young Entrepreneurs under this Chapter shall not be granted, even if the applicant complies with the requirements, if they are subject to any law or any Chapter under this Code, that grants tax or economic incentives . If during the term of the Agreement, the Young Entrepreneur is entitled to any law that grants tax or economic incentives, including the incentives provided in this Code, it shall be understood that it waives the benefits provided in this Chapter.
(c) Requirements-
(1) New Businesses of Young Entrepreneurs who wish to receive the tax benefits provided by this Chapter must comply with the following:
(i) The business must begin its main commercial operation after signing an agreement with the Secretary of the DDEC for the Creation of Young Companies;
(ii) The business must be operated exclusively by Young Entrepreneurs;
(iii) Any business that has been operating through Affiliates or that is the result of a reorganization, as defined in the Puerto Rico Internal Revenue Code, shall not be considered a new business .
(iv) The benefits will be limited to a single new business for each Young Entrepreneur.
(v) Any other requirement that the DDEC Secretary establishes through the Incentive Regulations.
Section 2100.02- Support for Small and Medium Business Owners through the Preferred Income program
(a) Eligibility - Any natural or legal person, including corporations, partnerships, limited liability companies or any other Entity or organization that conducts, or contemplates conducting business in Puerto Rico, regardless of its place of organization, that is an SME.
(b) Economic benefit - Preferential Income Program - All SMEs, through the process set forth in the Incentive Regulations, may lease an eligible property from the DDEC, among which they could qualify those properties that are in disuse, to establish their operation and pay an annual fee of one dollar ($ 1.00) during the first three (3) years of lease. The DDEC will establish, through the Incentive Regulations, guidelines for the lease of its facilities. The lease agreement will include all the usual terms and conditions for this type of contract and will comply with all legal provisions relating to DDEC leases. The applicable income, once the three (3) year period ends, will be the prevailing fee at the time of signing the lease.
Section 2100.03- Business Incubators Program
(a) For the purposes of this Section, the term “Business Incubator” means an organization or Entity established and certified by the Secretary of the DDEC to encourage the start of new businesses or accelerate the growth of incipient companies by providing entrepreneurs with the resources and services necessary to produce viable businesses that help to comply with the public policy of the Government of Puerto Rico of job creation, and to restore the vitality of lagging areas. This definition does not include organizations or Entities for profit.
(b) The DDEC will explore ways to stimulate the expansion of business incubators in Puerto Rico by adopting the incentives contained in this Code to strengthen business self-management on the Island and seeking the necessary training for the creation of sustainable businesses that generate New jobs For these purposes, the Secretary may grant incentives to:
(1) the development of feasibility studies and plans for the creation or expansion of business incubators;
(2) the implementation of such studies and plans by supporting the creation or expansion of business incubators, together with the appropriate technical and programmatic assistance;
(3) the temporary support of business incubator operations to the extent that it determines that such support is essential for business incubators to be self-sustaining.
(c) The Secretary of the DDEC will establish through regulations the criteria and requirements to be considered in any competitive process for the selection of eligible bidders for incentives, including requirements related to:
(1) the number of jobs to be created during the first five (5) years after the date of receipt of the incentive;
(2) the funds required to create or expand a business incubator during the first five (5) years after the date of receipt of the incentive;
(3) the types of business and research entities expected to participate in the business incubator and the surrounding community;
(4) letters of business intention and research entities to establish a space in the business incubator; Y
(5) any other factor that the Director deems appropriate to advance public policy and the purposes of this Code.
(d) The funds for the benefits provided in this Section will come from the Economic Incentive Fund .
CHAPTER 11- OTHER INDUSTRIES
Section 2110.01-Exemptions to Public Porters of Air Transport Services
(a) Eligibility- It is provided so that a business established, or that will be established, in Puerto Rico by a Person who is dedicated to providing air transport services as a public carrier may request the tax benefits provided in the Secretary of the DDEC section (b) of this Section.
(b) Tax benefits-
(1) Contributions on income. -
(i) In General- The net income from those eligible activities described in section (a) of this Section will be exempt during the entire period of the corresponding Decree.
(2) Contribution on Movable and Real Property
(i) In General- Public carriers of air transport services shall be exempt from any state, local and municipal contribution, of any name or nature that it may be, on all their movable or immovable properties that they currently own or acquire hereinafter, including all taxes or fees on equipment or materials.
(A) Airplanes and related equipment, leased and owned by a public carrier dedicated to the air transport service shall be exempt from the payment of the tax on movable property, provided that it is established, to the satisfaction of the Secretary of the DDEC and the Secretary from the Treasury, that such property is used for that purpose.
(B) These exemptions do not include fuel taxes or the right that Act No. 82 of June 26, 1959 authorized the Ports Authority to impose on all aviation gasoline, any combustible product for use or consumption in the propulsion of air transportation vehicles and any mixture of gasoline with any combustible product for use or consumption in the propulsion of air transportation vehicles, intended to be consumed on air travel between Puerto Rico and other places, or on air travel within territorial boundaries of Puerto Rico.
(3) Municipal Taxes–
(i) In General- The contractors and subcontractors of public carriers engaged in air transportation will be exempt from any contribution, tax, duty, licenses, arbitration, fee or fee imposed by any municipal ordinance on the construction of works used by carriers within a municipality. Such contributions do not include the municipal patent imposed on the volume of business of the contractor or subcontractor of the public carriers, during the term authorized by the exemption.
Section 2110.02- Exemptions to Porters of Maritime Transport Services
(a) Eligibility- It is provided so that a business established or established in Puerto Rico by a Person, or combination thereof, organized or not under a common name, may request the Concession from the Secretary of the DDEC when the Entity is established in Puerto Rico to engage in one of the following eligible activities:
(1) Sea Freight Transportation between ports located in Puerto Rico and ports located in foreign countries.
(2) The rental or leasing of vessels, which are used in such transportation, or property of any other type, movable and immovable, that is used in the operation of such vessels when the transportation meets the requirements of section (c) of this section.
(b) Tax benefits–
(1) Income contributions–
(i) In General- The Net Income from those Eligible Shipping Activities described in section (a) of this Section will be exempt from income tax during the entire exemption period.
(2) Taxation on Distributions. -
(i) The distributions of dividends or benefits made by a corporation or company under the provisions of this Subchapter, which have not enjoyed or are not enjoying industrial tax exemption, and that at the date of the start of exempt shipping operations have accumulated a taxable surplus shall be deemed to be made of the undistributed balance of said surplus, but once it is exhausted by virtue of such distributions, the provisions of subsection (iii) of this paragraph (2) shall apply.
(ii) Dividend or profit distributions made by a corporation or company that has enjoyed or is enjoying an industrial tax exemption will be considered made of the accumulated surplus during the period in which it has enjoyed or is enjoying an industrial tax exemption and will be governed by provisions of the laws under which they have been governed. Once this surplus has been exhausted, the provisions of subsection (iii) of this paragraph (2) shall apply.
(iii) Except as provided in subsections (i) and (ii) of the preceding paragraphs, distributions of dividends or benefits made by a corporation or company under the benefits granted by this Chapter shall be considered as derived from profits or benefits. more recently accumulated, and will be exempt in the same proportion in which the income was exempt, for the following persons:
(A) Domestic Persons, or
(B) Foreign Persons who are not required to pay in any jurisdiction outside of Puerto Rico any tax on their income derived from any source in Puerto Rico.
(C) Foreign Persons who, due to the laws of the country where they reside, cannot take as income deduction or as credit against the tax payable in said country on dividends or benefits derived from an exempt corporation or corporation under this Code, the contribution that would be imposed on them in Puerto Rico on such dividends or benefits; or
(D) Foreign Persons who, due to the laws of the country where they reside, can only partially take as income deduction or as credit against the tax payable in said country on dividends or benefits derived from an exempt corporation or corporation under this Code, the contribution that would be imposed on them in Puerto Rico on such dividends or benefits. The exemption provided by this Section shall apply only to that portion of the income tax applicable in Puerto Rico on dividends or benefits that is not deductible from income or creditable against the contribution to be paid in said country on such dividends or benefits.
(E) A person wishing to comply with the provisions of clauses (C) and (D) above, must submit to the DDEC Secretary a copy translated, certified or authenticated into Spanish or English of the laws or regulations in force in the country where he resides, specifically indicating the provisions of those laws or regulations that are applicable to his case, with any other information or evidence that demonstrates that the person qualifies under clauses (C) and (D) above.
(3) Contributions on movable and immovable property.- Ships and property of any other kind, movable or immovable, used in connection with an eligible business shall not be subject to municipal or state contributions on movable and immovable property during the term of validity of the decree.
(4) Municipal Contributions.- Eligible businesses will not be subject to the payment of patents, taxes, and other municipal contributions imposed by any ordinance of any municipality during the term of the Decree.
(c) Requirements- In the evaluation, analysis, consideration, granting, renegotiation and review of any incentive or benefit granted in this Section, the Secretary of the DDEC will determine how such exemption is necessary and convenient for the promotion of the economy and welfare of the People of Puerto Rico because:
(1) provide greater facilities for Sea Freight Transportation between ports located in Puerto Rico and ports located in foreign countries; Y
(2) provide those specific services that the Government of Puerto Rico determines are necessary to promote the economy and welfare of the People of Puerto Rico.
Section 2110.03- Incentive for the Cruise Ship Industry of Puerto Rico
(a) The primary objectives of this incentive for the cruise ship industry are the following:
(1) reaffirm and strengthen the importance of Puerto Rico as a destination for regional and global home base cruises;
(2) increase the traffic of cruise ships to Puerto Rico;
(3) increase the stay of cruise ship passengers in hostels in all regions and municipalities of Puerto Rico, and in all the islands of its archipelago (Vieques, Culebra and others);
(4) increase visits and passenger volume on cruise ships that visit Puerto Rico;
(5) encourage consumption on the Island by passengers and crew, including the costs of acquiring provisions and the operating costs of cruise ships that visit us;
(6) generate and increase the benefits received by different economic segments of Puerto Rico directly and indirectly linked to the cruise ship industry; Y
(7) offer equitable incentives to all cruise lines and create an alliance with each of the cruise lines to maximize the promotion of Puerto Rico as a tourist destination and improve the relationship with the cruise industry in general.
(b) Fund Administration-
(1) The DDEC will establish by means of the Incentive Regulations all matters concerning the manner and manner in which the incentives set forth in this Section will be requested and granted for the purposes of ensuring a sound administration of public funds.
(2) It will be the obligation of the DDEC to ensure that the funds allocated to the Fund are used in accordance with the regulations established. Eligibility- Cruise ship companies or operators that visit any port within the jurisdiction of Puerto Rico may be eligible for these benefits. Only the owners and operators of cruise ships, Entities dedicated to the sale of travel offers established in Puerto Rico or abroad and organizations authorized by the DDEC to pick up passengers at the docks, as the case; Provided, That their agencies or agents in Puerto Rico shall have the power to manage, process and receive such benefits as part of the commercial relationship with their representatives.
(c) Benefits -
(1) Incentive to Cruise Ship Companies:
(i) For cruise ships that dock at a port in the jurisdiction of Puerto Rico, four dollars and ninety-five cents ($ 4.95) will be deducted from the fare per passenger of thirteen dollars and twenty-five cents ($ 13.25) imposed per passenger as set by the incumbent authorities or port managers in Puerto Rico. The incentive will be applied to the first one hundred and forty thousand (140,000) passengers arriving at any port in Puerto Rico on ships of the cruise company in a period of twelve (12) months of the Fiscal Year, beginning in Fiscal Year 2019-2020 . Likewise, seven dollars and forty-five cents ($ 7.45) per passenger will be deducted when the company has exceeded that figure. If the rate of a port is less than the rate of thirteen dollars and twenty-five cents ($ 13. 25) the amount of four dollars and ninety-five cents ($ 4.95) will be deducted from the fare applicable to that port. If there is any decrease in official rates set, the incentive set forth herein shall be reduced by the same proportion.
(2) Home Port Visits Frequency Incentive :
(i) The following amounts will be provided:
(A) One dollar ($ 1.00) per passenger to cruise ship companies or operators that use any port in the jurisdiction of Puerto Rico as a home port .
(B) Two dollars ($ 2.00) per passenger from the twenty-first (21) visit that the cruise ship company has during the period of a Fiscal Year. From the fifty-third (53) visit in the Fiscal Year of the cruise ship company, it will receive a contribution of three dollars ($ 3.00) per passenger.
(C) There will be an additional contribution to those described above of fifty cents ($ 0.50) per passenger to companies or cruise ship operators that use any port in the jurisdiction of Puerto Rico as a home port during the days Monday through Friday, inclusive.
(D) In addition to the incentives indicated above, any cruise ship that uses any port in the jurisdiction of Puerto Rico as a home port and, in addition, visit one or more ports in the jurisdiction of Puerto Rico in the same week, will receive fifty cents ( $ 0.50) additional to any of the incentives provided in this clause.
(E) Any cruise ship that uses any port in the jurisdiction of Puerto Rico as a home port and leaves twice in the same week from the same port will receive fifty cents ($ 0.50) in addition to the incentives provided in this clause.
(F) Any home port cruise ship leaving San Juan Port before 4:00 PM will receive an incentive of one dollar fifty cents ($ 1.50) per passenger.
(G) In no case shall the total contributions contained in this Code exceed thirteen dollars and twenty-five cents ($ 13.25). The excess balance will not be paid on that figure. If there is a reduction or increase in this rate, the maximum contribution will be adjusted proportionally.
(3) Bilateral Marketing Program for Home Port Cruises :
(i) A Bilateral Marketing Program will be created between DDEC and the eligible cruise ship company (the “Marketing Program”) with the purpose of positioning Puerto Rico as the base port of the Caribbean and encouraging demand worldwide. The amount of one dollar ($ 1.00) per passenger on cruise ships whose trips originate in any port in the jurisdiction of Puerto Rico during the period of a Fiscal Year from Fiscal Year 2019-2020, shall be provided to each Marketing Program, provided that To qualify for such an incentive, the cruise ship company must contribute to its Marketing Program a percentage of the amount of the incentive it claims, as provided by the DDEC in the Incentive Regulations, as provided in this Code.
(4) Incentive Time in Port for Ships in Transit
(i) The amount of one dollar and fifty cents ($ 1.50) per passenger will be provided on cruise ships that dock at any port in the jurisdiction of Puerto Rico on a transit visit for at least eight (8) hours and pay the applicable fare to said port during the period of a Fiscal Year. This incentive will require the cruise ship to dock before 11:00 AM. Docking after 11:00 AM, one dollar ($ 1) will be provided, as long as the cruise ship remains eight (8) hours in port.
(ii) The funds required for the incentives to be provided under this paragraph will come from the Incentive Fund, and will be administered by the DDEC.
(5) Incentive of provisions and services
(i) Each cruise ship that docks at any port in the jurisdiction of Puerto Rico will be eligible to receive an incentive equivalent to ten percent (10%) of the expense for purchases of provisions or the contracting of maintenance services or repairs of the cruise ship in Puerto Rico, excluding materials, products or equipment installed in the service offering, as specified in the regulations established by the DDEC. An additional five percent (5%) will be offered for purchases of Manufactured Products in Puerto Rico, as certified by the Puerto Rico Industrial Development Company, or agricultural products of Puerto Rico, as certified by the Department of Agriculture.
(ii) The services contemplated by this subsection exclude those berthing services required by the cruise ship in each of the ports that you visit.
(iii) The owners or operators of a cruise ship that comply with the provisions herein will receive these benefits after having evidenced, to the satisfaction of said agencies, that the purchases were made to companies where fifty percent (50%) or more of their Shareholders have domicile in Puerto Rico or manufacturing fifty percent (50%) or more of the products sold. In the case of companies dedicated to offering services, as defined by the DDEC, employees performing the duties must be domiciled in Puerto Rico. The transshipment or transfer of merchandise from ports where food or beverage boats dock directly to the cruise ships will not constitute an incentive or eligible activity for this incentive. Merchants and service providers must be certified by DDEC,
(iv) The funds for incentives to be provided under this subsection will come from the Incentive Fund.
(d) The incentives provided herein shall be satisfied by the DDEC, as the case may be, to the corresponding company, operator or agent within a term not exceeding thirty (30) days after the invoices have been submitted, according to the corresponding regulations. If there are discrepancies between the DDEC and the Puerto Rico Port Authority over any line of the invoice presented, this will not be an impediment to the payment of all other items that are not in dispute. Likewise, the DDEC will have the responsibility to notify in said thirty (30) day period any objection to a payment item detailing the reasons that support the objection to the requesting Entity.
(e) Incentives to Organizations Authorized to Offer Tourist Transportation in Docks-
(one) Every tourist excursion company authorized by the DDEC to offer excursions or tourist transportation on the docks of Puerto Rico, where it picks up or leaves passengers, will have the right to offer its services and contract directly with the cruise ship companies and may receive a basic contribution of one dollar ($ 1.00) for each cruise ship passenger who purchases an excursion on the cruise ship on which he is traveling. The excursion companies may receive a contribution of four dollars ($ 4.00) for each cruise ship passenger who purchases an excursion on the cruise ship on which they travel, as long as this excursion includes a visit to the municipalities of Vieques or Culebra. The contribution for excursions to Vieques and Culebra will be in addition to the basic contribution. The DDEC may vary the contribution per passenger,
(2) Any tourist excursion company authorized by the DDEC to offer tourist transportation in the area of the docks will be eligible to receive the benefits of this paragraph, as long as it complies with the provisions of this Section and the regulations promulgated under its protection.
(3) The Secretary of the DDEC shall have the power to establish, through regulations, the manner and manner of granting these incentives and the certification that the applicants of the DDEC must obtain as a tourist excursion company.
(f) Funding - The funds to grant the incentives to be provided under this Section will come from the Economic Incentives Fund and will be administered by the DDEC.
SUBTITLE C- STIMULUS MONEY ( "CASH GRANTS") or credits TAX
Section 3000.01- General Rules for the Granting of Tax Credits
(a) The Secretary of the DDEC is authorized to establish, through the Incentive Regulation, the processes for granting Tax Credits for particular programs and projects to maximize their economic impact, the Return on Tax Investment and their performance. These Tax Credits will be granted through an incentive contract between the DDEC and the Exempt Business.
(b) The process established by the Incentive Regulation for project selection may, without being understood as a limitation, include the following criteria:
(1) the order of receipt of complete applications that meet all the established requirements;
(2) the availability of funds and the financial commitments already made with Investors that demonstrate the financial viability of the project;
(3) the permits already obtained to start the project or the proposed activity that demonstrate the regulatory viability of the project;
(4) the level of Tax Credit requested as a percentage of the corresponding investment or expense.
(5) the return on investment of the Tax Credit, as a primary and essential criterion, as well as the company's contribution to the revenues of the Government of Puerto Rico and the multiplier effect on employment and income of the activity to be incentivized.
(6) the purchase of Manufactured Products in Puerto Rico, as defined in this Code.
(c) Tax Exemption - Any Tax Credit granted under this Chapter to an Exempt Business shall be exempt from income taxes. In addition, it will be exempt from municipal contributions, including the contribution on turnover.
Section 3000.02- Additional Rules for the Granting, Sale and Transfer of Tax Credits
(a) Tax credits granted under section (a) of this Section shall be subject to the following:
1. Tax credits will be granted to Exempt Businesses that have a Decree under this Code or under Previous Incentive Laws.
2. The tax credits may be used, with respect to the Tax Year in question, against one hundred percent (100%) of the tax liability determined for such year pursuant to Subtitle A of the Puerto Rico Internal Revenue Code, including the alternate basic tax applicable to individuals and the minimum alternative tax applicable to corporations, as well as any income tax imposed by this Code with respect to the activities that gave rise to the tax credit, or any other income tax that is established by special law or any combination thereof . In addition, tax credits may be used against the tax liability of any unpaid return, including under valid extension, even if it is one year prior to the granting of the tax credit.
3. The ownership of the tax credits will be the Exempt Business. In the case of a Condohotel, and only for tax credit purposes, provided in Section 3010.01 of this Code, the Condohotel Developer may choose between requesting the tax credit for himself or reserving the tax credit for the purchaser of a unit from Condohotel claim it.
4. Tax credits may be carried over until they are exhausted. However, the Secretary of the DDEC is authorized to limit the carry-over of such credits through the Incentive Regulations.
5. Tax credits may not be refundable.
6. Except for the tax credits provided in Section 3020.01, the tax credits or any part thereof that may be issued pursuant to this Code may be assigned, sold or otherwise transferred, without this being a taxable event, under the Puerto Rico Internal Revenue Code and the "Municipal Patent Law", for the Exempt Business that assigns, sells or transfers such credits or for the person who acquires such credits. Likewise, in the case of tax credits granted under Section 3010.01 (a) (1) and 3010.01 (a) (2) of this Code, such credits may be assigned, sold or in any way transferred only by an Exempt Business afterwards Once the construction and development of the entire Tourism Project is completed and the final amount of the tax credit for tourism investment has been determined, through a certification for such purposes issued by the Secretary of the DDEC. Any discount admitted by an assignee of tax credits granted under the Puerto Rico Internal Revenue Code and the "Municipal Patent Law".
7. The base of the assets that comprise all the investment that generates the tax credits will be reduced by the amount taken as credit for such investment, but it can never be reduced to less than zero.
(b) The Secretary of the DDEC is authorized to establish through the Incentive Regulations the processes for the granting of the tax credits authorized by section (a) of this Section, which will be subject to the same principles established in sections (a ) and (b) of Section 3000.01.
(c) The Secretary of the DDEC is authorized to regulate the provisions of section (b) of this Section, as well as to impose additional rules or limitations that he deems pertinent with respect to the tax credits authorized under section (a) of this Section by means of the Incentive Regulation.
CHAPTER 1- TAX CREDITS OF THE VISITOR'S ECONOMY
Section 3010.01- Tax Credit for Eligible Tourism Investment
(a) Tax Credit for tourism investment- Any Exempt Business under this Code or Previous Incentive Laws may request, subject to the approval of the Secretary of the DDEC, a Tax Credit for tourism investment, at the election of the Exempt Business, equal to:
(one) thirty percent (30%) of your Eligible Tourism Investment, as defined in this Code, made after the effective date of this Code.
i. The Exempt Business may take a portion of the Tax Credit of up to ten percent (10%) of its Eligible Tourism Investment in the year in which the Exempt Business obtained the necessary financing for the total construction of the Tourism Project, and
ii. The Tax Credit balance may be taken in three (3) installments: the first third of the Tax Credit balance granted in the year in which the Exempt Business receives its first guest that pays for their stay (paying guest), and the balance remaining, in the two (2) subsequent years in equal parts. The Secretary of DDEC may require a bond that guarantees the recovery of the advance of ten percent (10%) in case the Exempt Business does not carry out the proposed project.
(2) forty percent (40%) of your Eligible Tourism Investment, as defined in this Code, made after the effective date of this Code. The Exempt Business may take the Tax Credit in three (3) installments: the first third of the Tax Credit in the second year after the Exempt Business began operations , and the balance remaining in the two (2) subsequent years in parts same.
(b) Maximum amount of the Tax Credit for tourism investment. The Tax Credit for tourism investment for each Tourism Project that will be available to the Exempt Business may be up to thirty percent (30%) of the Total Cost of the Tourism Project with respect to the Tax Credits granted under section (a) (1) ) of this Section, or forty percent (40%) of the Total Cost of the Tourism Project with respect to the Tax Credits granted under section (a) (2) of this Section, as determined by the Secretary of the DDEC.
(c) Any Eligible Tourism Investment made within the Taxable Year shall qualify for the Eligible Tourism Investment Tax Credit provided in this Section.
(d) Basic adjustment and recovery
(1) The base of the Assets that comprise all Eligible Tourism Investment will be reduced by the amount claimed of the Tax Credit, but it can never be reduced to less than zero.
(2) The Exempt Business shall submit an annual report to the Secretary of the DDEC in which the total of the Eligible Tourism Investment is broken down into the Tourism Project made at the date of the annual report. The Secretary of the DDEC through the Incentive Regulations will provide the content of said annual report including the reconciliation between the Tax Credit received and the total investment made during the year.
(3) Any Exempt Business that claims a Tax Credit under the provisions of this Section You must request an accrediting certificate issued annually by the DDEC which certifies the Eligible Tourism Investment. In the case of Condohotels, the operator of the integrated leasing program must submit an annual report to the Secretary of the DDEC, in which he identifies the units participating in the integrated leasing program. The report must indicate the dates of commencement of participation in the program of the participating units, as well as the date or dates on which one or more units withdrew from the program. If any unit withdraws from the program before the expiration of the fifteen (15) year period, the Investor shall owe as income tax an amount equal to the tax credit. by Tourism Investment taken by the Investor with respect to such unit, multiplied by a fraction whose denominator will be fifteen (15), and whose numerator will be the balance of the period of fifteen (15) years required by this Code. The amount due for income tax will be paid in two (2) installments, beginning with the first Tax Year following the withdrawal date of the integrated leasing program unit. For the purposes of this paragraph, the fact that an Investor in a Condohotel ceases to comply with any requirement established in the Concession that has been granted for such purposes or is revoked for any reason, shall be deemed to cease to dedicate the units of Condohotel covered under said Concession to an integrated leasing program. In those cases in which the unit withdraws from the integrated leasing program to engage in any other Tourist Activity that is Exempt Business under this Code for not less than the time remaining from the period of fifteen (15) years under the integrated lease program , the recovery of income tax will not apply to the Investor. If this condition is not met, the subsequent purchaser of the unit will be responsible for any amount that has to be subsequently recovered for income tax. There will be no recovery for the years in which the unit was part of an integrated leasing program and other Tourism Activity that is Exempt Business under this Code.
(4) Notification of the beginning of the construction work- The Exempt Business will notify the date of commencement of the construction work subject to the Tourist Investment Tax Credit, by means of an affidavit within a term of ninety (90) days from the beginning of said work.
(5) Notification of the Beginning of Operations - The Exempt Business shall notify the date of commencement of operations, by means of an affidavit within a term of ninety (90) days from the commencement of operations.
(e) The proceeds of the sale of a Tourist Investment Tax Credit must be used in the following order; first, for the repayment of the financing provided by any financial institution or governmental entity, including, but not limited to, the Puerto Rico Tourism Company, its subsidiary, the Hotel Development Corporation and the Economic Development Bank; second, for the repayment of all other loans, if any, granted to the exempt business to defray the total cost of the project or to defray any expense or disbursement that is part of the total cost of the project; and, third, to make distributions to the Exempt Business Investor.
(f) The credit for tourism investment may be assigned, sold or in any way transferred only by an Exempt Business Investor, except in the event that they are pledged to the Government Development Bank, to any other agency of the Government of the Commonwealth of Puerto Rico, or any other lender, tourism investment credits granted to an investor for purposes of financing the eligible cost of the tourism project, the pledgee may sell, assign, or otherwise transfer such credits acquired through (i) the assignment of the credit by the Exempt Business as a Source of repayment to said financing or (ii) the execution of the pledge to a third party, if said pledge is executed.
CHAPTER 2- MANUFACTURE TAX CREDITS
Section 3020.01- Tax Credits for Manufacturing Entities
(a) Tax Credit for Purchases of Products Manufactured in Puerto Rico-
(one) If an Exempt Business under this Code or Previous Incentive Laws purchases Products Manufactured in Puerto Rico, including components and accessories, or purchases or uses products transformed into merchandise made of recycled materials, or with raw material from recycled or collected or reconditioned materials For Exempt Businesses that have been granted a Decree under paragraph (8) of section (a) of Section 2061.01 of this Code or similar provisions of Previous Incentive Laws, may claim a Tax Credit of up to twenty-five percent (25%) of purchases of such products made during the Tax Year. This Tax Credit will be granted only for purchases of products that have been manufactured by companies not related to said Exempt Business.
(2) The Secretary of the DDEC through the Incentive Regulations will provide the guidelines for the granting of this Tax Credit.
(3) Any Exempt Business that is interested in claiming a Tax Credit under the provisions of this Section must request an accrediting certificate issued annually by the DDEC, which will certify the eligible purchases for the granting of the Tax Credit.
(4) Notwithstanding the provisions of section (b) (6) of Section 3000.02, in the case of tax credits granted under this Section, they shall not be transferable, except in the case of an exempt reorganization. The amount of the tax credit not used by the Exempt Business in a taxable year may be carried forward to subsequent taxable years, until it is fully utilized. This credit will not generate a refund.
(5) In the case of an Exempt Business whose decree has been granted under Previous Incentive Laws, the credit provided in this section will not be available, and no credit will be granted under this Section for the taxable year, if said exempt business claims any special deduction or credit of a similar nature under said previous incentive law for said taxable year.
CHAPTER 3- TAX CREDIT FOR INVESTMENT IN RESEARCH AND DEVELOPMENT
Section 3030.01- Tax Credit for Science and Technology
(a) Tax Credit for Investment in Research and Development
(1) Any Exempt Business that has a Decree under this Code or Previous Incentive Laws may claim, subject to the approval of the Secretary of the DDEC, an Investment Tax Credit of up to fifty percent (50%) of the Special Eligible Investment made in Puerto Rico within the Tax Year after the approval of this Code, subject to the limits, terms and conditions established by the Secretary of the DDEC.
(2) Any Exempt Business that is interested in claiming a Tax Credit under the provisions of this section must request an accrediting certificate issued annually by the DDEC which will certify that the research and development activities carried out in Puerto Rico are eligible to request the Tax Credit provided in paragraph (1) of this section If the Secretary of the DDEC does not decide to extend the term set forth herein, evaluating case by case, taking into account the benefit of the best economic and social interests of Puerto Rico, said Certificate must be requested on or before the deadline to file the income tax return corresponding to the Taxable Year in which the Eligible Investment was carried out, as provided by the Puerto Rico Internal Revenue Code, including any extension granted by the Secretary of the Treasury for filing. The certification must include the amount of the Special Eligible Investment, which must be supported by the presentation of Agreed Procedures (Agreed Upon Procedures) made by an Authorized Public Accountant with a valid license in Puerto Rico, and the amount of the Tax Credit granted for each Tax Year Said certification must be included with the return as a requirement to grant the claimed credit.
(3) For the purpose of the Tax Credit provided in this Section, the term “Special Eligible Investment” is defined in Section 1020.01 of this Code.
(4) Grant of the Tax Credit - The Tax Credit that is granted may be taken in two (2) or more terms: fifty percent (50%) Tax Credit may be taken in the Tax Year in which the Eligible Investment is made Special and balance in subsequent years until sold out.
(5) An amount equivalent to the Tax Credits received by the Exempt Business for a research and development activity shall be reinvested by the Exempt Business in research and development activities in Puerto Rico.
(6) Adjustment to the base- The base of any asset for which the Tax Credit set forth in this section is claimed will be reduced by the amount of the Tax Credit claimed.
(7) The Exempt Business may not apply for this Tax Credit in relation to the portion of the Special Eligible Investment on which it takes or has taken the deduction established in section (b) of Sections 2062.02 and 2072.02 of this Code or special deduction analogous under Previous Incentive Laws. This Tax Credit will not generate a refund.
(8) In the case of an Exempt Business whose Decree has been granted under one of the Previous Incentive Laws, the Tax Credit provided under this section will not be available, and no Tax Credit will be granted under this section for the Tax Year, If the Exempt Business claims any special deduction or credit under any of the Previous Incentive Laws for such Tax Year.
CHAPTER 4-
Section 3040.01- Reserved.
CHAPTER 5- TAX CREDIT FOR CREATIVE INDUSTRIES
Section 3050.01- Tax Credit for Creative Industries
(a) Concession of the Tax Credit - Under this Section, the Concessionaires dedicated to Film Projects may request a Tax Credit, regarding Production Expenses of Puerto Rico
(b) Subject to the limitations, terms and conditions described in this Section, the Tax Credit will be available to the Concessionaires at the beginning of the activities covered by the Decree in the case of Film Projects, as certified by the Secretary of the DDEC. Once the requirements of this Section are met, the Secretary of the DDEC will authorize the amount of the approved Tax Credit.
(c) Amount of the Tax Credit -
(1) In the case of Film Projects, the Tax Credit available in this Section will be:
(i) Up to forty percent (40%) of the amounts certified by the Auditor as disbursed in relation to Production Expenses in Puerto Rico, not including payments made to Foreign Persons; Y
(ii) Up to twenty percent (20%) of the amounts certified by the Auditor as disbursed in relation to Puerto Rico Production Expenses that consist of payments to Foreign Persons.
(iii) Up to fifteen percent (15%) of the amounts certified by the Auditor as disbursed in relation to Production Expenses in Puerto Rico, not including payments made to a Foreign Person, in feature films, or episode series , or documentaries in which a Domestic Producer is in charge of the Film Project and the director, the cinematographer, the editor, the production designer, the post-production supervisor, or the line producer are Domestic Persons, up to a maximum of four million ($ 4,000,000) of tax credit per Film Project under this line.
(2) In the case of a Film Project, the approved Tax Credit may be used in two (2) or more terms. Fifty percent (50%) of the Tax Credit may be used in the Tax Year during which the activities covered by the Decree begin, subject to the delivery of an acceptable Deposit to the Secretary of the DDEC or to the Certification of the Auditor as provided in section (d) of this Section, and the balance of said Tax Credit in subsequent years.
(3) The Tax Credits granted in this section (c) for payments to Domestic Persons may never exceed fifty-five percent (55%) of the total Production Expenses in Puerto Rico, not including payments made to a Person Foreign.
(d) Deposit or Certification of the Auditor and Tax Credit available- In the case of Film Projects, up to fifty percent (50%) of the Tax Credit as described in section (a) of this Section, will be available in the Tax Year When the Concessionaire delivers an acceptable Deposit to the Secretary of the DDEC or the Auditor certifies to the Secretary of the DDEC that fifty percent (50%) or more of the Puerto Rico Production Expenses have been disbursed, the Exempt Business has begun operations covered by the Decree, and the Secretary of the DDEC determines that the other applicable provisions of this Code have been complied with.
(e) The remaining fifty percent (50%) of the approved Tax Credit will be available in the Tax Year in which the Auditor certifies to the Secretary of DDEC that all Puerto Rico Production Expenses have been paid.
(f) The Tax Credit Certification described in section (d) of this Section must be provided within thirty (30) days after receiving the Auditor's Certification. The thirty (30) day period will be interrupted if the Secretary of the DDEC requests additional information. However, when the thirty (30) day period is interrupted and the requested information is supplanted, the Secretary of the DDEC will only have the remaining days of the thirty (30) day period, from the date the Auditor Certification is received , to issue the Tax Credit Certification; as long as the Secretary of the DDEC has at his disposal all the necessary documents for the evaluation of the case.
(g) Tax Exemption - Any Tax Credit under this Section granted to an Exempt Business shall be exempt from income taxes as provided in the Puerto Rico Internal Revenue Code. In addition, it will be exempt from municipal contributions, including the contribution on turnover (Patent).
(h) The Tax Credits may be granted on a multi-annual basis to a Concessionaire through competitive calls and as established by the Secretary of the DDEC through the Incentive Regulations.
(i) Every Concessionaire shall pay the Secretary of the DDEC, through the purchase of a voucher at an internal revenue group of the Department of the Treasury, rights equivalent to one percent (1%) of the Puerto Rico Production Expenses that qualify for such Tax Credit, as established by the Secretary of the DDEC through the Incentive Regulations, up to a limit of two hundred and fifty thousand dollars ($ 250,000). Such income will be deposited in the Economic Incentive Fund that is created under this Code. The Secretary of the DDEC may use such funds to encourage the development of the film industry as determined or to pay for any expenses incurred in the promotion or administration of the Film Industry Development Program.
(j) Filmic Projects may not apply for Tax Credits or additional tax credits once a Tax Credit or tax credit has been granted, which will be subject to the maximum amount established in the Decree.
SUBTITLE D-SUBSIDIES AND OTHER PROGRAMS
CHAPTER 1- SALARY SUBSIDY PROGRAM FOR AGRICULTURAL WORKERS
Section 4010.01- Establishment of the Wage Subsidy Program for Agricultural Workers
(a) Salary Subsidy-
(1) Subject to the restrictions imposed by paragraph (2) of section (b) of this Section, a wage guarantee is established for eligible Agricultural Workers, through a subsidy, of not less than five dollars and twenty-five cents ($ 5.25) from the 1st. July 2010, Fiscal Year 2010-2011.
(2) The salary subsidy established here will not alter any salary that already exists or is agreed in the future for the different job classifications in the agricultural industry. Any increase in salary achieved by Agricultural Workers through collective agreement or employment contract from the 1st. From July 1989, the worker will receive it on the salary guarantee level, via the subsidy established here, without affecting the farmer's right to reimbursement for the salary subsidy. The payment of salary allowance for work carried out during overtime will not proceed, as defined in Law No. 379 of May 15, 1948, as amended, known as the “Law to Establish the Working Day in Puerto Rico”.
(b) Payment method-
(1) The employers of the Agricultural Workers will pay their guaranteed wages, by way of subsidy, in this Section, or those fixed directly by contractual obligations, legislation, decrees, whichever is higher. The Government of Puerto Rico, through the Department of Agriculture, shall establish through regulations the salary allowance to be remitted to employers of Agricultural Workers who comply with the provisions of this Section.
(2) The Secretary of the DDEC, in consultation with the Secretary of Agriculture, will determine through criteria of Incentives, or through special regulations that may be delegated to the Secretary of Agriculture, the criteria that will govern the determination of Agricultural Workers who will be eligible for receive the benefits of this Section. Among these criteria, the Secretary of Agriculture may consider the number of hours that workers must work weekly in relation to seasonal and non-seasonal crops and agricultural activities, wage subsidies to be paid, taking into account the different human labor needs required to produce each kind of crop based on the grade of mechanization achieved by each company and each group of entrepreneur, the wages paid in Puerto Rico in each kind of agricultural activity, and any other factor that, in the opinion of the Secretary, must be taken into consideration. The Secretary of Agriculture will fix the salary subsidy, using as a base the Production Unit or area of sown land, or those other bases determined by regulation taking into consideration the nature of the agricultural company involved and its marketing systems, but it may not be less than the amount two dollars and seventy-two cents ($ 2.72) from the 1st. July 2010, Fiscal Year 2010-2011, per certified hour worked.
(3) The Employers of the Agricultural Workers will be obliged to render to the Secretary of Agriculture, or the official to whom he delegates, within the term established by regulation, those reports that are requested to compute the data on which they will be based the wage subsidies that the Government of Puerto Rico undertakes to pay to compensate the employers of the Agricultural Workers of the additional expense incurred to comply with the provisions of this Section.
(4) Payments of salary subsidy to farmers will be made Secretary of Agriculture has received the reports referred to in paragraph (3) of this section.
(5) The funds for the salary allowance will come from the item that is allocated annually as part of the General Fund budget.
(c) Violations - Any natural or legal person that violates the provisions of this Section or its regulations, related to the payment of the salary subsidy, must reimburse the amount of money received in excess of the amount that corresponded to it through regulations.
(d) Regulation- The Secretary of the DDEC is empowered together with the Secretary of Agriculture to adopt the rules and regulations necessary to implement the provisions of this Section.
(e) The funds for the operation of the program established in this Section shall come from the Economic Incentive Fund.
Section 4010.02- Annual Farm Workers Bonus
(a) The payment of an annual bonus to Agricultural Workers by the Department of Agriculture is provided, in accordance with the amount that is annually designated for it in the General Fund budget, for an amount not less than one hundred sixty-five ( 165) dollars or four percent (4%) of the annual income of the Agricultural Worker, whichever of the two amounts is greater, up to a maximum of two hundred thirty-five (235) dollars.
(b) This bonus will be paid annually to those Agricultural Workers who work in Puerto Rico not less than two hundred (200) hours in agricultural work carried out in Puerto Rico, within the period of twelve (12) months from July 1 of each year until June 30 of the following year.
(c) Each year, not later than August 31, employers of Agricultural Workers shall submit to the Department of Agriculture those reports required by the Secretary of Agriculture through regulations to establish the eligibility of Agricultural Workers, as well as to compute the bonus amount provided by this Section.
(d) In the cases in which it considers it necessary, the Secretary shall provide a form in which the employers of the Agricultural Workers shall indicate the name of each worker, the Social Security number, the total hours worked and the income earned by his work within each specified period, as well as any other information that the Secretary of Agriculture determines pertinent for such purposes.
(e) Neither the Government of Puerto Rico nor the Department of Agriculture shall be responsible for paying the claims of the Agricultural Workers due to the non-compliance by the employers of the Agricultural Workers of any of the provisions of this Section or for information that has been discontinued
(f) When it turns out that the claimant is eligible for payment of the bond provided by this Section and that he ceased to receive it for breach of his employer, the Agricultural Worker shall have the right to claim from said employer or employers twice the amount left to receive and , in case the employer refuses, he may request judicially the corresponding remedy.
(g) The funds for the operation of the program established in this Section shall come from the Economic Incentive Fund.
SUBTITLE E- FUNDS FOR GRANTING BENEFITS
CHAPTER 1- ECONOMIC DEVELOPMENT FUNDS
Section 5010.01- Economic Incentive Fund
(a) For the purposes of executing the economic development purposes of this Code, the Economic Incentives Fund is created . The Secretary of the Treasury shall establish an account in his custody and segregate the funds provided in this Section.
(b) In the account called the Economic Incentive Fund, you will enter ten percent (10%) of both the proceeds from the income tax paid by all Exempt Businesses with a Decree under this Code or previous incentive laws, such as of the collections for the payment of taxes withheld for royalties related to the operations exempted under this Code or Previous Incentive Laws and any other assignment for these purposes.
(c) The Secretary of the DDEC shall administer the monies of the Economic Incentives Fund and shall have the necessary and sufficient discretion for the use of the monies provided that such use leads to the achievement of the purposes set forth in this Code.
(d) The economic benefits provided by this Code through this Section and Sections 2014.01 2022.06, 2034.01, 2084.01, 2025.01, 2025.02, 2100.02, 2100.03, 2110.03, 4010.01, 4010.02, 5010.02, 5010.03 will be borne by the Economic Incentives Fund.
(e) The amount entering the Fund from New Business Economic Incentives will be allocated annually to the entity called Invest Puerto Rico Inc . in accordance with the provisions of Law 13-2017, as amended.
(f) The Secretary of the DDEC will establish through regulations the criteria that will be used for the granting and disbursement of the remainder of the funds of the Economic Incentives Fund, a model for the calculation of the estimated Return on Investment of the incentive program, and the circumstances and requirements that an applicant must meet to benefit from each of the incentives provided by the DDEC. Any allocation and disbursement of monies from the Economic Incentives Fund must be approved by the Secretary of the DDEC and established through an incentive contract that must be registered with the Office of the Comptroller of Puerto Rico.
(g) Annually, the Secretary of the DDEC will include the detail of the benefits granted under the Economic Incentives Fund in the Incentives Report.
(h) The Secretary of the Treasury shall establish the processes and reserves necessary to accumulate and disburse the collections that correspond to the Economic Incentives Fund established herein.
(i) The Economic Incentive Fund created by this Section will be the successor for all legal purposes of the following Special Funds:
(1) the Special Fund for Economic Development created by Law 73-2008, as amended;
(2) the Special Fund for the Development of Export Services and Promotion created by Law 20-2012, as amended;
(3) the Special Fund for the Development of the Film Industry created by Law 171-2014, as amended;
(4) the Special Fund under the "Law of Economic Incentives for the Film Film Industry of Puerto Rico" for the Training of the Local Film Industry created by Law 27-2011, as amended;
(5) the Puerto Rico Green Energy Fund created by Law 83-2010;
(6) Industrial Incentive Program Funds in accordance with the provisions of Article 21 of Act No. 188 of May 11, 1942, as amended and Act 203-1997, as amended;
(7) the funds transferred to the Industrial Development Company for the Puerto Rico Rums Program established by Law 108-2014;
(8) the Fund for the Promotion of Employment and Economic Activity established by Law 73-2014, as amended;
(9) the Entrepreneurship Fund established by Law 73-2014, as amended;
(10) the Tourism Company Fund for Cruise Ship Industry Incentives created by Law 113-2011, as amended.
(j) As of the validity of this Code, the funds available or owed by the Department of the Treasury to any of the funds mentioned in the preceding paragraph, will directly enter the Economic Incentives Fund.
(k) The Secretary of the DDEC is authorized to use up to seven percent (7%) of the appropriation provided for each fiscal year to cover the administrative expenses incurred in the execution of the provisions of this Section and any expenses directly related to the Code implementation.
Section 5010.02- Incentive for the Development of the Film Industry of Puerto Rico
(a) The main objectives of this incentive will be to develop the Puerto Rico Film Industry, providing tools to finance, encourage, develop and stimulate the production of Puerto Rican films for movie theaters and with additional distribution via television, internet, alternate window platforms or digital media, in accordance with the conditions established by regulation by the Secretary of DDEC, and with the objective of increasing the production of Puerto Rican Cinema and its public at local, national and international levels.
(b) The funds required to grant the incentives provided in this Section shall come from the Economic Incentive Fund and shall be administered by the Secretary of the DDEC.
(c) Fund Administration-
(1) The DDEC shall establish, through regulations to that effect, all that concerns the manner and manner in which the incentives provided in this Section will be requested and granted for the purposes of ensuring a sound administration of public funds.
(2) It will be the obligation of the DDEC to ensure that the funds allocated to the Economic Incentives Fund are used in accordance with the regulations established by it.
(d) Eligibility-
(1) Only the Film Projects for which eighty percent (80%) of the Production Expenses are to Puerto Rico Residents will be eligible for the benefits of the Economic Incentive Fund.
(2) Only feature projects that qualify to receive Tax Credits in accordance with the provisions of Subtitle C of this Code will be eligible for the benefits of the Economic Incentive Fund.
(e) Benefits-
(1) The benefits granted under this Section shall be structured as capital investments in a Film Project and may not exceed twenty-five percent (25%) of the total cost of a Film Project or one hundred and twenty-five thousand dollars ($ 125,000.00), whatever less. This investment is considered reimbursable, so it will be associated with a percentage, established by regulation, of all the income of the Film Project which will be directed towards the Incentive Fund.
(2) Receiving benefits under this Section shall not limit that the Film Project obtains the Tax Credit or other benefits provided by this Code for investments incurred through private capital or public or governmental funds of other jurisdictions to be invested in the production in Puerto Rico of the Film Project
Section 5010.03- Incentives for Creative Industries
(a) The objective of the Incentives for Creative Industries set forth in this Section will be to foster the ideal conditions to turn Puerto Rico into a world-class center where artists and producers who are part of the Creative Industries, as said term is defined in Section 1020.09 of this Code, or the eSports and Fantasy Leagues industries including local artists and producers, as well as those who want to settle in Puerto Rico, have the opportunity to develop, present and expand their work and talent. Any Person dedicated to exposing and / or producing musical events will be eligible to request the incentive provided in this Section, provided that as for the other Creative Industries, those Persons who operate within the Creative Industry Development Districts that are designated in accordance with Section 2094.01 of this Code. Persons who receive the incentives provided in Sections 3050.01 and / or 5010.02 of this Code shall not be eligible for the incentives of this Section.
(b) The funds required to grant the Incentives for Creative Industries provided in this Section shall come from the Economic Incentives Fund and shall be administered by the Secretary of the DDEC.
(c) Fund Administration-
(1) The DDEC shall establish, through regulations to that effect, all that concerns the manner and manner in which the incentives provided in this Section will be requested and granted for the purposes of ensuring a sound administration of public funds.
(2) It will be the obligation of the DDEC to ensure that the funds allocated to the Economic Incentives Fund are used in accordance with the regulations established by it.
SUBTITLE F- ADMINISTRATIVE PROVISIONS
CHAPTER 1- GENERAL ADMINISTRATIVE PROVISIONS
SUBCAPTER A- OFFICE OF BUSINESS INCENTIVES IN PUERTO RICO
Section 6011.01- Creation
The Office of Incentives for Businesses in Puerto Rico (Office of Incentives) is created, attached to the DDEC, which will be in charge of processing, evaluating, processing and supervising the requests for granting incentives, the decrees granted and the requests for amendments to the same, among other matters related to the granting of incentives under this Code.
Section 6011.02- Incentive Office Director
(a) The Secretary of the DDEC shall appoint the Director of the Incentives Office, who will direct and administer this Office. The Director of the Incentives Office will exercise the powers inherent in his office, and will comply with the duties and obligations imposed by this Code.
(b) The Secretary of the DDEC may delegate to the Director of Incentives any of the powers conferred on him in this Code, or with regard to matters covered by this Code, except the signing of Decrees and the granting of Loans Taxpayers
Section 6011.03- Incentive Grant Applications
(a) The Secretary of the DDEC will be responsible for processing the applications for granting incentives under the procedure established in this Code.
(b) The Incentives Office is ordered to create and administer the Portal , and use it to:
(1) Facilitate the filing and electronic and live transmission of incentive grant applications and related documents, so as to expedite the evaluation of applications and processes in general;
(2) Maintain a public database. The information provided by the applicant, as well as formal comments provided by government entities, will be available in the Incentive Office database from its filing so that both the applicant and government entities can access the information exchanged to through the system. The specific content of the database will be established by the Secretary of the DDEC through the Incentive Regulations;
(3) Allow the creation of a profile for each applicant Eligible Business or Concessionaire that includes all the information necessary to process the application or renewal, a history of previous applications, the type of incentive requested, and any other information that the Secretary regulates of the DDEC determine corresponding;
(4) Contain an automated and interactive guidance tool for the general public with information on the application process, the information necessary to evaluate it, the types of incentives available, and any other information that the Secretary of the DDEC deems appropriate by regulation;
(5) Facilitate the exchange of information between the Office of Incentives and other agencies of the Government of Puerto Rico; Y
(6) Provide data for the periodic review of the performance indicators of each Concessionaire, incentive and industry.
(c) The Secretary of the DDEC may require incentive applicants to submit any additional documentation they deem necessary to evaluate and justify the granting of incentives requested.
Section 6011.04- Concessionaires Investigation
(a) The Secretary of the DDEC may carry out any investigation that he deems necessary in relation to the operations of a Concessionaire to evaluate and ensure that the activities that a Concessionaire carries out comply with the terms of the Concession. Every Concessionaire must submit any report and submit any other information requested by the Secretary of the DDEC, from time to time, in relation to any Concession.
(b) The Secretary of the DDEC may examine any books, papers, records or memoranda pertinent to the purpose of the Concession, and shall have the power to cite witnesses and take their statements regarding the alleged facts, or in any other way related to the requested Concession , take an oath to any person who testifies before him, and submit a report regarding the evidence presented, along with his recommendations on the case.
Section 6011.05- Administrative Review
(a) The Secretary of the DDEC may hold public or administrative hearings to comply with the duties and obligations imposed by this Code, such as:
(1) The process of reviewing, suspending or revoking a Concession as provided later in this Code; Y
(2) The review of fines established pursuant to this Code and Previous Incentive Laws.
Section 6011.06- Transfer of functions and powers
(a) In accordance with the purposes of this Code, the Industrial Tax Exemption Office described in Act 73-2008, as amended, and previous laws, will transfer its powers, functions, assets and resources to the Incentive Office created under this Code. Both the Secretary of the DDEC and the staff of the former Office of Industrial Tax Exemption, must exercise powers and perform the duties and fulfill the obligations imposed by this Code to the Office of Incentives.
(b) Except in the case of the Department of the Treasury that will continue the process of endorsing the Decrees, all agencies, instrumentalities or government entities that previously administered the process of granting incentives under the different incentive laws, will transfer to the Secretary of the DDEC and to the Office of Incentives, as applicable, the matters set forth in this Code as of the effective date thereof, including everything related to:
(1) The process of application, evaluation, approval, issuance, denial, administration and revocation of incentive concessions for all Eligible Businesses covered by this Code;
(2) The approval and final granting of benefits from the Economic Incentives Fund; Y
(3) The Secretary of the DDEC may carry out any function assigned by virtue of this Code, or if not expressly assigned, is deemed convenient and necessary to administer and fulfill the purposes of this Code.
(c) Any regulations governing the operation of the Office of Industrial Tax Exemption or any regulations related to the granting of the incentives established in this Code that are in force on the date on which the transfer authorized here is effective and that is not contrary to The purposes of this Code will continue in effect until the Incentive Regulation is adopted.
Section 6011.07- Procedures
(a) Applications before the Incentives Office-
(1) Any person who has established, or proposes to establish an Eligible Business in Puerto Rico, as said term is defined in this Code, may request the benefits of this Code, by filing an application with the Incentives Office, using the Portal, in accordance with the provisions of Chapter 2 of Subtitle F of this Code.
(2) All official communication regarding an application to the Incentives Office will be made by accessing the account of the applicant on the Portal.
(3) Any Concession issued in accordance with the provisions of this Code shall be subject to faithful compliance with the provisions of this Code, and the applicable regulations, circular letters or determinations. The Incentives Office reserves the right to evaluate, after a Concession has been issued, the operations of the Concessionaire to confirm the information provided by the Concessionaire and impose fines or penalties in case of non-compliance, as well as the suspension, revocation or nullity of the Concession, as appropriate toSecretary of DDEC
(b) Evaluation of Applications and Determination of Incentive Concession-
(1) The procedure for the evaluation and approval of an application before the Incentives Office shall be in accordance with the provisions of Chapter 2 of Subtitle F of this Code.
Section 6011.08- Annual Incentive Report
(a) Annually, but not later than September 30 of each year, the DDEC will publish a report of all incentives requested and granted under this Code or under other Prior Incentive Laws known as the “Incentive Report”. At a minimum, the report must contain the following information:
(1) Name of Exempt Business and its main shareholders.
(2) Date on which the Decree was requested and granted.
(2) Preferential rates granted and the Chapter of this Code or the Previous Incentive Law under which the Decree was requested and granted.
(4) Name of the Municipality where the Exempt Business will operate and the municipal exemptions granted.
(5) The total number of jobs generated or retained in Puerto Rico by Exempt Businesses compared to the jobs that said businesses committed to maintaining.
(6) The total amount of investment in property, plant and equipment made in Puerto Rico by the Exempt Businesses compared to the investment that said businesses committed to investing.
(7) The value of imports, local purchases and exports carried out by the Exempt Business.
(8) An estimate of the Return on Investment of each incentive program included in this Code based on a formula that incorporates the following factors:
(i) The various sources of tax revenue generated by the activity;
(ii) All tax and economic benefits granted;
(iii) The direct, indirect and induced effects based on the official multiplier factors provided or endorsed by the Planning Board; Y
(iv) Local purchases, including purchase of Manufactured Products in Puerto Rico;
(v) An analysis of the benefits attributable to incremental and non-redundant economic activity to sustainable economic activity due to aggregate local demand.
(9) The Secretary of the DDEC shall make the report, or a substantial summary of said report, public and explain in detail the conclusions and recommendations contained therein.
(b) The Secretary of the DDEC shall submit a report to the Legislature on the thirty-first (31) of January and the thirty-first (31) of July of each year with the information contained in section (a) of this Section and with a detail of the tax credits granted under each Chapter of this Code.
CHAPTER 2-ADMINISTRATIVE PROVISIONS APPLICABLE TO SUBTITLE B
Section 6020.01 - Incentive Grant Application
(a) The request for granting incentives must include, but should not be limited to, a detailed description of the services or products of the requesting Eligible Business, the incentive granted, the compliance requirements, the expected benefit and the legal basis for the incentive granted. The language of the incentive grant application must be simple and uniform.
(b) Presentation-
(1) The application for granting incentives shall be submitted using the Portal established for these purposes by the Incentives Office in accordance with the provisions of Section 6011.01 of this Code.
(2) The Secretary of the DDEC shall establish, through regulations, administrative orders or any other communication of a similar nature, the information and documentation required by said request.
(3) At the time of the presentation, the Secretary of the DDEC will charge the fees for the corresponding procedure, which will be paid by electronic transfer in the Portal established for this by the Incentives Office. The Secretary of the DDEC will establish through regulations, the fees to be charged for the process. Provided that said regulation shall be reviewed every three (3) years after its approval.
(c) Evaluation of Applications-
(1) Within a period of five (5) days from the presentation of the request for the granting of incentives, the Incentive Director shall preliminary review said request in order to determine if it meets the initial requirements, identify the type of incentive applicable, and distinguish between an application under the ordinary or extraordinary procedure.
(2) If in the request for the grant of incentives submitted any information or element necessary for consideration is missing, the applicant shall be notified of such omission, not later than ten (10) days after the request has been received, and shall be granted a term of ten (10) days for the applicant to submit the information. If the Incentive Office does not receive the information requested in the notification of omission within the term established in this paragraph, the case file may be filed.
(d) Ordinary Procedure-
(1) The ordinary procedure refers to the one whose applications for granting incentives are submitted, evaluated and granted using standardized formats. The applications for granting incentives under the ordinary procedure shall not contain minimum levels of investment, employment or other conditions beyond those established in the Code or those established by the Secretary of the DDEC through regulations and uniform applicability to all Concessionaires.
(2) That request for the granting of incentives that qualify for the ordinary procedure will be dealt with internally in the Incentives Office, and will not require the consultation or endorsement of other agencies of the Government of Puerto Rico. The Incentives Office shall evaluate the request and issue a recommendation to the Secretary of the DDEC within a term not exceeding thirty (30) days. However, the Secretary of the DDEC, prior to making a final determination, will request the endorsement of the Secretary of the Treasury and, at its sole discretion and when deemed necessary. You may also consult with other agencies of the Government of Puerto Rico and its municipalities. In these cases, the procedure established in section (e) of this Section will be followed.
(3) The Secretary of the DDEC, in consultation with the Secretary of the Treasury, will establish in the Incentive Regulations the criteria to qualify for the ordinary procedure.
(e) Extraordinary Procedure-
(1) An extraordinary procedure is one that requires a particular language not contemplated in the predesigned forms and that entails a negotiation process between the parties and the evaluation, consultation or recommendation of any other agency of the Government of Puerto Rico for approval.
(2) The Decrees granted through the extraordinary procedure may contain minimum levels of investment, employment or other conditions that are not of general applicability to all Concessionaires.
(3) Under the extraordinary procedure, those agencies of the Government of Puerto Rico or municipalities will be identified as having an inherent incentive application and a recommendation on the legal and economic viability of the same will be requested. In these cases, the procedure established in section (g) of this Section will be followed.
(f) Expedited Procedure -
(1) An Expedited Procedure is provided for any Person who submits an application for granting incentives under this Section, that qualifies for the ordinary procedure and that includes with it a pre-eligibility report prepared by a Certified Professional, as defined in subsection (3) of this section.
(2) An applicant who complies with the requirements established in the Expedited Procedure will receive his Decree within a period not exceeding thirty (30) days, counted from the date on which the incentive grant application process was completed and the payment of the rights for the corresponding procedure has been issued, as determined by the Secretary of the DDEC through the Incentive Regulation.
(3) Certified Professional - For the purposes of this section, a Certified Professional is considered to be a lawyer admitted to the practice of law by the Supreme Court of Puerto Rico or an authorized public accountant who has a current license to practice his profession, that, by means of pay or remuneration, prepare a certificate of pre-eligibility, an application for granting incentives or compliance reports related to the granting of decrees authorized by the Secretary of the DDEC and that is registered in the Registry of Certified Professionals maintained by the DDEC.
(i) A natural or legal person who:
(A) be an employee of the DDEC;
(B) was an employee of the DDEC, except after two (2) years of separation from its service, and in cases where the Government Ethics Office grants a waiver for such purposes;
(C) is an employee of an Applicant or Concessionaire, including its officers or directors; or
(D) is or has been the Qualified Promoter of the same Concessionaire.
(4) Registration in the Registry will be valid as long as it is not withdrawn, suspended or revoked.
(5) The Secretary of the DDEC shall prepare the procedures and adopt the necessary rules for compliance with the provisions of this section, which shall be part of the Incentive Regulations or other regulations to be promulgated by the Secretary of the DDEC.
(g) Interagency Consideration of Applications-
(1) Under the extraordinary procedure, the Secretary of the DDEC will send a notification to the Secretary of the Treasury and, when he deems appropriate, to any other Agency or corresponding governmental entity, including the CRIM and the municipalities where the requesting business will operate. Said notification shall be sent within a period of five (5) working days, counted from the date on which the incentive grant application process was completed.
(2) Each notified agency, as well as the municipalities and the CRIM, will have a term of twenty (20) working days to submit their comments, counted from the date they receive the incentive grant application. Comments should be submitted to the Secretary of the DDEC through the Portal.
(3) After twenty (20) working days indicated in paragraph (2) of this section, the Incentives Office must complete the evaluation of the incentive grant application and issue the recommendation to the Secretary of the DDEC in a term not exceeding of ten (10) working days.
(4) The notification established in subsection (1) of this section must be sent electronically using the Portal created for these purposes. All communication regarding the request for granting incentives will be made by accessing the account of the applicant on the Portal established for these purposes by the Incentive Office.
(5) In the case of amendments to concessions approved under this Code, the period for the agencies and municipalities concerned to submit their comments to the Secretary of the DDEC shall be ten (10) working days.
(h) Incentive Concession Determination-
(1) Once the Director of Incentives notifies him of his final recommendation on the request for granting incentives, the Secretary of the DDEC shall issue his final determination.
(2) The Secretary of the DDEC may rely on the comments of those agencies or municipalities that are consulted and may request additional information from them to supplement that included at the time of issuing his recommendation. Any approval or denial of the request for granting incentives will be at the discretion of the Secretary of the DDEC, subject to the endorsement of the Department of the Treasury.
(3) Once the Secretary of the DDEC issues his determination on the granting of incentive, he will publish it in the account of the applicant on the Portal.
(4) For purposes of its final determination, the Secretary of DDEC may request additional information from the applicant or request a meeting.
(5) In case of approval, the Secretary of the DDEC will issue an electronic notification to the applicant with the Decree, which must be accepted by the applicant under oath to enter into force.
(6) In case of denial, the Secretary of the DDEC will issue an electronic notification to the applicant, with a brief explanation of the reasons for their denial and warning of the rights and processes allowed under this Code for a reconsideration request.
(7) The applicant, after being electronically notified of the denial, may request a reconsideration from the Secretary of the DDEC within twenty (20) working days after receipt of the notification, citing the facts and arguments that he understands to do, including Any consideration for the benefit of Puerto Rico that it deems merits your request for reconsideration.
(8) If the request for reconsideration is accepted, the Secretary of the DDEC shall notify the petitioner within twenty (20) working days of receiving the request for reconsideration, provided that said term has elapsed without the DDEC Secretary issuing a reply. upon request, it will be understood that the reconsideration was denied, for which a written notification must be issued for this purpose. Once a request for reconsideration has been received, the Secretary of the DDEC will evaluate it and may accept any consideration offered for the benefit of Puerto Rico and require and dispose of any other term or condition that is necessary to ensure that incentive grants are in the best interests. of Puerto Rico and economic development purposes.
(9) In cases where the reconsideration by the Secretary of the DDEC entails changes to the Decree, such changes will be notified to the consulted government entities.
(i) Compliance with the Terms of the Decrees-
(1) The Secretary of the DDEC may include in the Decrees those clauses, terms and conditions that he deems necessary to address the lack of compliance with the terms and conditions of the Decrees, including the revocation of the Decrees, reduce exemptions, and increase the fixed rate of contribution on income tax. The Incentive Regulation will provide the mechanisms to ensure compliance with the terms and conditions of the Decrees as well as the penalties to be imposed in case of non-compliance.
(2) The Secretary of the DDEC will take into consideration the fulfillment of a Concessionaire with the terms and conditions established in a Decree at the time of renegotiating or approving an amendment to the Decree. If the Concessionaire is not in compliance with the terms and conditions of the Decree, the applicable clauses contained in the Decree that address the breach situation will be executed. If there are no clauses in the Decree to address the situation of non-compliance, the Secretary of the DDEC will apply what is provided through the Incentive Regulations.
(j) All decisions and determinations of the Secretary of the DDEC under this Code, regarding the approval of the request for the granting of incentives and their content, will be final and against them there will be no judicial or administrative review or other appeal. Once a Concession has been granted, no agency, public instrumentality, political subdivision, public corporation, or municipality of the Government of Puerto Rico may challenge the legality of said Concession or any of its provisions.
Section 6020.02- Effective Date of the Incentive Concession
(a) For the purposes of this Code, and except as otherwise provided in Subtitle B of this Code:
(1) The effective date of the Decree will be the date of commencement of operations, after the Decree has been granted;
(2) In the case of existing or new Exempt Businesses, the date of commencement of operations may be the date of submission of the incentive grant application or a later date as determined by the Secretary of the DDEC; Y
(3) The date of commencement of operations may be extended for a term not exceeding five (5) years from the date of filing of the incentive grant application.
Section 6020.03- Exemption, Renegotiation and Extension of Decree Period
(a) Exemption Period - Any Exempt Business that has a Decree under this Code, will enjoy the benefits for a period of fifteen (15) years provided that during this term it meets the requirements and conditions established in the Decree, unless otherwise provided in this Code.
(b) Renegotiation - Any Exempt Business under this Code, or under Previous Incentive Laws, may request to renegotiate its Decree for the enjoyment of the benefits granted under this Code. The Incentive Regulations shall provide the requirements and the procedure to be followed for the renegotiation of a Decree under this Code.
(c) Extension - Any Exempt Business under this Code, or under the previous Incentive Laws, which, throughout its exemption period, has complied with the requirements or conditions set forth in the Decree, and demonstrates to the Secretary of the DDEC that the extension of its Decree will result in the best economic and social interests of the people of Puerto Rico, may request the Secretary an extension of his Decree for an additional fifteen (15) years, for a total of thirty (30) years.
Section 6020.04- Conversion of exempted businesses under Previous Incentive Laws
(a) Any of the following Exempt Businesses under Previous Incentive Laws may request to avail themselves of the provisions of this Code, subject to the limitations set forth herein, provided it demonstrates that it is complying with all applicable legal provisions. The benefits granted in the converted Decrees may not be greater than those provided under this Code.
(1) Exempt Businesses that have not started operations at the effective date of this Code, may request to convert them, at the discretion of the Secretary of the DDEC, for the remainder of the period of time originally granted in such decree, in which case, If the conversion is approved, your exemption will be adjusted according to the benefits granted under this Code.
(2) Exempt Businesses whose Decrees were granted on or before the effective date of this Code and that had not been enjoying exemption before said date may request to convert them according to the benefits granted under this Code.
(3) The conversion under this Section will have to be requested within a term of twelve (12) months from the approval of this Code and may be set from the first day of the Tax Year in which they are requested but never before the date of effectiveness of this Code.
(4) The Secretary of the DDEC, when considering any conversion request under this Section, in consultation with the Secretary of the Treasury and with any agency it deems appropriate, may establish the terms and conditions it deems necessary and appropriate to the best interests of Puerto Rico, within the limits provided in this Code, as well as impose additional requirements as established in the Incentive Regulations.
(5) Revenue accrued by an Exempt Business until the effective date of the conversion, and distributed after the effective date of the conversion, will be subject to the tax treatment provided in the law under which they were accrued. , or the Internal Revenue Code, whichever is applicable.
(6) Exempt Businesses that comply with the provisions of this Section will be taxed, in full liquidation, as regards their Exempt Income, according to the tax treatment provided in each of the laws under which said benefits were accrued.
(7) The other terms, conditions and benefits contained in this Code that do not conflict with the provisions of this Section shall apply to Exempt Businesses covered by it.
Section 6020.05- Denial of Applications
(a) Denials-
(1) The Secretary of the DDEC may deny any request when it determines that the concession does not result in the best economic and social interests of Puerto Rico, after considering the nature of the physical facilities, the number of jobs, the amount of the payroll and the investment, the location of the project, its environmental impact, the available resources or other factors that in its opinion merit such determination, as well as the recommendations of the agencies that report on tax exemption.
(2) The petitioner, after being notified electronically of the denial, may request a reconsideration from the Secretary of the DDEC in accordance with the provisions of Section 6020.01 (h) of this Code.
(b) Refusal for Conflict with the Public Interest
(1) The Secretary of the DDEC may deny any request when it determines, based on the facts presented for its consideration, that the request is in conflict with the public interest of Puerto Rico, that the requesting business has not been organized as a bona fide business on a permanent basis, or in view of the moral or financial reputation of the persons that constitute it, the plans and methods to obtain financing, or any other factor that may indicate that there is a reasonable possibility that the granting of exemption will result in prejudice to the economic and social interests of Puerto Rico.
(2) The petitioner, after being notified electronically of the denial, may request a reconsideration from the Secretary of the DDEC in accordance with the provisions of Section 6020.01 (h) of this Code.
Section 6020.06- Limitation of Benefits - Production for Export of Manufacturing Businesses
(a) The Secretary of DDEC, from time to time, may designate eligible Eligible Products, those to which the benefits of this Code will be granted only for export production, when determining the existence of the following factors :
(1) That the production in Puerto Rico of the same for the local market already satisfies the existing demand and that the capacity of said local production can satisfy the demand that is expected for a period of five (5) years; or,
(2) That there is active competition in the production and marketing of the particular product in Puerto Rico. They will be considered as different manufactured products and that require a separate designation, those that although similar in name, appearance and use, differ from each other in their quality, size, price or other factors that affect the market of the product and consequently, their demand .
(3) When the aforementioned conditions cease to exist, the Secretary of the DDEC may, after consulting with the agencies that render reports on the tax exemption applications, cease the imposition of said limitation or resume its designation when the aforementioned conditions reappear.
(4) This limitation will apply to tax exemption applications that have not been granted as of the effective date of this Code.
Section 6020.07- Exempt Business Transfer
(a) General Rule - Prior to the transfer of a tax exemption concession, or of the Shares, property or other property interest in an Exempt Business that has a Decree granted under this Code, it must be approved by the Secretary of the DDEC. If this is carried out without prior approval, the exemption grant will be canceled from the date on which the transfer occurred, except in the cases listed in section (b). Notwithstanding the foregoing, the Secretary of the DDEC may retroactively approve any transfer made without his prior approval, when in his judgment, the circumstances of the case so warrant, taking into consideration the best interests of Puerto Rico and the economic development purposes of the latter. Code.
(b) Exceptions-
(1) The following transfers will be authorized without prior consent:
(i) The transfer of the assets of a deceased to his estate or the transfer by legacy or inheritance.
(ii) The transfer within the provisions of this Code.
(iii) Transfer of Shares when such transfer does not directly or indirectly result in a change in the domain or control of an Exempt Business that has a Decree granted under this Code.
(iv) The transfer of Shares of an Entity that owns or operates an Exempt Business that has a Decree granted under this Code, when it occurs after the Secretary of the DDEC has determined that any transfer of Shares will be allowed without prior approval.
(v) The pledge, mortgage or other guarantee for the purpose of responding to a bona fide debt . Any transfer of control, title or interest under said contract shall be subject to the provisions of the procedure established in Section 6020.01 of this Code.
(vi) The transfer by operation of law, by order of a court or by a bankruptcy judge to a trustee or fiduciary. Any subsequent transfer to a third person that is not the same debtor or bankrupt above will be subject to the provisions of the procedure established in this Section.
(c) Notification-
(1) Any transfer included in the exceptions of section (b) of this Section shall be informed, by the Exempt Business that has a Decree granted under this Code, to the Secretary of the DDEC within thirty (30) days of the transfer, except those included under subsection (iii) of section (b) that do not become a shareholder a holder of ten percent (10%) or more of the issued capital of the corporation, which must be reported by the Exempt Business to the Secretary of the DDEC, prior to the date of transfer.
Section 6020.08- Nature of the Concessions
(to) In General- The concessions of tax benefits under this Code shall be considered a contract between the Concessionaire, its Shareholders and the Government of Puerto Rico, and said contract shall be the law between the parties. Therefore, it will be the obligation of any government agency or instrumentality, public corporation or municipality, to honor and respect such contractual obligations in any administrative or judicial forum. Said contract shall be interpreted liberally, in accordance with the purpose of this Code to promote the socioeconomic development of Puerto Rico. The Secretary of the DDEC has discretion to include, on behalf of and on behalf of the Government of Puerto Rico, those terms and conditions,
(b) Obligation to Comply with the Representation in the Application - Any Exempt Business that has a Decree granted under this Code, will carry out its exempt operations substantially as represented in its application, except when they have been varied by means of amendments that Concessionaire's request the Secretary of the DDEC authorizes him according to the provisions of this Code.
Section 6020.09- Procedure for Revocation Permit or Mandatory
(a) To the extent that the Secretary of the DDEC has delegated this function to him, the Incentives Director may suspend the effectiveness and benefits of any Concession, for a specific period or may revoke any Concession permanently under any of the following cases:
(1) Suspension and Revocation Permit-
(i) A permissive revocation shall be understood when:
(A) the Concessionaire does not comply with any of the obligations imposed on it by this Code or other applicable laws and its regulations, or by the terms of the Incentive Concession;
(B) the Concessionaire does not begin operations within the period set for those purposes in the Concession, taking into consideration the type of activity being promoted in this Code; or
(C) the Concessionaire ceases to comply with its tax liability under the Puerto Rico Internal Revenue Code and this Code.
(2) Mandatory Revocation-
(i) The DDEC Secretary shall retroactively revoke any Concession granted when it has been obtained by false or fraudulent representations about the nature of the Eligible Business, or the nature or extent of the eligible activity, or any other facts or circumstances that, in whole or in part , motivated the Concession. In the case of this revocation, all net income previously reported as Exempt Income, whether or not it has been distributed, will be recalculated and will be subject to the contributions imposed under the provisions of the Puerto Rico Internal Revenue Code. The Concessionaire, in addition, will be considered as having filed a false or fraudulent return with the intention of avoiding the payment of contributions and, consequently, will be subject to the penal provisions of the Internal Revenue Code of Puerto Rico.
(b) In cases of revocation of a Decree granted under this Code, the Concessionaire will have the opportunity to appear and be heard at a hearing before a DDEC employee designated for that purpose, who will report his conclusions and recommendations to the Secretary of DDEC,
Section 6020.10- Reports
(a) Reports Required to Exempt Businesses and their Shareholders:
(1) Every Exempt Business that has a Decree under this Code, will file an income tax return annually, regardless of the amount of its gross or net income, separate from any other return that for other reasons is required to perform in relation to the operations of the industry covered by the benefits provided in this Code, and in accordance with the Puerto Rico Revenue Code. The Secretary of the Treasury may share with the Secretary of the DDEC the information thus received, provided that the confidentiality of the information is protected.
(2) Every Shareholder of an Exempt Business that has a Decree granted under this Code, must file annually with the Department of the Treasury an income tax return in accordance with the provisions of the Internal Revenue Code, provided that under the provisions of the Code of Revenue Internal Revenue had the obligation to do so.
(3) The Exempt Business that has a Decree under this Code shall have the obligation to maintain, in Puerto Rico, separately, the accounting related to its exempt operations, as well as the records and files that are necessary, in addition to providing and submitting those affidavits and comply with the rules and regulations in force for the due fulfillment of the purposes of this Code and that the Secretary of the Treasury may prescribe from time to time in relation to the imposition and collection of all kinds of contributions.
(4) Every Exempt Business that has a Decree under this Code shall annually file electronically with the Incentives Office, not later than thirty (30) days after the date prescribed by law for filing the corresponding income tax return. , including extensions granted for this purpose, a compliance report.
(i) The report must contain a list of data that reflect the fulfillment of the conditions established in the Decree for the Tax Year immediately prior to the filing date, according to the nature of your Exempt Business and the eligible activities that it performs, as well as any other information or documentation that may be required on the form established for these purposes or that is required by regulation, circular letter or administrative determination.
(ii) This report must be accompanied by the rights provided by regulation, and they will be paid by electronic transfer through the electronic Portal in the manner and manner established for these purposes by the Incentive Office. The information offered in this annual report will be used for statistical purposes and economic studies. Likewise, the Incentives Office must carry out every two (2) years, at least, a compliance audit with respect to the terms and conditions of the Decree granted under this Code.
(iii) This report will be filed electronically in the electronic Portal that the Incentives Office will establish for these purposes.
(iv) The Secretary of the DDEC shall establish, through regulations, administrative orders or any other communication of a similar nature, the information and documentation required to complete this report.
(b) The annual reports required by this Code for Exempt Businesses under Section 2021.01 shall be accompanied by evidence of an annual contribution of at least ten thousand dollars (10,000), of which fifty percent (50%) will be allocated to non-profit entities operating in Puerto Rico under Section 1101.01 of the Internal Revenue Code of Puerto Rico, which is not controlled by the same person, nor by their descendants or ascendants, spouses or partners and that is on a list that will publish the Special Joint Commission of Legislative Funds for Community Impact on or before December 31 of each year on those organizations whose work plan addresses the eradication of child poverty .The remaining fifty percent (50%) will be destined to any other non-profit entity operating in Puerto Rico under Section 1101.01 of the Puerto Rico Internal Revenue Code, which is not controlled by the same person, nor by their descendants or ascendants , spouses or partners and that is not in the list published by the Special Joint Commission of Legislative Funds for Community Impact. The Exempt Business will have to show the Exemption Office that the selected nonprofit entity is an entity that provides direct services to the community. The contribution will be made directly to the nonprofit entity selected by the Exempt Business under Section 2021.01 that makes the annual contribution. However, the Exemption Office will send, no later than thirty (30) days, to the Special Commission of Legislative Funds for Community Impact a detailed report of the non-profit entities that receive the contribution.
(c) As regards the Resident Investor Individual, he must submit evidence of having acquired, as sole owner, or in conjunction with his spouse, by purchase, within two (2) years after obtaining the Decree under the provisions of this Code, the ownership of real property in Puerto Rico, acquiring from an owner, be a person or company totally detached and alien to the person with the Decree under this Code, so that it constitutes their principal residence in the jurisdiction of Puerto Rico and accredit in the Annual Report, which maintains the exclusive and complete ownership of a real estate as a principal residence, either exclusively or with your spouse, during the entire term of the Decree.
The Secretary of the DDEC, after being informed by the agency concerned, may impose an administrative fine of up to a maximum of ten thousand (10,000) dollars to any Exempt Business that has a Decree granted under this Code and stops filing any of the reports that the Secretary of the Treasury, the Secretary of the DDEC or the Commissioner of Insurance requires, or that they file after the expiration date. The filing of an incomplete report will be considered as not filed, if the agency concerned notifies the Exempt Business of any omission in the required report and said Exempt Business does not submit the missing information within fifteen (15) days of being notified, or does not reasonably justify the lack thereof.
Section 6020.11- Anti-Abuse Rule
The Secretary of DDEC and the Secretary of the Treasury are empowered to void any Decree, transaction or series of transactions that are intended to avoid or evade the requirements and limitations set forth in this Code. In addition, the Secretary of DDEC and the Secretary of the Treasury are empowered to establish through regulations the scope and limitations of this Section.
Section 6020.12- Other provisions regarding the Worker's Compensation System
The exemptions and tax benefits provided in this Code shall in no case be construed to include or cover income tax or fees payable under Act No. 45 of April 18, 1985, as amended, known as “ Work Accident Compensation System Law ”.
CHAPTER 3-ADMINISTRATIVE PROVISIONS APPLICABLE TO SUBTITLE C
Section 6030.01- Tax Credit Application
(a) Any Exempt Business that meets the requirements established for the granting of Tax Credits, may request any Tax Credits of those set forth in Subtitle C of this Code, by filing the corresponding application with the Incentives Office, provided that when tax credits are requested, the Exempt Business must also file the tax credit application to the Secretary of the Treasury for the endorsement or granting of the same.
(1) The application of the Tax Credits required in this section (a) will be filed electronically on the Portal established for these purposes by the Incentive Office. The term for submission will be established through the Incentive Regulation.
(2) If it is necessary to certify any item included in the application, the proponent must support it by submitting to the Incentive Office a document of Agreed Procedures ( Agreed Upon Procedures ) made by an Authorized Public Accountant with a valid license in Puerto Rico.
(3) The Secretary of the DDEC will establish, through the Incentive Regulation, administrative order or any other communication of a similar nature, the information and documentation that such request will require.
(4) At the time of filing, the Secretary of the DDEC will charge the fees for the corresponding procedure, which will be paid by electronic transfer on the Portal established for that purpose by the Incentives Office.
(5) The Secretary of the DDEC will establish through the Incentive Regulations, the fees that will be charged for the procedure. The Regulation must be reviewed every three (3) years after its approval.
CHAPTER 4-ADMINISTRATIVE PROVISIONS APPLICABLE TO SUBTITLE D
Section 6040.01- Application for Benefits
(a) The proponent must submit a proposal to the Secretary of the DDEC, which must be signed by the authorized person by corporate resolution or by Affidavit in the case of individuals. The proposal will indicate the Section of Subtitle D under which benefits are requested and will describe in detail the project for which the funds will be used and how it would advance the purposes of this Code. The proponent will accompany the proposal with evidence on how it plans to finance the project and its economic capacity.
(b) If it is necessary to certify any item included in the proposal, the proponent must support it by submitting an Agreed Procedures document ( Agreed Upon Procedures ) made by an Authorized Certified Public Accountant to the Incentives Office Puerto Rico.
(c) The Secretary of the DDEC will establish, through the Incentive Regulation, circular letter or administrative order, the information and documentation that the proposal will require.
(1) At the time of filing, the Secretary of the DDEC will charge the fees for the corresponding procedure, which will be paid by electronic transfer on the Portal established by the Incentive Office for such purposes.
(2) The Secretary of the DDEC will establish through the Incentive Regulation the rights that will be charged for the procedure. The Regulation must be reviewed every three (3) years after its approval.
CHAPTER 5-ADMINISTRATIVE PROVISIONS APPLICABLE TO SUBTITLE E
Section 6050.01- Application for Funds
(a) The proponent must submit a proposal to the Secretary of the DDEC, which must be signed by the authorized person by corporate resolution or by Affidavit in the case of individuals. The proposal will indicate the Section of Subtitle E under which benefits are requested and will describe in detail the project for which the funds will be used, and how it would advance the purposes of this Code. The proponent will accompany the proposal with evidence on how it plans to finance the project and its economic capacity.
(b) If it is necessary to certify any item included in the proposal, the proponent must support it by submitting an Agreed Procedures document ( Agreed Upon Procedures ) made by an Authorized Certified Public Accountant to the Incentives Office Puerto Rico.
(c) The Secretary of the DDEC will establish, through the Incentive Regulation, circular letter or administrative order, the information and documentation that the proposal will require.
(d) At the time of filing, the Secretary of the DDEC will charge the fees for the corresponding procedure, which will be paid by electronic transfer on the Portal established by the Incentive Office for such purposes.
(e) The Secretary of the DDEC will establish through the Incentive Regulations, the fees that will be charged for the procedure. The Regulation must be reviewed every three (3) years after its approval.
CHAPTER 6- COMPLEMENTARY AND TRANSITIONAL PROVISIONS
Section 6060.01- Application of the Puerto Rico Internal Revenue Code
The Internal Revenue Code of Puerto Rico shall apply in a supplementary manner to this Code to the extent that its provisions are not in conflict with the provisions of this Code.
Section 6060.02- Regulations Under This Code
(a) The Incentive Regulations shall provide for the implementation of the objectives and purposes of this Code and shall be adopted within six (6) months from the date of approval of this Code. The Secretary of the DDEC may request the Governor to extend said period for an additional six (6) months.
(b) As long as the Incentive Regulations are not adopted, the regulations for the operation of the Office of Industrial Tax Exemption will remain in force and, in the granting of the incentives provided in this Code, the Secretary may use as a guide the Regulations that operated under previous analogous laws except to the extent that they are incompatible with this Code. Likewise, the regulations or regulations of the Department of the Treasury applicable to the evaluation of incentive applications will continue in force until they are expressly substituted, amended or repealed.
(c) The Secretary of the DDEC, in consultation with the agencies or instrumentalities required in accordance with the regulated matter, shall adopt those regulations, circular letters, administrative orders, guides or other communications of a general nature that are necessary to enforce the provisions and Purposes of this Code.
(d) The Secretary of the DDEC shall be empowered to delegate those functions, as deemed necessary, to other officials. However, the Secretary of the DDEC may not delegate the signature of approval of the Tax Exemption Decrees or the granting of Tax Credits.
(e) The Secretary of the DDEC shall have the authority to create additional incentives or benefits to promote the economic development of Puerto Rico, provided that the necessary funds are available.
(f) The Secretary of the DDEC may establish through the Incentive Regulation, administrative order or circular letter the service charges deemed necessary and appropriate for any procedure related to an incentive that is part of this Code.
(g) Without prejudice to the powers and powers of the Secretary of the Treasury under the Internal Revenue Code, the DDEC shall have exclusive jurisdiction to examine any controversy that may arise in the application of this Code. To these ends, it will apply, in a supplementary manner, Law 38-2017, as amended, known as the "Uniform Administrative Procedure Act of the Government of Puerto Rico." The DDEC will consult with the Department of the Treasury those controversies in which its expertise is necessary. Likewise, agency heads may be consulted with particular expertise on the industry to be examined.
Section 6060.03- Existing rights and obligations-
a) The repeal of any law, article or provision through this Code shall not affect acts performed or any right acquired under the protection thereof or any procedure or lawsuit that has begun in any civil case, before such derogation.
b) All rights and obligations acquired through Decree or Certification of Bonafide Farmer and / or Bonafide Farmer Compliance Certificates conferred prior to the validity of this Code, will continue to be honored by the Government of Puerto Rico, its agencies and municipalities. As for Decrees granted prior to the validity of this Code, as long as a new Decree is not issued under this Code, the provisions of the previous law will continue to apply as if the repeal had not been made.
Section 6060.04- Decrees Granted Under Previous Laws-
(a) Decrees or other benefits granted under the Industrial or Tax Incentive Laws, as that term is defined in paragraph (41) of Section 1020.01 of this Code, or similar laws above, may be amended and / or maintained in in accordance with their respective provisions. Requests for new decrees or other benefits that have been filed under said laws and that, as of the effective date of this Code, have not been granted or approved, may be processed, at the applicant's choice, under the equivalent provisions of this Code.
CHAPTER 7- FINAL PROVISIONS
Section 6070.01.- Industrial or Tax Incentive Laws replaced by this Code
As of January 1, 2020, requests for decrees will not be accepted under the laws mentioned in Sections 6070.02 through 6070.21 of this Code.
Section 6070.02.- A new Section 5 is added to Act No. 135 of May 9, 1945 , as amended, known as the “Tax Exemption for Public Carriers of Air Transport Services”, to read as follows:
“Section 5.- Term to Request
The benefits granted by this Law may be claimed during taxable years beginning before January 1, 2020. ”
Section 6070.03.-Article 8 of Act No. 7 of March 4, 1955, as amended, known as the “Tax Exemption of Historic Areas”, is amended to read as follows:
“Article 8.-Validity
This Law will take effect immediately. The benefits granted by this Law may be claimed during taxable years beginning before January 1, 2020. ”
6070.04.- section is Article 6 Amendment Act. No. 72 of June 21, 1962, as amended , known as the "Tax Exemption for Dairy Industry Corporation of Puerto Rico, Inc.", to read as follows :
“Article 6.-Validity
This Law will take effect immediately after its approval. The benefits granted by this Law may be claimed during taxable years beginning before January 1, 2020. ”
Section 6070.05.-Section 9 of Act No. 126 of June 28, 1966, as amended , known as the “Sea Freight Transportation Act” is amended to read as follows:
“Article 9.-Validity. -
The provisions of this subchapter shall apply to taxable years beginning after December 31, 1966 and before January 1, 2020. This subchapter shall take effect immediately after its approval. ”
Section 6070.06.-Section 8 of Act No. 54 of June 21, 1971, as amended , is better known as the “Tax Exemption for Commercial Production of Flowers and Ornamental Plants”, to read as follows:
“Section 8.-
This Law shall take effect immediately after its approval, but the provisions thereof shall apply to taxable years beginning after December 31, 1970 and before January 1, 2020. ”
Section 6070.07.- Article 12 of Act No. 47 of June 26, 1987, as amended , known as the “Public and Private Sector Co-Participation Law for the New Housing Operation”, is amended to read as follows. :
“Article 12.- Validity.-
This Law will enter into force immediately after its approval, except as regards the tax exemptions on the property, which will become effective as of the taxable year that begins the year. January 1988.
The benefits granted by this Law may be claimed during taxable years beginning before January 1, 2020. ”
Section 6070.08.- Article 8 is amended to Act 165-1996, as amended , known as the “ Housing Rental Program for the Elderly with Low Income”, to read as follows:
“Article 8.- Validity.-
This Act will come into effect immediately after its approval, except for tax exemptions on property that will begin on January 1, 1997. The benefits granted by this Law may be claimed for taxable years beginning before January 1, 2020. "
Section 6070.09.- A new Article 7 is added to Law 213-2000, as amended , better known as the “Social Interest Housing for People with Disabilities or the Elderly,” which reads as follows:
“Article 7.-
The benefits granted by this Law may be claimed during taxable years beginning before January 1, 2020. ”
Section 6070.10.- Article 2.3 of Act 140-2001 is amended, as amended , known as the “Tax Credit Law for Investment in the Construction or Rehabilitation of Housing for Rental to Low or Moderate Income Families and Tax Credits for Investment in the Acquisition, Construction or Rehabilitation of Affordable Housing to Rent for the Elderly ”, to read as follows:
“Article 2.3.- Request for Certificate of Qualification; Requirements; Rights
...
(d) Term to Request.- The Executive Director may not accept applications with respect to, nor grant the credits and other tax benefits described in Article 2.2 of this Law after December 31, 2019. ”
Section 6070.11.- A new Article 23 is added to Act 244-2003, as amended , known as the “Law for the Creation of Housing Projects of“ Assisted Living ”for the Elderly in Puerto Rico,” which reads as follow:
“Article 23.-
The benefits granted by Article 15 of this Law may be claimed during taxable years beginning before January 1, 2020. ”
Section 6070.12. Section 5 of Act 73-2008 is amended, as amended, known as the "Puerto Rico Economic Incentives for Development Act", to read as follows:
“Section 5.-Credits
(to) ...
(b) ...
(c) Credit for Investment in Research and Development, Clinical Tests, Toxicological Tests, Infrastructure, Renewable Energy or Intangible Property.-
(1) Any exempt business that has a decree granted under this Act or under previous incentive laws may claim an investment credit equal to fifty percent (50%) of the special eligible hedity investment in Puerto Rico after the approval of this Law for said exempt business or for any affiliated entity thereof. Any special eligible investment made prior to the date for filing the income tax return, as provided by the Internal Revenue Code of Puerto Rico, including any extension granted by the Secretary of the Treasury for filing it, will qualify for the tax credit of this paragraph in the tax year for which the aforementioned return is being filed. Said credit may be applied, at the option of the exempt business,
as provided by the Internal Revenue Code of Puerto Rico, including any extension granted by the Secretary of the Treasury for filing it. Said certification must be included with the return as a requirement to grant the claimed credit.
...
(two) ...
...
(d) ...
...
... ”
Section 6070.13.- Section 20 of Act 73-2008 is amended, as amended , known as the "Puerto Rico Economic Incentives for Development Act", to read as follows:
“Section 20.- Decrees granted under previous laws.-
No new requests for exemption decrees will be received under Act 135-1997, as amended, after the effective date of this Act. However, decrees granted under it, or similar laws above, may be amended in accordance with their respective provisions. Requests for new decrees filed under said law that have not been granted before the effective date of this Law may be processed, at the applicant's choice, under this Law.
As of January 1, 2020, no new decree requests will be accepted under this Act. ”
Section 6070.14.- Section 15 of Law 74-2010 is amended, as amended , known as the "Tourism Development Act of Puerto Rico of 2010", to read as follows:
"Section 15.- Incentives under the" Tourism Development Act of 1993 ", as amended and under this Act.
No decrees will be granted under the "Tourism Development Act of 1993", as amended, after July 10, 2010. Any application for concession of benefits under the "Tourism Development Act of 1993", as amended, already filed to the date of approval of this Law, it will be considered filed under this Law, and the petitioner must submit any additional information necessary to complete an application duly filed under this Law. Requests for new decrees under this Law will be received until December 31, 2019. "
Section 6070.15- Article 3.6 of Act 83-2010 is amended, as amended , known as the “Puerto Rico Green Energy Incentives Act”, to read as follows:
“Article 3.6.- Validity.-
This Law will take effect immediately after its approval. Incentive and exemption applications will be received under this Law until December 31, 2019. The taxable impositions provided by this Law will remain in effect during the term in which the tax exemption concessions granted under it remain in force. ”
Section 6070.16.- Article 19 of Law 118-2010 , known as the "Law of Incentives for Municipal Economic and Tourism Development", is amended to read as follows:
“Article 19.- Validity.- This Law shall take effect immediately after its approval. Applications for new decrees under this Law will be received until December 31, 2019. ”
Section 6070.17.- Article 9.7 of Law 27-2011, known as the “Law of Economic Incentives for the Film Industry of Puerto Rico,” is amended to read as follows:
“Article 9.7. -Validity.
This Law will take effect immediately after its approval. Requests for benefits covered by this Law will be received by the Secretary of the Department of Economic Development and Commerce until December 31, 2019. However, the Decrees granted under this law may be amended in accordance with its provisions. The contributions imposed and exemption provided by this Law shall remain in force during the term governed by the Decrees issued under this Law . "
Section 6070.18.- Article 20 of Act 20-2012 is amended, as amended , known as the “Law to Promote the Export of Services”, to read as follows:
“Article 20.- Validity Clause.
This Law will take effect immediately after its approval. Applications for new decrees will be received until December 31, 2019. The tax rates provided by this Law will remain in effect during the term in which the decrees granted remain in force. ”
Section 6070.19.-Article 12 of Law 22-2012 is amended, as amended , known as the “Law to Encourage the Transfer of Investor Individuals to Puerto Rico,” to read as follows:
“Article 12.-Validity.- This Law shall take effect immediately after its approval. Applications for new decrees will be received until December 31, 2019. ”
Section 6070.20.- Article 17 of Law 135-2014 is amended, as amended , known as the "Incentives and Financing Law for Young Entrepreneurs", to read as follows:
“Article 17.-Validity.
This Law will take effect immediately after its approval and will be effective for the taxable years beginning after December 31, 2013 and before January 1, 2020. ”
Section 6070.21.- Article 20 of Act 14-2017 is amended, as amended , referred to as the "Incentive Law for the Retention and Return of Medical Professionals", to read as follows:
“Article 20.- Validity.
This Law shall take effect sixty (60) days after its approval, except as provided in Article 16, which shall be effective immediately. Requests for new decrees will be received under this Law until June 30, 2019. Subsequent applications will be considered in accordance with the provisions of the Puerto Rico Incentives Code. ”
Section 6070.22.- Repeals.-
(a) Repealed:
(1) Article 61.240 of Act No. 77 of June 19, 1957, as amended, known as the “Puerto Rico Insurance Code”;
(2) Act No. 42 of June 19, 1971, as amended, known as the "Annual Farm Workers Bonus Act";
(3) Act No. 46 of August 5, 1989, as amended, known as the “Law to Establish the Salary Subsidy Program for Eligible Farmers”;
(4) Law 225-1995, as amended, known as the "Puerto Rico Agricultural Tax Incentives Act";
(5) Law 325-2004, as amended, known as the "Law for the Development of Renewable Energy";
(6) Law 464-2004, as amended, known as the "JUVEMPLEO Program Law";
(7) Law 26-2008, as amended, known as the "Law of the Program for the Financing of Agricultural and Food Technology Research and Development";
(8) Section 1033.12 of Act 1-2011, as amended, known as the “Internal Revenue Code for a New Puerto Rico”;
(9) Law 159-2011, as amended, known as the “Tax Incentives Law for Investment in Disposal Reduction Facilities and / or Solid Waste Treatments”;
(10) Law 1-2013, as amended, known as the "Employment Now Law";
(11) Law 95-2013, as amended, known as the "Business Incubator Incentives Program Act";
(12) Articles 5, 6 and 7 of Act 73-2014, as amended, and the remaining Articles of conformity are renumbered;
(13) Article 5, 6 and 7 of Law 171-2014, as amended, and the remaining Articles of conformity are renumbered;
(14) Law 185-2014, as amended, known as the "Private Capital Funds Act"; Y
(15) Articles 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12 and 13 of Law 187-2015, as amended, known as the “Interagency Portal Validation Law for the Concession of Incentives for the Economic Development of Puerto Rico ”, and the remaining Articles of conformity are renumbered.
(16) Law 21-2019, as amended known as the "Development Law of Economic Development Opportunity Areas of Puerto Rico 2019".
Section 6070.23.- Article 8 of Act No. 74 of June 21, 1956, as amended , known as the “Puerto Rico Employment Security Law,” is amended to read as follows:
“Article 8.
(a) ...
...
(h) Special contribution. - As of January 1, 1992, every employer, except the government agencies and instrumentalities and their political subdivisions, subject to the payment of contributions under the provisions of this Chapter, shall pay a special contribution equivalent to one percent (1%) of the taxable wages paid by him. Provided, that those employers to whom a tax rate greater than (4.4%) shall be set shall pay the difference between (5.4%) and said rate. This special contribution will enter the General Fund of the Government of Puerto Rico .
(i) ...
... ”
Section 6070.24.- Article 24 of Law 272-2003 is amended, as amended , known as the “Canon Tax Law for Occupancy of Housing of the Commonwealth of Puerto Rico,” to read as follows:
“Article 24. - Tax.
TO. ...
...
F. ...
G. ... ”
Section 6070.25.- Section (b) of Section 2 of Act 132-2010 is amended, as amended, known as the “ Law on the Stimulation of the Real Estate Market ” , to read as follows:
“Section 2.- Taxable Exemption Applicable to Income Accrued for Residential Property Income
(a) ...
(b) Term of the Exemption.- The tax exemption provided here shall only apply for a period of up to fifteen (15) taxable years, beginning on January 1 , 2011 and ending on December 31, 2025 .
...
... ”
Section 6070.26.-Section 1023.10 of Act 1-2011 is amended, as amended , known as the “Internal Revenue Code for a New Puerto Rico,” to read as follows:
“Section 1023.10. - Taxation of additional tax on gross income.
(to) ...
...
(g) Definitions. - For purposes of the tax imposed by this Section, the following terms shall have the meaning indicated below:
(one) ...
(TO) ...
...
(F) All taxpayers.- Gross income will exclude the following items, including when they are part of the distributable share of gross income determined in accordance with Sections 1071.02, 1114.06 and 1115.04, as the case may be:
(i) ...
(ii) Reserved .
(iii) ...
(two) ..."
Section 6070.27.- Section 1031.02 of Act 1-2011 is amended, as amended , known as the “Internal Revenue Code for a New Puerto Rico,” to read as follows:
“Section 1031.02.- Gross Income Exemptions
The following entry items will be exempt from taxation under this Subtitle:
(one) ...
...
(6) Incentives received by farmers. -
(TO) ...
(B) These incentives will be considered a reduction in costs or expenses, as the case may be, incurred by the farmer. The Secretary of Agriculture and / or the Secretary of the Department of Economic Development and Commerce, as applicable, shall submit to the Secretary annually, on or before January 31 of the year following the calendar year in which the said incentives were granted, a relationship containing the next information:
(i) ...
(ii) ...
(7) ...
...
(26) Reserved
(27) Reserved.
(28) Reserved.
(29) ...
... ”
Section 6070.28.-Section 1031.06 of Act 1-2011 is amended, as amended, known as the “Internal Revenue Code for a New Puerto Rico,” to read as follows:
“Section 1031.06.- Special rules for capital gains invested in an eligible opportunity fund.
(a) In general.-
(1) Treatment of capital gains. - In the case of a gain derived from the sale or exchange of a capital asset between a taxpayer and an unrelated person after November 7, 2018, at the taxpayer's choice-
(TO) ...
(B) ...
(C) ...
(two) ...
(3) ...
(b) ...
(c) ...
(d) ...
(e) ...
(f) Effectiveness.- This Section will be applicable for taxable years ended after November 7, 2018. ”
Section 6070.29. - Paragraph (5) of section (b) of Section 1033.14 of Act 1-2011 is amended, as amended, known as the “Internal Revenue Code for a New Puerto Rico,” to read as follows:
“Section 1033.14. - Deduction for Net Loss of Operations.
(a) ...
(b) Amount to Crawl. -
(1) ...
...
(5) For the rules related to the carry-over of net operating losses after certain control changes, for taxable years beginning before January 1, 2019, see Section 1034.04 (u)
(c) ...
... ”
Section 6070.30.- Section 1033.15 of Act No. 1-2011 is amended, as amended, known as the “Internal Revenue Code for a New Puerto Rico,” to read as follows:
“Section 1033.15.-Deductions Applicable to Individual Taxpayers.
(a) For the purposes of this Section, the taxpayer may claim as deductions the following items:
(one) ...
...
(8) Savings for Education.-
(A) Allowable deductions .- In the case of an individual, the cash contribution of the latter to a My Future Account will be allowed as a deduction, in accordance with the provisions of Section 2026.01 of the Incentives Code, and / or a contribution account educational, as long as the beneficiary of said accounts is a child or relative up to the third degree of consanguinity or second by affinity in accordance with the provisions of Section 1081.05 of this Subtitle.
...
... ”
Section 6070.31. - A paragraph (11) is added to section (u) of Section 1034.04 of Act 1-2011, as amended, known as the “Internal Revenue Code for a New Puerto Rico,” to read as follows:
"Section 1034.04. - Recognition of Profit or Loss.
(a) ...
...
(u) Limitation on Trawling of Net Operating Losses After a Change in Control.
(one) ...
...
(11) The provisions of this section (u) shall apply for taxable years beginning before January 1, 2019. ”
Section 6070.32 .- Section (d) of Section 1040.02 of Act 1-2011 is amended, as amended, known as the “Internal Revenue Code for a New Puerto Rico,” to read as follows:
“Section 1040.02.- General Rule for Accounting Methods
(a) ...
...
(d) Limitation of the Use of the Received and Paid Method -
(1) Notwithstanding the provisions of section (c), the use of the method of receipt and payment shall be permissible only if the following two (2) conditions are met:
(TO) …
(B) when the business has an average annual gross income (determined on the basis of the last three (3) years of business operations) one million (1,000,000) dollars or less, for taxable years beginning before January 1, 2019 and three million (3,000,000) dollars or less, for taxable years beginning after December 31, 2018.
(i) Provided that, those taxpayers who, for their last taxable year started before January 1, 2019, use the accumulation method and wish, for their first taxable year started after December 31, 2018, to use the method of Received and paid, as they qualify under the new average annual gross income, they may attend it without having to request a determination from the Secretary to change their accounting method. For these purposes, the Secretary shall establish, through regulations, administrative determination, circular letter or general newsletter, the contributory effect of the change in accounting method established in this subsection.
(two) ...
... ”
Section 6070.33.- Section (e) of Section 1040.05 of Act 1-2011, as amended, known as the “Internal Revenue Code for a New Puerto Rico,” is amended to read as follows:
“Section 1040.05.- Term Sales
(a) ...
...
(e) Gain or Losses in the Disposition of Term Obligations. -
(1) ...
...
(5) Notwithstanding the provisions of this section (e), in the case of installment obligations between members of a group of related entities or related persons, as defined in Section 1010.05, if the installment obligation ceases to exist as a result of a confusion of law as part of a reorganization between said entities, both the debtor and the creditor will not recognize profit or loss, except as provided in this paragraph.
(A) The creditor shall calculate the gain or loss generated in the cancellation of the debt of the installment sale in accordance with paragraph (1) (B) of this section. However, any profit or loss generated will not be recognized until the debtor has the property. For these purposes, a change in control in the debtor that causes the creditor and debtor not to belong to the same group of related entities or related persons, shall be understood as a disposition of the property.
(B) The debtor will not recognize income in debt forgiveness. However, the basis of the property acquired through the sale in installments must be reduced, but not less than zero (0), by an amount equal to the income not recognized under the provisions of this subsection. ”
Section 6070.34.- Reserved
Section 6070.35 .- A new paragraph (4) is added and paragraph (4) is renumbered and amended as paragraph (5) of section (a) of Section 1061.20 of Act 1-2011, as amended, known as “ Internal Revenue Code for a New Puerto Rico ”, to read as follows:
“Section 1061.20. - Obligation to Pay Estimated Tax by Individuals.
(to) ...
(one) ...
(two) ...
(3) those individuals whose gross income comes solely and exclusively from remuneration for services rendered in agricultural work not subject to withholding at source under said Section 1062.01 of the Code;
(4) those individuals who, in addition to the income provided in paragraphs (1), (2) and (3) of this section, receive income from Distributions due to a Disaster Declared by the Governor of Puerto Rico, pursuant to the Sections 1081.01 (b) (1) (D) and 1081.02 (d) (1) (I); or
(5) ...
(b) ...
... ”
Section 6070.36.- Section (c) of Section 1062.03 of Act 1-2011 is amended, as amended, known as the “Internal Revenue Code for a New Puerto Rico,” to read as follows:
“Section 1062.03.-Withholding at Origin About Payments for Services Provided
(to) ...
(b) Special Rules.- The deduction and retention obligation set forth in section (a) of this Section shall not apply to:
(one) ...
...
(8) Payments for services to individuals, corporations and societies during the first three (3) years of the beginning of a service provision activity. This exemption may be enjoyed by the taxpayer under the provisions of paragraph (4) of section (g) of this Section.
(9) ...
...
(16) Payments made by a person dedicated to the exercise of an industry or business activity or for the production of income in Puerto Rico to another person dedicated to the exercise of an industry or business activity or for the production of income in Puerto Rico and that is part of a controlled group of corporations or a group of related entities, as defined in Sections 1010.04 and 1010.05 of this Code.
(c) Responsibility of the Payer.- Unless otherwise provided, any person who is obliged to deduct and withhold any contribution under the provisions of this Section shall be liable to the Secretary for payment of said contribution and shall not be liable to any other person for the amount of any such payments. Any person who at the time of filing his income tax return has not remitted to the Department of the Treasury the entire amount withheld on payments described in section (a) of this Section and has not filed with the Department of the Treasury the required information returns in sections (h), (i) and (j) of this Section, you may not claim such payments as operating expenses. Provided that, in the case of persons under the accumulation method or with an economic year, They may claim the deduction even if the amount is not reflected in an informative declaration, provided that they present a reconciliation between the claimed expense and the amount reported in the declaration. However, people under the accrual method or with an economic year will not be required to submit, together with their return, a reconciliation between the claimed expense and the amount reported in the statement so that they can claim the deduction even if the amount is not reflected in an informative statement, when said person submits the audited financial statement together with their income tax return in accordance with the provisions of Section 1061.15 (a) (3) or (4) and submit the Supplementary Information required in Section 1061.15 (b ). as long as they present a reconciliation between their claimed expense and the amount reported in the declaration. However, people under the accrual method or with an economic year will not be required to submit, together with their return, a reconciliation between the claimed expense and the amount reported in the statement so that they can claim the deduction even if the amount is not reflected in an informative statement, when said person submits the audited financial statement together with their income tax return in accordance with the provisions of Section 1061.15 (a) (3) or (4) and submit the Supplementary Information required in Section 1061.15 (b ). as long as they present a reconciliation between their claimed expense and the amount reported in the declaration. However, people under the accrual method or with an economic year will not be required to submit, together with their return, a reconciliation between the claimed expense and the amount reported in the statement so that they can claim the deduction even if the amount is not reflected in an informative statement, when said person submits the audited financial statement together with their income tax return in accordance with the provisions of Section 1061.15 (a) (3) or (4) and submit the Supplementary Information required in Section 1061.15 (b ).
(d) ...
...
(g) Relay.-
(one) ...
(2) In the case of entities according to said term, it is defined in Section 1010.05 (c), with turnover of one million (1,000,000) dollars or more that are up to date with their tax liabilities and submit financial statements accompanied by a Auditor Report, subject to the provisions of Section 1061.15, in lieu of the withholding provided in section (a), no withholding will be made for payments for services rendered by these entities.
(3) In the case of individuals and entities not included in paragraph (2) of this section, with turnover of one million (1,000,000) dollars or more, who are up to date with their tax responsibilities and submit accompanied financial statements By an Auditor Report, subject to the provisions of Section 1061.15, the applicable withholding percentage shall be six (6) percent, in lieu of the withholding provided in section (a).
(4) ...
(5) In the case of individuals or entities that, for a particular taxable year, choose to tax their income under the optional tax established in Section 1021.06 or 1022.07 and the total gross income based on the return of the previous taxable year does not exceed One hundred thousand (100,000) may obtain a partial relief so that the withholding provided in section (a) of this Section is six (6) percent instead of the amount provided in section (a) of this Section. Every individual who obtains this partial withholding relief is obliged to pay taxes under the optional tax provided in Section 1021.06 for the taxable year for which said relief was requested, provided that during said taxable year it complies with the requirements of Section 1021.06 or 1022.07.
(h) Quarterly reconciliation form.- Any person obliged to deduct and withhold any contribution under this Section shall, on or before the last day of the month following the close of each of the quarters ended on March thirty-first (31) , thirty (30) of June, thirty (30) of September and thirty-one (31) of December of each year, submit a return detailing the payments made, the tax withheld and deposited during the quarter and pay that part of the same that has not been paid or deposited as established in the manner and manner set forth in Subtitle F. Said return shall contain that information, and shall be made in that form established by the Secretary through regulations to that effect. The Secretary may require that the quarterly reconciliation form, as well as any balance owed with it are submitted only through electronic means. Provided that the Quarterly Return here provided shall not contain information on payments to telecommunications service providers, internet access services, cable or satellite television services, advertisements or insurance premiums.
(i) ...
... ”
Section 6070.37 .- Subsection (A) is added to paragraph (1) and paragraph (3) is added to section (a) of Section 1062.05 of Act 1-2011, as amended, known as the “Internal Revenue Code for a New Puerto Rico ”, to read as follows:
“Section 1062.05.— Estimated Payment Requirement of the Income Tax of Proportional Participation in the Income of a Corporation of Individuals.
(a) Obligation to Withhold. - The corporation or any other persons to whom the obligation to deliver to the shareholders the report described in section (b) of Section 1061.07 has been delegated shall determine and remit the amount that is greater between paragraph (1) and (2). ) or, in cases where the corporation will comply with the provisions of Section 1115.11, paragraph (3) of this section minus the amount withheld, in accordance with Sections 1062.02 and 1062.03:
(1) thirty (30) percent of the estimated amount of a shareholder's proportional share in the entry item of an individual corporation, described in Section 1115.04 (b) (10) plus the percent contribution applicable to those income or profit items derived by the corporation of individuals that are subject to tax at a preferential rate, in accordance with the provisions of Subchapter C of Chapter 2 of Subtitle A or applicable special law;
(A) Provided that, for taxable years beginning after December 31, 2018, the corporation of individuals shall be exempt from withholding the contribution provided in this paragraph, in those cases that:
(i) the shareholder possesses losses or tax credits, including his participation in the withholdings made to the corporation of individuals, that satisfy any income tax that could generate his distributable participation in the corporation of individuals. For these purposes, the shareholder will have to submit an affidavit to the entity in which it includes a statement that it believes in good faith that it has sufficient losses or credits to satisfy any tax liability resulting from its distributable participation.
(ii) The individual corporation avails itself of the Optional Tax, pursuant to Section 1115.11.
(2) the amount resulting from the calculation provided in section 1023.10 for the distributable share in the gross income of the shareholders, during the periods specified in section (b) of this Section, or
(3) For taxable years beginning after December 31, 2018, the amount of the Optional Tax not covered by the withholding provided in Section 1062.03. Only those corporations of individuals whose gross income comes substantially from the provision of services may make the estimated payment under the provisions of this paragraph (3).
(b) ...
... ”
Section 6070.38 .- Section (a) of Section 1062.07 of Act 1-2011 is amended, as amended, known as the “Internal Revenue Code for a New Puerto Rico,” to read as follows:
"Section 1062.07. - Estimated Payment Requirement of the Income Tax Attributable to the Distributable Participation of a Partner in a Company or a Member of a Limited Liability Company, subject to the Provisions of Chapter 7 of Subtitle A of this Code.
(a) Obligation to Withhold. - The partner or member to whom the administration of a limited liability company or company has been delegated, subject to the provisions of Chapter 7 of this Subtitle, or any other persons to whom the obligation to deliver to direct partners has been delegated of said company the report described in section (b) of Section 1061.03, or deliver to the direct members of a limited liability company, subject to the provisions of Chapter 7 of this Subtitle, the report described in section (b) of Section 1061.04, shall determine and remit the amount that is greater between paragraph (1) and (2) or, in the case of companies that comply with the provisions of Section 1071.10, paragraph (3) of this section minus the amount withheld,
(1) thirty (30) percent of the estimated amount of the distributable share of a partner or member in the items described in paragraphs (1) through (3), (10) and (11), as applicable in section ( a) of Section 1071.02; plus the percentage of tax applicable to those income or profit items derived from the limited liability company or company, subject to the provisions of Chapter 7 of this Subtitle that are subject to tax at a preferential rate, in accordance with the provisions of the Subchapter C of Chapter 2 of Subtitle A or applicable special law; or
(A) Provided, that in the case of partners or members that are foreign corporations, the limited liability company or company may, at the election of said partner or member, retain the maximum tax rate for corporations plus a ten (10) per additional one hundred over the amount equivalent to dividend, pursuant to Section 1092.02, resulting from its distributable share.
(B) For taxable years beginning after December 31, 2018, the limited liability company or company will be exempt from determining and remitting the contribution provided in this paragraph, in those cases that:
(i) The member has tax losses or credits, including their participation in the withholdings made to the limited liability company or company, that satisfy any income tax that could be generated by their distributable participation in the limited liability company or company. For these purposes, the partner will have to submit an affidavit to the entity in which it includes an affirmation that it believes in good faith that it has sufficient losses or credits to satisfy any tax liability resulting from its distributable participation.
(ii) The limited liability company or company avails itself of the Optional Tax provided in Section 1071.10.
(2) ...
(3) For taxable years beginning after December 31, 2018, the amount of the Optional Tax not covered by the withholding provided in Section 1062.03. Only those companies whose gross income comes substantially from the provision of services may make the estimated payment under the provisions of this paragraph (3).
(b) ...
... ”
Section 6070.39.- Section (a) of Section 1063.01 of Act 1-2011 is amended, as amended, known as the “Internal Revenue Code for a New Puerto Rico,” to read as follows:
“Section 1063.01.-Information at the Origin
Any person who, at the time of submitting his income tax return, has not filed with the Department of the Treasury the informative declarations required in this section, may not claim such payments as operating expenses, in the cases in which the payments are expenses of the operation carried out by the payer. However, in the case of people under the accumulation method or with an economic year, they may claim the deduction even if the amount is not reflected in an informative statement, provided that they present a reconciliation between the claimed expense and the payment Amount reported in the statement. However,
Provided that, in order to deduct the payment for purposes of determining the net income subject to alternate basic tax, in the case of individuals, or minimum alternative contribution in the case of corporations, any payment must be informed in an informative statement, although the amount to be reported is less than five hundred (500) dollars.
(b) ...
... ”
Section 6070.40 .- Section 1063.16 is added to Act 1-2011, as amended, known as the “Internal Revenue Code for a New Puerto Rico,” to read as follows:
“Section 1063.16.- Information Statement on Announcements, Insurance Premiums, Telecommunications Services, Internet Access and Cable or Satellite Television
(a) For payments received after December 31, 2018, any entity dedicated to telecommunications services provider, according to said term is defined in Section 4010.01 (kk), internet access services or cable or satellite television services in Puerto Rico or that receives payments for advertisements or insurance premiums shall be required to submit an annual informative declaration, as provided in section (b) of this Section to any client, whether a commercial or residential customer. The original of said declaration must be provided to the payer, on or before February 28 following the calendar year for which the copy of the declaration must be filed with the Secretary.
(b) Information Statement on Telecommunications Services, Internet Access, Cable or Satellite Television, ads or insurance premiums. For the purposes of this Section, the informative statement shall be prepared and rendered in accordance with the manner prescribed by the Secretary and shall contain, without limitation, the following information:
(1) name, address and social security number or employer identification number of the person from whom the payments described in section (a) are received,
(2) the amount of payments received from said person during the calendar year, and
(3) any other information that the Secretary prescribes through regulations.
(c) The informative declaration required in this Section shall be submitted to both the payer and the Secretary by electronic means. ”
Section 6070.41 .- Section (c) is amended and a new section (e) is added to Section 1071.02 of Act 1-2011, as amended, known as the Internal Revenue Code for a New Puerto Rico, to read as follows:
"Section 1071.02. - Membership Revenue and Credits.
(a) ...
(b) ...
(c) Gross Income of a Member. - In any case that it is necessary to determine the gross income of a partner for purposes of this Subtitle, said gross income will include its distributable share in the gross income of the company.
(d) ...
(e) Optional contribution. - The provisions of this Section shall not apply to partners of companies that have received the Optional Contribution of Section 1071.10 for said taxable year. ”
Section 6070.42. - Section 1071.10 is added to Act 1-2011, as amended, known as the “Internal Revenue Code for a New Puerto Rico,” to read as follows:
“Section 1071.10. - Optional contribution to companies that provide services.
(a) In the case of companies whose source of income comes substantially from the provision of services, they may opt for an optional contribution, as follows:
If the gross income is: The contribution will be:
No more than $ 100,000 6 percent
In excess of $ 100,000 but
no more than $ 200,000 10 percent
In excess of $ 200,000 but
no more than $ 300,000 13 percent
In excess of $ 300,000 but
no more than $ 400,000 15 percent
In excess of $ 400,000 but
no more than $ 500,000 17 percent
In excess of $ 500,000 20 percent
(b) The partners of a company that avails itself of the provisions of this Section shall not be liable for the payment of the income tax of said company for the year of the election, including the contributions imposed by Sections 1021.01, 1021.02, 1022.01 , 1022.02 or 1022.03. For these purposes, the distributable share that the member receives will be considered an exclusion from gross income, but it will be considered to determine the contributory basis of the partner's participation in the company.
(c) The choice of the company under this Section does not exempt it from informing the results of its operations to the partners pursuant to Section 1061.03 or 1061.04 for purposes of these determining the basis of their participation, pursuant to Section 1071.05.
(d) The company may avail itself of the contribution provided in section (a) of this Section, provided that the following requirements are met:
(1) At least eighty (80) percent of the company's gross income for the taxable year in which it chooses to pay taxes under the provisions of section (a) of this Section, comes from income from services rendered; Y
(2) At least the total of the resulting optional tax was withheld at source in accordance with Section 1062.03 or was covered by the estimated payment provided in Section 1062.07.
(e) That eligible company that opts for this optional contribution will determine its contribution to be paid by applying the rate set forth in section (a) of this Section on gross income, without considering exempt income, and may not claim expenses or deductions and not will be subject to the reports required in Section 1061.15 of the Code, if it complies with the provisions therein.
(f) The Secretary shall establish through regulations, administrative determination, circular letter or general newsletter the conditions under which a company may opt for this optional contribution, established in this Section.
(g) The provisions of this Section shall be effective for taxable years beginning after December 31, 2018. Provided that as long as the Secretary does not establish the conditions under which a service provider may opt for this optional contribution, said service provider shall submit to the withholding agent a copy of an affidavit indicating name, address, employer account number, an affirmation in good faith that your gross income during the taxable year will be equal to or less than one hundred thousand (100,000) dollars and a statement of that the payment received is subject to a withholding tax in accordance with the provisions of this Section instead of the withholding provided in Section 1062.03 of this Code. ”
Section 6070.43. - A Subchapter G is added to Chapter 7 of Subtitle A of Act 1-2011, as amended, known as the Internal Revenue Code for a New Puerto Rico, to read as follows:
SUBCAPTER G - REORGANIZATIONS BETWEEN DRIVING ENTITIES
Section 1077.01 - Election or Conversion to Society.
(a) Entities with a choice of special partnership or corporation of individuals. - In the case of limited liability companies or companies that have an election in force as a special partnership, under Section 1114.12, or as a corporation of individuals, under Section 1115.02, they may request conversion to a company under the provisions of this Chapter. .
(b) Under the conversion provided in section (a), the company will receive the assets and liabilities with the same tax bases, period of possession of said assets and contributory attributes of the special partnership or corporation of individuals, in a transaction exempt from contributions. However, the company will be subject to Section 1115.08 under the same terms and conditions to which the limited liability company or company was subject immediately before the conversion.
(c) That company or limited liability company with the choice of a special company or corporation of individuals who wish to exercise the option of becoming a company for tax purposes must request such conversion through the form determined by the Secretary through a publication of a general nature. Said application must be submitted on or before the filing date of the return required in Section 1061.03 of the taxable year for which the conversion is requested, including extension.
Section 1077.02 - Reorganizations
(a) The provisions of Section 1077.01 shall apply to transactions between a partnership and a special partnership or a partnership and a corporation of individuals, provided that it complies with the definition of reorganization under Section 1034.04 (g) if both entities were Corporations In addition, the provisions of Section 1077.01 will also apply in a liquidation of a special partnership or corporation of individuals with subsequent contribution to a new or pre-existing partnership.
(b) That company, special partnership or corporation of individuals that are interested in a transaction qualifying under the provisions of this Section, must file a request for administrative determination before the Secretary. The Secretary shall establish by general publication the information that the request for administrative determination must contain.
Section 6070.44. - Sections (a) and (c) of Section 1082.01 of Act 1-2011, as amended, known as the “Internal Revenue Code for a New Puerto Rico,” be amended to read as follows:
"Section 1082.01. - Definition of Real Estate Investments.
(a) In General. - For purposes of this Subchapter, the term "real estate investment trust" means a corporation, partnership, trust or association that satisfies the following requirements:
(1) ...
...
(5) its shares or certificates of participation are owned by not less than twenty (20) people. Provided that for the purposes of this paragraph, the shareholders of the real estate investment trust shall be counted:
(A) the shareholders or holders of certificates of participation of an exempt investment trust that falls under Section 1112.02;
(B) the shareholders, partners, members or holders of certificates of participation of any entity created or organized under the laws of the United States of America, or of any State of the United States of America and that during the taxable year qualify as a registered investment company or real estate investment trust under the United States Internal Revenue Code of 1986, as amended; Y
(C) the shareholders, partners, members or holders of certificates of participation of any entity that, by reason of an election or provision of law or regulation under the 1986 Internal Revenue Code of the United States, as amended, or similar provision from a foreign country, be treated as an ignored entity (disregarded entity) or company, or whose income and expenses are attributed to its members for purposes of the federal or foreign country income tax;
(6) at any time during the last half of your taxable year more than fifty (50) percent of the total value of your issued and outstanding shares are owned (based on the attribution rules established by Section 1033.17 (b) (2)) by or for no more than five (5) individuals, but for purposes of this paragraph, individuals described in clauses (A), (B) and (C) will be counted as shareholders of the real estate investment trust of paragraph (5) of this section;
(7) ...
...
(c) Limitations. - A corporation, company, society, trust, or association will not be considered a real estate investment trust for a certain taxable year unless:
(one) ...
...
(7) For purposes of this Subchapter:
(TO) ...
...
(D) The term “real property” means land located in Puerto Rico or the improvements made in them that are used as:
(i) ...
...
(x) facilities and shopping centers, including warehouses;
(xi) ...
...
...
... ”
Section 6070.45 - Section (d) of Section 1082.02 of Act 1-2011 is amended, as amended, known as the Internal Revenue Code for a New Puerto Rico, to read as follows:
“Section 1082.02. —Taxation of a Real Estate Investment Trust and its Beneficiaries.
(to) ...
...
(d) Taxation of the Shareholders or Beneficiaries of a Real Estate Investment Trust.
(1) Residents of Puerto Rico or citizens of the United States. —Any individual resident of Puerto Rico or citizen of the United States and any corporation or domestic partnership, or foreign corporation or corporation engaged in industry or business in Puerto Rico, subject to taxation—
(TO) ...
(B) will include in its gross income and will be taxed at a tax rate of ten (10) percent instead of any other contribution imposed by this subtitle:
(i) ...
(ii) instead of the amount included under clause (i), the total of said dividends, plus the proportional share corresponding to the beneficiary of any contributions on excessive income and benefits paid to the United States, any state, possession or any another part of the United States or any foreign country, for the real estate investment trust with respect to the benefits of which such dividends are considered to have been paid. If a shareholder or beneficiary chooses to include such dividends in the gross income plus such assignable contributions thereto, said beneficiary shall have the right to credit the tax imposed with the amount of said assignable contributions, subject to the limitations of Section 1051.01,
(C) ...
(two) ...
(3) Foreign individuals and foreign corporations and corporations. -
(A) Any foreign individual not resident of Puerto and any foreign corporation or corporation not engaged in industry or business in Puerto Rico subject to taxation shall be taxed at a tax rate of ten (10) percent, instead of any other contribution imposed by this subtitle, on the amount of taxable dividends, as defined in subsection (C) of paragraph (4) of this section.
(B) Any real estate investment trust that pays dividends to a shareholder or beneficiary subject to the tax rate of ten (10) percent imposed by subsection (A) of this paragraph shall, subject to the limitations of Section 1051.01 , deduct and withhold such contribution in accordance with the provisions under Sections 1062.08 and 1062.11, and accredit said contribution with the proportionate share corresponding to said shareholder of the income and excess benefits paid to the United States, any state, possession or any other part of the United States or any foreign country, for such real estate investment trust over or with respect to the benefits of which such dividends are deemed to have been paid.For the purposes of determining the gross amount of the tax that is required to deduct and withhold prior to such credit, dividends paid during the taxable year by the real estate investment trust to the beneficiary shall be considered:
(i) ...
(ii) as including the real and effective total of all other dividends, plus the proportional share corresponding to the beneficiary of any contributions on excessive income and benefits paid to the United States, any state, possession or any part of the United States or to any foreign country, for the real estate investment trust over or with respect to the benefits of which such dividends are deemed to have been paid.
(4) ...
(5) ...
(6) When it is demonstrated to the satisfaction of the Secretary, or the Secretary himself determines, that the retention provided in paragraph (2) or subsection (b) of paragraph (3) will cause undue mishaps without leading to any practical purpose, due to that the amounts thus withheld will have to be reimbursed to the taxpayers, or that such withholding will be excessive, the Secretary may, under those rules and regulations promulgated, relieve the withholding agent from carrying out such withholding in whole or in part.
(7) The Secretary is authorized to provide by regulation, circular letter or any other general information method, under those conditions and up to the limit that he deems appropriate, the requirements and documentation necessary to establish that a shareholder or beneficiary is an entity that It is not subject to taxation.
... ”
Section 6070.46.- Section 1114.16 of Act 1-2011, as amended, known as the “Internal Revenue Code for a New Puerto Rico,” is amended to read as follows:
“Section 1114.16. —Delivery Participation Treatment to Non-Resident Partners.
Participation in the income of a special company distributable to a partner that is a non-resident foreigner or corporation or non-resident foreign corporation of Puerto Rico, as reduced, up to the amount allowed by paragraph (5) or (6), as applicable , of section (e) of Section 1033.02, for the distributable participation of said partner in losses of the special partnership not admitted as a deduction to said partner for previous taxable years under Section 1033.02 (e), shall be considered as a distribution made to the finalize the tax year of the special partnership and it will be governed by the provisions of Sections 1062.08, 1062.10, 1062.11, 1091.01 and 1092.01. However, the amount of the tax withheld under these provisions will be remitted to the Department no later than the fifteenth (15th.
Section 6070.47 .- A Section 1115.11 is added to Act 1-2011, as amended, known as the Internal Revenue Code for a New Puerto Rico, to read as follows:
“Section 1115.11. - Optional contribution to corporations of individuals providing services.
(a) In the case of corporations of individuals whose source of income comes substantially from the provision of services, they may opt for an optional contribution, as follows:
If the gross income is: The contribution will be:
No more than $ 100,000 6 percent
In excess of $ 100,000 but
no more than $ 200,000 10 percent
In excess of $ 200,000 but
no more than $ 300,000 13 percent
In excess of $ 300,000 but
no more than $ 400,000 15 percent
In excess of $ 400,000 but
no more than $ 500,000 17 percent
In excess of $ 500,000 20 percent
(b) The shareholders of a corporation of individuals that avail themselves of the provisions of this Section shall not be liable for the payment of the income tax of said corporation of individuals for the year of the election, including the contributions imposed by Sections 1021.01 and 1021.02. For these purposes, the distributable share that the member receives will be considered an exclusion from gross income, but it will be considered to determine the contributory basis of the partner's participation in the company.
(c) The choice of the corporation of individuals under this Section does not exempt it from informing the results of its operations to its shareholders in accordance with Section 1061.07 for purposes of these determining the basis of their participation, pursuant to Section 1115.05.
(d) The corporation of individuals may avail themselves of the contribution provided in section (a) of this Section, provided that the following requirements are met:
(1) At least eighty (80) percent of the gross income of the corporation of individuals for the taxable year in which it chooses to tax under the provisions of section (a) of this Section, comes from income from services rendered; Y
(2) At least the total of the resulting optional tax was withheld at source in accordance with Section 1062.03 or was covered by the estimated payment provided in Section 1062.05.
(e) That corporation of eligible individuals who opt for this optional contribution will determine their contribution to be paid by applying the rate set forth in section (a) of this Section on gross income, without considering exempt income, and may not claim expenses or deductions and will not be subject to the reports required in Section 1061.15 of the Code, if it complies with the provisions therein.
(f) The Secretary shall establish through regulations, administrative determination, circular letter or general newsletter the conditions under which a corporation of individuals may opt for this optional contribution, established in this Section.
(g) The provisions of this Section shall be effective for taxable years beginning after December 31, 2018. Provided that as long as the Secretary does not establish the conditions under which a service provider may opt for this optional contribution, said service provider shall submit to the withholding agent a copy of an affidavit indicating name, address, employer account number, an affirmation in good faith that your gross income during the taxable year will be equal to or less than one hundred thousand (100,000) dollars and a statement of that the payment received is subject to a withholding tax in accordance with the provisions of this Section instead of the withholding provided in Section 1062.03 of this Code. ”
Section 6070.48.- Section 4010.01 of Act 1-2011, as amended, known as the “Internal Revenue Code for a New Puerto Rico,” is amended to read as follows:
“Section 4010.01.-General Definitions
For the purposes of this Subtitle the following terms, words and phrases will have the general meaning that is expressed below, except when the context clearly indicates another meaning.
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(l) ...
(ee) ...
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(ll) Designated Professional Services. - Means legal services and the following professional services, as regulated by their respective Examining Boards attached to the Department of State of Puerto Rico, if applicable:
(1) ...
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(10) Designated professional services, as defined in this section, if they are provided by a non-resident person to a person located in Puerto Rico, regardless of where the service was provided, as long as said service is directly related or indirectly with the operations or activities carried out in Puerto Rico by said person
(11) Continuing education services, provided by for-profit entities, that are certified by an agency of the Government of Puerto Rico, the Government of the United States, the Supreme Court of Puerto Rico or a private non-profit organization for be offered to professionals who provide designated professional services, as described in this section.
(12) Notwithstanding the provisions of this section, the designated professional services shall not be subject to the fee set forth in Sections 4210.01 (c) and 4210.02 (c) of this Code when:
(A) ... ''
Section 6070.49.- Section 4050.09 of Act 1-2011 is amended, as amended, known as the “Internal Revenue Code for a New Puerto Rico,” to read as follows:
"Section 4050.09. - Creation of the Municipal Improvement Fund.
(a) Creation of the Fund.- A “Municipal Improvement Fund” is created under the custody of one or more private financial institutions designated by the Municipal Financing Corporation:
(1) For periods prior to July 1, 2014, the Municipal Improvement Fund will be nurtured from a special fund to be created by the Government of Puerto Rico, and
(2) For periods beginning as of July 1, 2014, the Municipal Improvement Fund will be nurtured in accordance with the provisions, terms and other conditions set forth in the Municipal Administration Fund Law.
The monies in the Municipal Improvement Fund will be distributed to the municipalities through legislation by the Legislative Assembly of Puerto Rico to be assigned to projects of works and permanent public improvements in the municipalities, such as:
(1) Improvements to schools in the public education system, whether from the State or municipalities.
(2) Works and permanent improvements in communities with limited economic resources.
(3) Works and permanent improvements in state or municipal public residential.
(4) Works and permanent improvements in recreational and sports facilities.
(5) Works and permanent improvements.
(6) Works of rehabilitation or construction of houses for people of limited economic resources, among the projects of works and permanent improvements.
(7) Acquisition and maintenance of movable equipment, school supplies for public education system schools and non-profit institutions.
(8) Up to a maximum of fifteen percent (15%) of the resources of the Municipal Improvement Fund may be distributed to address situations related to direct and essential services to citizens, such as: services aimed at serving the population of children, young and old, as well as acquisition and maintenance of furniture, school and sports equipment and direct services offered through non-profit organizations or through programs to improve the quality of life of residents in disadvantaged communities.
Section 6070.50.- Section (a) of Section 6030.25 is amended to Act 1-2011, as amended, known as the “Internal Revenue Code for a New Puerto Rico,” to read as follows:
“Section 6030.25.- Assignment of payments
(a) General Rule.- When a taxpayer makes voluntary payments to the Secretary, and the latter shall owe contributions, deficiencies, interests, surcharges or penalties for one or more tax periods, the Secretary shall credit said payments to the most previously assessed due debt in strict order. of expiration If the amounts due for a particular tax period exceed the amount of the partial payment, the Secretary shall credit said partial payment against the principal, interest, penalty, and surcharge (in said order), until the amount due in said period is fully satisfied.
(b) ...
(c) ... "
Section 6070.51.- Section 6041.11 of Act 1-2011, as amended, known as the “Internal Revenue Code for a New Puerto Rico,” is amended to read as follows:
"Section 6041.11. —Penality for Failing to Render Certain Information Statements, Forms and Reconciliation Statements, Transaction Reports, Broker Statements or Securities Negotiators.
(a) The penalties established in section (b) shall apply in the event that it ceases to yield on the prescribed date (considering any extension granted) or that it does not surrender in the manner and manner prescribed by the Secretary, including filing by means electronic when required:
(one) ...
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(9) the informative statement on debt forgiveness required in Section 1063.14,
(10) the information statement on payments received by Announcements, Insurance Premiums, Telecommunications Services, Internet Access and Cable or Satellite Television required in Section 1063.16, or
(11) any other informative declaration required by Subtitle A of this Code, which is not included in paragraphs (1) through (10) of this section (a).
(b) ...
(1) for each statement required by Sections 1062.01 (n) (2), 1062.08, 1062.11, 1063.01 (a), 1063.02, 1063.03, 1063.04, 1063.05 (a), 1063.06, 1063.12, 1063.13, 1063.14 and 1063.16, five hundred ( 500 dollars;
(two) ...
... ”
Section 6070.52.-Section 1081.05 of Act No. 1-2011, as amended, known as the “Internal Revenue Code for a New Puerto Rico,” is amended to read as follows:
“Section 1081.05.-Educational Contribution Account.
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(c) Asset Distribution of Educational Contribution Accounts.-
(1) Taxation of payments or distributions of an educational contribution account.-
(A) The tax treatment of total or partial distributions of an educational contribution account shall be determined in accordance with the provisions in force in Section 1081.02 (d) (1) of this Subtitle; provided that any “qualified distribution” in the case of My Future Accounts will not be included as gross income and will be exempt from taxation. For the purposes of this Section, the term “qualified distribution” means any payment or distribution to cover costs of university, technical or vocational studies, or as initial capital for your own business of the account beneficiary, as defined by regulations issued pursuant to the Section 2026.01 of the Incentives Code.
...
... ”
Section 6070.53.- Article 115 is amended and renumbered as Article 102 of Act 187-2015, as amended , known as the “Interagency Portal Validation Law for the Granting of Incentives for Economic Development of Puerto Rico,” to read as follows:
“Article 102.- Term for the fulfillment of the Issuing-Certifying Agencies and the Receiving-Granting Agencies with the requirements related to the Compliance Certification.
Notwithstanding the provisions of this Law, any agency, agency or instrumentality of the Government of Puerto Rico, municipality or public corporation, which is considered as an Issuing-Certifying Agency or a Receiving-Granting Agency, shall be relieved to comply with Articles 1 to 99 of this Law indefinitely, in everything that is related to the Certification of Compliance. ”
Section 6070.54.- Public Policy Statement applicable to the Opportunity Zones.
(a) It shall be the public policy of the Government of Puerto Rico:
(1) Convert Puerto Rico into an investment destination for Opportunity Zone Funds that invest in Priority Projects in areas of opportunity.
Provide the environment for the continuous formation of local and foreign capital for investment in Priority Projects in areas of opportunity.
(3) Establish the tax, legal and regulatory framework that encourages, streamlines and encourages investment in Priority Projects in areas of opportunity.
Section 6070.55.- Definitions applicable to the Opportunity Zones.-
(a) For the purposes of this Chapter the following terms and phrases shall have the meaning set forth below:
(1) “Eligible Activity” - means a Priority Project in Opportunity Zones.
(2) “Chief Financial Officer” - means the chief public finance officer created under Executive Order OE-2013-007.
(3) “Chief Investment Officer” - means the chief investment officer created under Executive Order OE-2018-035.
(4) “Internal Revenue Code” - means Act 1-2011, as amended, known as the “Internal Revenue Code for a New Puerto Rico, or any successor law.
(5) "Federal Internal Revenue Code" - means the Federal Internal Revenue Code of 1986, Pub. Law 99-514, 68A Stat. 3, as amended, or any subsequent law that replaces it.
(6) “Commissioner” - means the Commissioner of Financial Institutions created by Act No. 4 of October 11, 1985, as amended .
(7) “Committee” - means the “Priority Projects Committee in Areas of Opportunity”, attached to the Office of the Governor, with the powers set forth in this Chapter, and composed of the Chief Financial Officer, who will preside, the Chief Investment Officer (Chief Investment Officer), the Executive Director of the Financial Advisory Authority and Fiscal Agency of Puerto Rico, the Executive Director of the Authority for Public Private Partnerships of Puerto Rico, the Secretary of the Department of Economic Development and Commerce, a member appointed by the Senate of Puerto Rico and a member appointed by the House of Representatives of Puerto Rico,or their respective designated from time to time who will have the same rights and obligations of the officials they represent, including attending meetings by those means and / or technology that is authorized and, therefore, used by the Committee to carry out the same. At the request of the Chairman of the Committee, the Governor may appoint other members to the Committee to meet specific requests, according to the nature of the requesting business. The Committee shall adopt the norms, procedures and regulations that are necessary for the purposes of the functions assigned in this Chapter without subjectto the provisions of Law 38-2017, known as the "Uniform Administrative Procedure Act of the Government of Puerto Rico." Provided that five (5) of the seven (7) or a majority of the members of the Committee shall constitute quorum for the meetings of said Committee. However, quorum will only be recognized if a representative of the Legislative Bodies participates in the meetings and is thus certified, unless there are unexcused inconsistencies to two or more consecutive meetings, in which case the quorum will be certified with the other five (5) members present.
(8) “Decree” - means the decree issued in accordance with Section 6070.60 of this Code, whereby the approval of a duly filed application and the conditions imposed on it are notified.
(9) “Credit for eligible investment” - means the credits according to section (i) of 6070.56 of this Code.
(10) “Director” - means the Director of the Industrial Tax Exemption Office.
(11) “Distribution of net income from development of opportunity zones” - means any distribution of dividends or profits of an exempt business or a liquidation distribution of a business exempt from the profits and benefits from the net income of opportunity zones .
(12) “Entity ignored” - means an entity that is treated as a “disregarded entity” for purposes of the Federal Internal Revenue Code.
(13) “Fund” - means an entity that meets the following requirements:
(A) not later than the date of commencement of operations in accordance with section (e) of Section 6070.59 of this Code and during the designation period established in Section 1400Z-1 (f) of the Federal Internal Revenue Code , the entity is an “Opportunity Zone Fund” pursuant to Section 1400Z-2 (d) (1) of the Federal Internal Revenue Code;
(B) during the period beginning the day following the expiration of the designation established in section 1400Z-1 (f) of the Federal Internal Revenue Code and ending the day of the expiration of the decree, the entity would otherwise qualify as an “Opportunity Zone Fund” pursuant to Section 1400Z-2 (d) (1) of the Federal Revenue Code, if such designation is still in effect .
(14) "Governor" - means the Governor of Puerto Rico.
(15) “ Net income from opportunity zones” - means the net income of an exempt business generated in the operation of an eligible activity, as determined under the Internal Revenue Code.
(16) “Eligible investment” - means the cash that has been contributed to:
(A) a Fund that is an exempt business in exchange for shares issued by the Fund (if the Fund is a corporation) or in exchange for a participation in the Fund (if the Fund is a company, limited liability company, company or company in common);
(B) a Fund in exchange for shares issued by the Fund (if the Fund is a corporation) or in exchange for a participation in the Fund (if the Fund is a partnership, limited liability company, partnership or joint venture) and the Fund invests such contributions to the capital of a corporation that is an exempt business or a company that is an exempt business in exchange for shares issued by the corporation or in exchange for a stake in the company (if the company is a limited liability company, company or joint venture) and said investment by the Fund is in compliance with Section 1400Z-2 (d) (2) of the Federal Internal Revenue Code; or
(C) to a corporation that is an exempt business in exchange for shares issued by the corporation, or a limited liability company, partnership or joint venture that is an exempt business in exchange for a stake in a limited liability company, partnership or joint venture, provided that a Fund invests in said corporation or limited liability company, partnership or joint venture and said investment by the Fund is in compliance with Section 1400Z-2 (d) (2) of the Revenue Code Federal internal.
(17) “Investor” - means any natural or legal person who makes an eligible investment, as defined in paragraph (16) of this section.
(18) "Municipal Patent Law" - means Act No. 113 of July 10, 1974, as amended.
(19) "Business" - means a corporation, partnership, liability company, partnership or joint venture.
(20) “Eligible business” - means a business that meets the following requirements:
(A) the business activity is carried out in its entirety in an eligible area;
(B) the activity carried out by the business is not eligible for a tax exemption concession under Previous Incentive Laws, such as: Act 20-2012, as amended, known as the “Law to Promote the Export of Services” , Act 73-2008, as amended, known as the "Puerto Rico Economic Incentives for Development Act," Act 74-2010, as amended, known as the "Puerto Rico Tourism Development Act of 2010," Law 83-2010, as amended, known as the "Green Energy Incentives Act of Puerto Rico", Law 27-2011, as amended, known as the "Law of Economic Incentives for the Film Industry of Puerto Rico" or any successor law or analogous to those described above;
(C) the business is carried out by the Fund or an entity in which the Fund invests under Section 1400Z-2 (d) (2) of the Federal Internal Revenue Code;
(D) the activity carried out by the business is a Priority Project in an area of opportunity.
(21) “Exempt business” - means an eligible business that has been granted a tax exemption decree under this Chapter.
(22) “Exemption Office” - means the Industrial Tax Exemption Office.
(23) “Priority Project in Opportunity Zones” - means an industry or business or other income production activity that will contribute to the social and economic diversification, recovery or transformation of the community in the eligible area.
(24) “Eligible Residential Priority Project” - means a Priority Project in areas of opportunity that has an important housing component.
(25) “Secretary” - means the Secretary or the Secretary of the Department of the Treasury of Puerto Rico.
(26) “Secretary of Economic Development” - means the Secretary or the Secretary of the Department of Economic Development and Commerce.
(27) “Eligible Zone” - means an area of Puerto Rico that has been designated as an area of opportunity under Section 1400Z-1 (b) (3) of the Federal Internal Revenue Code, as delineated on the map maintained by the Department of the Federal Treasury and which has been designated as an eligible area by the Committee through regulations, circular letter, administrative determination or general newsletter.
(b) Definitions of other terms.- The other terms applicable to the Opportunity Zones used in this Chapter, unless specifically provided otherwise, will have the same meaning as they have in the Internal Revenue Code and its regulations.
Section 6070.56.- Income Tax applicable to the Opportunity Zones.
(a) Net income of opportunity zones. - An exempt business will be subject to a fixed rate of income tax on its net income of opportunity zones of eighteen point five (18.5) percent instead of any other contribution imposed by the Internal Revenue Code.
(b) Treatment of ignored entities (“disregarded entities”) and societies.
(1) If an exempt business is an ignored entity, it will be treated for purposes of the Internal Revenue Code in the same manner as it is treated under the Federal Internal Revenue Code and the provisions of Chapter 7 of Subtitle A of the Internal Revenue Code They will not be applicable.
(2) If an Exempt Fund or business is an entity that would otherwise be subject to the provisions of Chapter 7 of Subtitle A of the Internal Revenue Code, the Fund or exempted business shall be treated as a corporation for purposes of Subtitle A of the Internal Revenue Code.
(3) The Secretary shall publish the forms, forms, and declarations that must be filed by the Fund or the exempt business covered by this section and issue any regulations, administrative determination, circular letter or general newsletter that is necessary for purposes of this section.
(c) Royalties, Income or Fees ("Royalties") and License Rights. - However, the provisions of the Internal Revenue Code, in the case of payments made by a business exempt from corporations, societies or non-resident persons, not engaged in industry or business in Puerto Rico, for the use or privilege of use in Puerto Rico of intangible property related to the operation declared exempt under this Chapter, and subject to said payments being considered from sources within Puerto Rico, the following rules shall be observed:
(1) Contribution to Corporations, Foreign Societies or Non-Resident Persons Not Dedicated to Industry or Business in Puerto Rico: Taxation of the Tax. - It will be imposed, charged and paid for each taxable year, instead of the tax imposed by Sections 1091.01 and 1092.02 of the Internal Revenue Code, on the amount of such payments received or implicitly received, by a non-resident foreign individual, or all foreign corporation or corporation not dedicated to industry or business in Puerto Rico, originating exclusively from sources within Puerto Rico, a contribution of eighteen point five (18.5) percent.
(2) Withholding at the Origin and deposit of the Tax. - Any exempt business that has the obligation to make payments to non-residents for the use of intangible property in Puerto Rico related to the exempt operation under this Chapter, will deduct and withhold at the source a contribution equal to that imposed in the paragraph ( 1) of this section and shall deposit withholding in accordance with the regulations of Sections 1062.08 and 1062.1l of the Internal Revenue Code, as applicable.
(d) Deduction and Drag of Net Operating Losses.-
(1) Deduction for Current Losses Incurred in Activities Not Covered by an Exemption Decree.- If an exempt business incurs a net loss in operations that is not in the operation declared exempt under this Internal Revenue Code, it may be used only against income not covered by an exemption decree and will be governed by the provisions of the Internal Revenue Code.
(2) Deduction for Current Losses Incurred in the Exempt Business Operation.- If an exempt business incurs a net loss in the operation declared exempt under this Chapter, it may deduct said loss against its net income from opportunity areas that incurred the loss. or against your net income from areas of opportunity for operations covered by other exemption decrees under this Chapter.
(3) Deduction for Dragging Losses from Previous Years.-A deduction will be granted for carry-over of losses incurred in previous years, as set forth below:
(A) The excess over deductible losses under paragraph (2) of this section may be carried forward against the net income of opportunity areas of subsequent taxable years. Losses will be carried in the order in which they were incurred.
(B) Any net loss incurred in a year in which the election of section (b) of Section 6070.59 of this Code is in force, may be carried forward only against net income of opportunity areas by the exempt business, under the decree under which was made the choice of section (b) of Section 6070.59 of this Code. Losses will be carried in the order in which they were incurred.
(C) Once the exemption period for income tax purposes has expired, the net losses incurred in the operation declared exempt under this Chapter, as well as any excess of the deduction allowed under subsection (B) of this paragraph that you are dragging the exempt business at the expiration date of said period may be deducted against any taxable income in Puerto Rico, subject to the limitations provided in Subtitle A of the Internal Revenue Code. Such losses shall be considered as incurred in the last taxable year in which the exempt business that has a decree under this Chapter enjoyed a tax exemption on income under the decree.
(D) The amount of the net loss in operations to be carried forward shall be computed in accordance with the provisions of Section 1033.14 of the Internal Revenue Code.
(e) Dividend distributions or benefits. -
(1) Exemption. - Shareholders or partners of a corporation or company that is an exempt business will not be subject to income tax onDividend distributions or profits from the profits and benefits generated by your net income from opportunity areas of said exempt business. Subsequent distributions of the profits and benefits generated by its net income from opportunity areas carried out by any corporation or society will also be exempt from any taxation. Provided that the provisions of Section 1062.13 of the Internal Revenue Code, relating to the tax on the implied dividend and Section 1092.02 of the Internal Revenue Code relating to the tax on the amount equivalent to the dividend, shall not apply to the exempt business.
(2) Taxation of Exempt Distributions. - The distribution of dividends or benefits made by an exempt business, even after the expiration of its tax exemption decree, shall be considered made from the profits and benefits generated by its net income from opportunity areas if, at the date of distribution, it does not it exceeds the undistributed balance of said profits and benefits, unless said exempt business, at the time of the declaration, chooses to distribute the dividend or benefit, totally or partially, of other profits or benefits. The amount,
(3) Other exemptions. - The distributions of dividends or benefits of the profits and benefits generated by the net income of opportunity areas of an exempt business will not be subject to the following income taxes:
(A) minimum alternative contribution of Section 1022.03 of the Internal Revenue Code;
(B) additional contribution to corporations and societies of Section 1022.05 of the Internal Revenue Code; Y
(C) alternate basic contribution of individuals of Section 1021.02 of the Internal Revenue Code, or any successor law of a similar nature.
(f) Sale or Swap of Assets.- No gain or loss will be recognized by an exempt business in the sale or exchange of the assets that are made during its exemption period if the exempt business invests an amount equal to the amount made in the sale or exchange in compliance with the requirements of Section 1400Z-2 (d) (1) of the Federal Internal Revenue Code. If the sale or exchange occurs after the expiration of designation of Section 1400Z-1 (f) of the Federal Internal Revenue Code, the requirements of Section 1400Z-2 (d) (1) of the Federal Internal Revenue Code will continue to be applicable for purposes of this section.
(g) Exempt swaps. - The swaps of assets that do not result in taxable events as they are exempt reorganizations will be treated in accordance with the provisions of the Internal Revenue Code, in force as of the date of the swap.
(h) Exemption for Individuals, Successions, Corporations, Societies, Limited Liability Companies and Trusts Regarding Interest Paid or Accredited on Bonds, Promissory Notes or Other Obligations of Certain Exempt Businesses. -
(1) Exemption.- Any individual, estate, corporation, company, limited liability company or trust, will be exempt from paying any tax imposed by the Internal Revenue Code and patents imposed under the Municipal Patent Lawon income from interest received with respect to bonds, promissory notes or other obligations of an exempt business for the development, construction or rehabilitation of, or improvements to an exempt business under this Chapter, conditioning that the funds be used in full for development , construction, or rehabilitation of, or improvements to, an exempt business and / or the payment of existing debts of said exempt business, as long as the funds from those existing debts have originally been used for development, construction or rehabilitation of, or improvements to said exempt business. Expenses incurred by a person making an investment described herein shall not be subject to Sections 1033.17 (a) (5), 1033.17 (a) (11), and 1033.17 (f) of the Internal Revenue Code with respect to said investment,
(2) Direct relationship.- The product of the bond, promissory note or other obligation has to be granted directly to an exempt business.
(i) Credits.-
Provided that in the event that the Eligible Investment is made after the construction of the Priority Project in Opportunity Zones is completed or that the exempt business has begun operations, the credit shall be taken in the following four (4) installments: twenty-five (25) percent in the year in which there has been a significant expansion in the built property or in the exempt business, as the case may be, and according to the Secretary of Economic Development define said term by regulation, administrative determination, circular letter or newsletter of general nature that is necessary for the purposes of this paragraph, and twenty-five (25) percent of the balance of said credit in the next three (3) subsequent years. In the event that the Fund never carries out the Priority Project, The credit provided herein will not be granted. Any eligible investment made during the investor's taxable year will qualify for the tax credit of this section, in that taxable year, as long as it meets all the requirements of this section. Said investment credit may be applied against any determined contribution of the investor, according to Subtitle A of the Internal Revenue Code including the minimum alternative tax of Section 1022.03; or the alternate basic tax of Section 1021.02 of the Internal Revenue Code; or against any other contribution imposed by Previous Incentive Laws, such as: Act 20-2012, as amended, known as the "Law to Promote the Export of Services", Act 73-2008, as amended,
(2) Credit carry-over.- Any investment credit not used in a taxable year may be carried over to subsequent taxable years until it is used in full.
(3) Maximum credit amount.-
(A) Credit for investment. - The maximum amount of the investment credit that will be available for each Fund and exempt business in which the Fund invests may not exceed twenty-five (25) percent of the sum of the following items:
(i) the cash contributed by the investors in exchange for shares or participations of a Fund that is contributed by the Fund to the exempt business in exchange for shares or participations of the exempt business, plus
(ii) the cash contributed by the investors to the exempt business, when said exempt business is carried out by the Fund directly, in exchange for the shares or participations of the exempt business.
(B) Ownership and Distribution of Credits. - The maximum amount of available investment credit will be distributed among investors, in the proportions desired by them. The Fund shall notify the distribution of the credit to the Director, the Secretary, its shareholders and partners and the shareholders and partners of the exempt business, on or before the date provided by the Internal Revenue Code to file the income tax return for the first taxable year of the exempt business, without considering extensions. The distribution chosen will be irrevocable and mandatory for the Fund, exempt business and investors.
(4) Basic adjustment and credit recovery. - The basis of any eligible investment will be reduced by the amount taken as an investment credit under this section, but it can never be reduced to less than zero. The basis of an eligible investment that will be subject to the reduction of this paragraph, will be the basis, as determined considering any election that has been made under Section 1031.06 of the Internal Revenue Code with respect to such investment. In the event that the investment credit taken by the investors, exceeds the investment credit computed by the Director, based on the total investment made by the investor in the Fund or the exempt business, said excess shall be due as a contribution on income to to be paid by the investors, in two installments, beginning with the taxable year where the aforementioned excess was discovered and notified, and the balance remaining in the subsequent year. The Director shall notify the Secretary of the excess credit taken by the investors.
(5) Reports and Penalty under Section 1400Z-2 (d) (1) of the Federal Internal Revenue Code. - The exempt business shall render an annual report to the Director and the Secretary, detailing the total investment made in the exempt business at the date of said annual report, complying with the requirements of Section 1400Z-2 (d) (1 ) of the Federal Internal Revenue Code and if the Fund is subject to the penalty of Section 1400Z-2 (f) (1) of that Code. In the event that a Fund is subject to the penalty of Section 1400Z-2 (f) (1) of the Federal Internal Revenue Code, the Fund shall owe the Secretary, as a penalty, an amount equal to the penalty imposed on the Fund under Section 1400Z-2 (f) (1) of the Federal Internal Revenue Code and will be payable with the income tax return corresponding to the taxable year in which the penalty was imposed. In the event that a Fund is not subject to the penalty of Section 1400Z-2 (f) (1) of the Federal Internal Revenue Code for the expiration of the designation under Section 1400Z-1 (f) of the Revenue Code Internal Federal, the Fund will owe the Secretary, as a penalty,
(6) Assignment of credit. -
(A) Credit for investment. -
(i) After the date of notification of the distribution of the investment credit provided in paragraph (3) of this section, the investment credit provided in this Article may be assigned, sold or in any way transferred, in full or partially, by an investor, to anyone else.
(ii) In the case of investment credit, the basis of the eligible investment will be reduced by the value of the investment credit assigned but may never be reduced to less than zero (0). The basis of an eligible investment that will be subject to the reduction established in this clause, will be the basis, as determined considering any election that has been made under Section 1031.06 of the Internal Revenue Code with respect to such investment.
(B) The money or the value of the property received in exchange for the investment credit shall be exempt from taxation under the Internal Revenue Code, up to an amount that is equal to the amount of the investment credit assigned.
(C) The investment credit may be assigned, sold or in any way transferred only by an Investor, except in the following cases:
(i) An Investor may assign, sell, or in any way transfer an investment credit through a broker-dealer who is registered as such with the Commissioner in the circumstances to be established by regulation by the Secretary of Economic Development.
(ii) A subscriber (“underwriter”) who, having acted as such, had acquired an investment credit at the time of closing for the financing of a Priority Project in Areas of Opportunity, may assign, sell, or in any way transfer any investment credit to a third party. Said assignment, sale or transfer will be considered as made by an Investor if it meets the requirements established by regulation by the Secretary of Economic Development.
(D) The excess of the amount of an investment credit under this section (i) over the money or the value of the property paid by an acquirer of said credit shall not constitute gross income for purposes of the Internal Revenue Code.
(E) The following persons shall notify the Secretary of the assignment, sale or transfer by means of an affidavit for such purposes that will be included with their income tax return for the year in which the transfer of the investment credit of this section is made (i ):
(i) The Investor who has assigned all or part of his investment credit in this section (i);
(ii) The broker-dealer (“broker-dealer”), subscriber (“underwriter”) or creditor of the pledge that has transferred all or part of its investment credit in this section (i); Y
(iii) The acquirer of the investment credit under this section (i).
The affidavit will contain the information that the Secretary deems pertinent through regulations promulgated for this purpose.
(7) Eligible percentage. -
(A) The term "eligible percentage" means the percentage determined by the Committee and may not exceed twenty-five (25) percent. Except as provided in subsection (B) of this paragraph seven (7), the minimum eligible percentage for all exempted businesses shall be five (5) percent.
(B) The Committee may establish a different eligible percentage, pursuant to Article 8, to the eligible percentage set forth in subsection (A) of this paragraph (subject to a maximum of twenty-five (25) percent) to exempt businesses located in those Eligible areas determined by the Committee to assign a different percentage and that meet the criteria determined by this Committee, taking into consideration the following factors:
(i) The potential of the exempt business in creating jobs;
(ii) The contribution of the exempt business in the areas of education, health, and housing; Y
(iii) The investment that could be made by the exempt business in land, buildings and machinery and equipment.
(iv) The potential effect on the economy and the needs of the geographical area
(C) The eligible percentages to be determined by the Committee and the criteria to be determined by the Committee pursuant to subsection (B) of this paragraph seven (7), shall be published in a circular letter, administrative determination or other general publication and shall have the same force of law as a regulation. Provided, further, that the provisions contained in the official publications established in this subsection, shall be valid for at least one (1) year from publication.
(j) Priority of credits under this Code applicable to the Zones of Opportunity.-
(1) In the event that other legislation establishes a ceiling or certain priority in the granting of investment credits, the approval of the investment credits requested under this Chapter shall have priority over the approval of loan applications that are submitted after the effectiveness of This Code under any other law that provides investment credits, if so decided by the Committee, except for those investment credits established in Previous Incentive Laws, such as: sections (c) and (f) of Section 5 of the Law No. 73-2008 as amended, known as the "Puerto Rico Economic Incentives for Development Act" or under Section 3030.01 of this Code, except also those investment credits with a positive Tax Return on Investment .The Secretary of Economic Development shall establish, through regulations, administrative determination, circular letter or general newsletter, the criteria that will be used to compute the estimated Return on Investment . It will be understood that a credit application has been submitted prior to the effectiveness of this Code only if the agency to which the request was submitted issues a written certification to the Committee that the request was submitted before the effective date of this Code and that the request had all the information required to be treated as a complete request.
(2) No agency to which investment credit applications requested under this Chapter are submitted may approve credits without the prior authorization of the Committee.
(3) The agencies before which credit applications are submitted must maintain an inventory of the credit applications submitted after this Code is approved, which will contain the following information:
(A) Previous Incentive Law or the Chapter of this Code under which the credit is requested;
(B) Amount of the requested credit;
(C) Location of the project that generates the credit;
(D) Name of the project proponent;
(E) Type of project;
(F) Total investment in the project;
(G) Direct jobs to be generated in the project;
(H) If the project requesting the loan has capital contributed by a Fund and the Fund's participation in it; Y
(I) Any other information that is required by regulation.
(4) The agencies to which credit applications are submitted, the Secretary of the Treasury and the Secretary of Economic Development shall submit a report to the Committee on a quarterly basis, and on January 1 and July 1 of each year a report to the Legislative Assembly , with the information contained in paragraph (3) of this section except that said reports will not contain the disclosure of the name of the project proponent or the confidential information of each project such as, for example, financial information, status statements and business secrets .
(5) The regulations on this section will be issued jointly by the Secretary of the Treasury and the Secretary of Economic Development, in consultation with the Committee, except that the regulation will not require the disclosure of the name of the project proponent or the confidential information of each project such as financial information, situation statements and business secrets.
Section 6070.57.- Contributions on movable and immovable property applicable to the Opportunity Areas.
(a) In General.-
(1) The movable property of an exempt business used in the development, organization, construction, establishment or operation of the activity covered under the decree shall have a twenty-five (25) percent exemption on municipal and state contributions on movable property during the exemption period set forth in Section 6070.59 of this Chapter. Likewise, in the case of an Eligible Residential Priority Project, the exemption will be twenty-five (25) percent.
(2) The real property of the exempt business used in its development, organization, construction, establishment or operation shall have a twenty-five (25) percent exemption on municipal and state contributions on the property during the exemption period established in Section 6070.59 of this Chapter.
(b) Property under construction or expansion. - The real property of an exempt business shall be twenty-five (25) percent exempt during the period authorized by the decree for the construction or establishment of said exempt business and during the first fiscal year of the Government in which the business exempt would have been subject to property taxes for having been in operations at 1st. of the previous January, at the beginning of said fiscal year, except for the exemption provided here. Similarly, the real property of said exempt business that is directly related to any expansion of the exempt business will be twenty-five (25) percent exempt from property tax during the period authorized by the decree to carry out the expansion.
(c) The municipalities, using their sole discretion and taking into consideration their fiscal and financial health, shall establish by ordinance for this purpose, not later than ninety (90) days after the validity of this Code and, subsequently, no later than June 30 of each year, the additional exemptions for each concept of municipal contribution that will offer uniformly to all exempted businesses above the exemption percentages provided in this Article and up to a maximum of seventy-five (75) percent . Provided, further, that once the Committee has published the list of commercial activities or specific geographical area in accordance with Section 6070.60 of this Code, the municipalities are empowered, in compliance with the requirements of this section and subject to a maximum of seventy-five (75) percent, to vary the additional exemptions, established for all exempted businesses, by municipal ordinance, as long as the municipality considers it beneficial to encourage any of these commercial activities or specific geographical area. It will be a requirement that the municipalities publish the municipal ordinances provided in this section, which will be valid for at least one (1) year from publication.
(d) The municipalities before which applications for exemptions from municipal contributions are presented, authorized in section (c) of this Section, must maintain an inventory of said applications after the approval of this Code, which shall contain the following information:
(A) Previous Incentive Law or Chapter of this Code under which the municipal exemption is requested;
(B) Waiver requested;
(C) Copy of the Municipal Ordinance, when applicable, granting the municipal exemption.
(D) Location or geographical area of the project within the municipality that generates the exemptions;
(E) Name of the project proponent;
(F) Type of project or commercial activity;
(G) Total investment of the project in the municipality;
(H) Direct jobs to be generated by the project in the municipality;
(I) Any other information that is required by the municipality.
(e) Each Eligible Business requesting exemptions from municipal contributions, empowered in section (c) of this Article 5, and the municipalities to which such applications are submitted, shall submit on or before the fifteenth (15) day of the month at the end each quarter, a report to the Committee and the Secretary of Economic Development with the information contained in section (d) of this Article 5. The Secretary of Economic Development, in turn, shall submit a report containing the information contained in section (d ) to the Legislature no later than January 31 and July 31 of each year, except that such reports shall not contain the disclosure of the name of the project proponent or the confidential information of each project, such as financial information, status statements and business secrets.
Section 6070.58.- Municipal Patents and other Municipal Taxes applicable to Opportunity Zones.
(a) Exempted businesses shall have a twenty-five (25) percent exemption on municipal patents, municipal arbitration and other municipal contributions imposed by any municipal ordinance, during the periods provided in section (e) of Section 6070.59 of this Code . Likewise, in the case of an Eligible Residential Priority Project, the exemption will be twenty-five (25) percent.
(b) The taxable portion under section (a) of this Section shall be subject, during the term of the decree, to the tax rate that is in effect on the date of signature of the decree, regardless of any subsequent amendment made to the decree to cover operations of the exempt business in one or several municipalities.
(c) The exempted business shall have a twenty-five (25) percent exemption on municipal contributions or municipal patents applicable to the turnover of said exempted business during the semester of the Government fiscal year in which the exempt business begins operations in any municipality, in accordance with the provisions of the Municipal Patent Law . In addition, the exempt business that has a decree granted under this Chapter will be twenty-five (25) percent exempt from municipal taxes or contributions on the volume of business attributable to said municipality during the two (2) semesters of the fiscal year or years Government prosecutors, following the semester in which operations began in the municipality.
(d) Exempt businesses and their contractors and subcontractors shall be twenty-five (25) percent exempt from any tax, tax, duty, license, arbitration (including construction arbitration), fee or fee imposed by any municipal ordinance on construction. of works to be used by said exempt business within a municipality, without it being understood that said contributions include the municipal patent imposed on the turnover of the contractor or subcontractor of the exempt business during the term authorized by the tax exemption decree.
(e) The municipalities, using their sole discretion and taking into consideration their fiscal and financial health, shall establish by means of ordinance for this purpose, not later than June 30 of each year, the additional exemptions for each concept of municipal contribution that they will offer uniform to all exempted businesses above the exemption percentages provided in this Article and up to a maximum of seventy-five (75) percent. Provided, further, that once the Committee has published the list of commercial activities or specific geographical area in accordance with Section 6070.60, the municipalities are empowered, in compliance with the requirements of this section and subject to a maximum of seventy-five (75 ) percent, to vary the additional exemptions, established for all exempted businesses, through municipal ordinance, as long as the municipality understands beneficial to encourage any of these commercial activities or specific geographical area. It will be a requirement that the municipalities publish the municipal ordinances provided in this section, which will be valid for at least one (1) year from publication.
(f) The shareholders or partners of a corporation or company that is an exempt business will not be subject to municipal patents on dividend distributions or profits from the profits and benefits generated by the net income of opportunity areas of an exempt business.
(g) The municipalities before which applications for exemptions from municipal contributions are presented, authorized in section (e) of this Section 6070.58, must maintain an inventory of said applications after the approval of this Act, which shall contain the following information:
(A) Previous Incentive Law or Chapter of this Code under which the municipal exemption is requested;
(B) Waiver requested;
(C) Copy of the Municipal Ordinance, when applicable, granting the municipal exemption;
(D) Location or geographical area of the project within the municipality that generates the exemptions;
(E) Name of the project proponent;
(F) Type of project or commercial activity;
(G) Total investment of the project in the municipality;
(H) Direct jobs to be generated by the project in the municipality;
(I) Any other information that is required by the municipality.
(h) Each Eligible Business requesting exemptions from municipal contributions, empowered in section (e) of this Section and the municipalities to which such applications are submitted shall submit on or before the fifteenth (15) day of the month at the end of each quarter, a report to the Committee and the Secretary of Economic Development with the information contained in section (g) of this Section. The Secretary of Economic Development, in turn, shall submit a report with the information contained in section (g) to the Legislature no later than January 31 and July 31 of each year, except that said reports shall not contain the Disclosure of the name of the project proponent or the confidential information of each project, such as financial information, status statements and business secrets.
Section 6070.59.- Tax Exemption Periods applicable to Opportunity Zones. -
(a) Exemption.- An exempt business will enjoy a tax exemption for a period of fifteen (15) years.
(b) Flexible Tax Exemption.- Exempted businesses will have the option of choosing the specific tax years to be covered under their decrees in terms of their net income from areas of opportunity as long as they notify the Secretary and the Director no later than the date set forth by law to file your income tax return for said taxable year, including extensions granted for this purpose. Once said exempt business opts for this benefit, its exemption period in terms of its net income from opportunity areas will be extended by the number of taxable years that it has not enjoyed under the exemption decree.
(c) Establishment of Operations in other Municipalities.- An exempt business may establish operations covered by a current exemption decree, in the same municipality where the main office is established, or in any other municipality of Puerto Rico, provided that it notifies the Exemption Office within thirty (30) days prior to the date of commencement of operations in the other municipality; and as long as the Committee has designated that the commercial activity to be established within a geographical area of the same municipality where the main office or in any other municipality is located, is a Priority Project in Opportunity Zones, pursuant to Section 6070.60 of this Code .
(d) Interruption of the Exemption Period. - An exempt business that has ceased operations and subsequently wishes to resume them, the time it was without operating will not be deducted from the corresponding exemption period that corresponds to it and may enjoy the remainder of its exemption period while its tax exemption decree is in force, provided that the Director determines that said cessation of operations was for justified reasons and that the reopening of said exempt business would result in the best social and economic interests of Puerto Rico.
(e) Setting of the Dates of Start of Operations and Exemption Periods.-
(1) The exempt business may choose the date of commencement of operations for the purposes of Section 6070.56 of this Code by filing an affidavit before the Exemption Office, with a copy to the Secretary, expressing the unconditional acceptance of the concession approved to the business exempted under this Act. The date of commencement of operations for the purposes of Section 6070.56 of this Code may be the date of the first payroll for training or production of the exempt business that has a decree granted under this Chapter, or any date within a period of two (2) years after the date of the first payroll.
(2) The exempt business may postpone the application of the fixed tax rate provided in Section 6070.56 of this Code for a period not exceeding two (2) years from the date of commencement of operations set forth under subsection (1) of this section. During the postponement period, said exempt business will be subject to the tax rate applicable under Subtitle A of the Internal Revenue Code.
(3) The exemption period provided in section (a) Section 6070.57 of this Code for the exemption on movable and immovable property shall commence on the first day of the fiscal year of the Government of Puerto Rico subsequent to the last fiscal year in which the Exempt business that has a decree granted under this Chapter was partially exempt, pursuant to the provisions of section (b) of Section 6070.57 of this Code. The partial exemption, provided in section (a) of Section 6070.57 of this Code, for said fiscal year shall correspond to the tax on the property owned by the exempt business on January 1 prior to the beginning of said fiscal year.
(4) The partial exemption period provided in section (a) of Section 6070.58 of this Code, for purposes of the exemption of municipal patents and any other municipal contribution, shall begin on the first day of the first half of the fiscal year of the Government of Puerto Rico, subsequent to the expiration of the partial exemption period set forth in section (c). Provided that, in the case of exempt businesses that have been operating on a commercial scale before applying for the benefits of this Code, the date of commencement of operations for the purpose of municipal patents shall begin on the first day of the semester following the filing date. of the tax exemption request.
(5) In the case of exempt businesses that have been operating on a commercial scale before applying for the benefits of this Chapter, the date of commencement of operations for purposes of the fixed income tax rate provided in Section 6070.56 of this Code will be the date of filing of an application with the Exemption Office, but the start date may be postponed for a period not exceeding two (2) years from that date.
(6) The exempt business must begin operations on a commercial scale within one (1) year from the date of the signing of the decree, the term of which may be extended at the request of said business for cause justified for it, but not grant extensions extending the date of commencement of operations for a term greater than five (5) years from the date of approval of the concession.
Section 6070.60.-Procedures applicable to the Zones of Opportunity. -
(a) Ordinary Procedure for Priority Projects in Areas of Opportunity under this Law. -
(1) The Committee will issue a list designating all those commercial activities or businesses eligible by geographic area, which will be recognized as Priority Projects in Opportunity Zones. The first of said list must be issued on or before July 31, 2019. Each list will be valid for at least one (1) year from its publication. However, none of the provisions set forth herein shall limit the Committee's power to amend the list, including the list of activities or geographical areas arising under paragraphs (2) and (3) of this section, in order to add activities commercial or additional geographic areas, which will be valid from its approval until the end of the term of one (1) year of the original list.
(A) When determining which activities will be considered eligible, as well as the geographic areas in which the list will be applied, the Committee shall take into consideration:
The need for commercial activity in Puerto Rico or a geographical area.
Economic impact of the granting of decrees in the region.
The best interests of the people of Puerto Rico.
(B) When issuing the list, the Committee may not impose additional requirements to those set forth in this Chapter.
(2) Activities that are not published by the Committee as Priorities:
(A) Any person interested in an activity being considered a Priority Project in Areas of Opportunity under this Chapter, and who is not designated as such by the Committee in the published list mentioned in paragraph one (1) of this section, request such designation by letter addressed to the Committee, and file a copy of this request with the Secretary of Economic Development. In said request, any person interested in establishing an economic activity in a geographical region, including the mayors of the Municipalities, will explain and present a description of the activity or activities that they intend to carry out, the location of the activity, the merits of the proposed activity as a Priority Project in Areas of Opportunity and any other information that the Committee may require by regulation or administrative order. The Committee, within thirty (30) days following the date of application, will approve or deny the designation of the activity as a Priority Project in Zones of Opportunity, or request in writing additional information that it deems necessary to help make a determination or request a meeting to discuss the proposed project within thirty (30) days following the date of said request. The Committee will make its decision within thirty (30) days following the receipt of the additional information or after the meeting. In addition, the Committee may extend, in its sole discretion, for a term not exceeding fifteen (15) days the decision on whether the proposed activity constitutes a Priority Project in Opportunity Zones. The Committee will evaluate the information submitted by the applicant and will vote, within the terms set forth herein, to approve or deny the designation of the proposed activity as a Priority Project in Areas of Opportunity and / or expand the geographical area to an activity already approved in another region. In case the application is approved, an amended list of Priority Projects will be published, including that activity. In case the Committee does not comply with the terms set forth herein,
(B) The Committee may delegate to the Secretary of Economic Development to carry out evaluations to determine if an activity can be considered as a Priority Project in Areas of Opportunity under this Chapter, and include it in the published list mentioned in paragraph one (1) of this section. The Secretary of Economic Development will complete its analysis, within the terms set forth in subsection (A) of this paragraph, and issue a report to the Committee, which will determine whether the proposed activity constitutes a Priority Project in Areas of Opportunity. The Committee, within the terms set forth in subsection (A) of this paragraph, by vote, shall approve or deny the designation of the proposed activity issued by the Secretary of Economic Development.
(3) Tax Exemption Applications.-
(A) Any person who has established, or proposes to establish in Puerto Rico an eligible business and that has received a designation as a Priority Project in Areas of Opportunity by the Committee may request from the Director the benefits of this Chapter by filing the application corresponding duly sworn before the Exemption Office.
(B) At the time of filing, the Director will charge the fees for the corresponding procedure, which will be paid by certified check, money order or bank transfer in the name of the Secretary. Such rights shall be provided by regulation, circular letter, administrative determination or general newsletter.
(C) The Secretary of Economic Development shall establish through regulations, the fees to be charged for the procedure. Provided that, after its approval, said regulation shall be reviewed every three (3) years.
(4) Interagency Consideration of Applications.-
(A) Upon receipt of any request under this Chapter by the Exemption Office, the Director shall send, within a period of five (5) days from the date of filing of the request, a copy thereof to the Secretary, to the municipality concerning, and to the Secretary of Economic Development so that this one gives a report of eligibility on the activity to be carried out and other facts related to the request. In evaluating the application, the Secretary and the municipality concerned will verify the compliance of the shareholders or partners of the requesting business with their tax liability under the laws they administer. This verification will not be necessary in the case of non-Puerto Rican shareholders who have not previously been residents of Puerto Rico or have a direct or indirect participation, in the Fund less than ten (10) percent, or corporations whose securities are publicly traded. Failure to comply with said tax liability will be the basis for the Secretary not to endorse the request for exemption from the requesting business.
(B) After the Secretary of Economic Development submits its Eligibility Report and recommendation, the Director will send a copy of the draft decree within five (5) working days of receiving the necessary documentation for the processing of the case, to the agencies concerned , including the municipality concerned and the Municipal Revenue Collection Center (CRIM), for its evaluation and recommendation, of not having submitted any request for opposition to it. Any unfavorable recommendation on the draft decree will have to include the reasons for it.
(i) The agencies and municipalities consulted by the Director shall have ten (10) days to submit their report or recommendation to the draft decree referred to them. In the event that the recommendation of the agency or municipality is favorable, or that it is not received by the Exemption Office during the aforementioned term of ten (10) days, it will be estimated that said draft decree has received a favorable recommendation and The Secretary of Economic Development may take the corresponding action on said request.
(ii) In the event that the municipality raised any objection in relation to the draft decree that referred to it, the Exemption Office will proceed to give consideration to said objection, as it deems necessary, so the Exemption Office will notify the parties and the corresponding agencies, for the administrative action or revision of the draft decree deemed pertinent. Once the controversy raised has been elucidated, the Director will make the determination that he deems appropriate and will submit the case to the Secretary of Economic Development for final consideration.
(C) In case of amendments to concessions approved under this Chapter, the period for the agencies and municipalities concerned to submit a report or opinion to the Director shall be ten (10) days.
(D) Once the reports are received, or the terms for making said reports have expired, the Director shall submit the draft decree and its recommendation, for the consideration of the Secretary of Economic Development, within the following five (5) days.
(E) The Director may rely on the recommendations provided by those agencies or municipalities that provide reports or opinions and may request that they supplement them.
The Secretary of Economic Development shall issue a final determination, in writing, within a term not exceeding five (5) days from the date of submitting the draft decree for consideration.
(G) The Secretary of Economic Development may delegate to the Director the functions that he deems appropriate in his discretion, in order to facilitate the administration of this Chapter, except the function of approving or denying original tax exemption concessions.
(H) The Secretary of Economic Development or the Director may impose additional requirements not provided in this Chapter of this Code to exempted businesses. Nor may it limit the geographical area beyond those established by the Committee.
(b) Renegotiations and Conversions.-
Renegotiation of Current Decrees.-
(A) Any exempt business may request from the Secretary of Economic Development that it considers renegotiating its current decree if said exempt business demonstrates that it will increase the average employment it has had during the three (3) tax years prior to the date of filing the application in twenty-five (25) percent or more; or that you will make a substantial investment in your existing operation that will help maintain economic and labor stability and that represents an increase of twenty-five (25) percent or more in the investment of property used in the exempt business that is land, buildings or structures , machinery or equipment.
(i) If said exempt business proves to the satisfaction of the Secretary of Economic Development that it cannot meet the requirements for increase in average employment or investment described above, it will submit the necessary evidence to the Exemption Office. The Secretary of Economic Development, prior to the favorable recommendation of the Secretary of the Treasury, and prior to the recommendation of the agencies that report tax exemption, may at its discretion consider renegotiation taking into account any other factor or circumstance that reasonably demonstrates that the Renegotiation of its decree will result in the best social and economic interests of Puerto Rico.
(ii) For the purposes of this Article, the employment of the aforementioned exempted business shall consist of the number of individuals resident of Puerto Rico who work permanently on a full-time regular basis in the exempt business providing services as an employee, even if they are not directly in the Exempt business payroll (such as people provided by a staff lease, but will not include people such as consultants or independent contractors).
(iii) For the purposes of this Article, the investment of the exempt business in its existing operation shall be computed according to the value in the books of the property, computed with the benefit of the depreciation allowable under the straight-line method, taking into account the useful life of said property determined in accordance with Subtitle A of the Internal Revenue Code, instead of any other accelerated depreciation allowed by law.
(iv) If the requested renegotiation is approved, the Secretary of Economic Development, upon recommendation of the agencies that report on tax exemption, will take into consideration the number of jobs of the exempt business, the place where it is located, the investment and additional employment, as well as the remainder of the period of its decree, the tax benefits already enjoyed and its financial capacity, so that the exempt business can obtain a new decree with tax benefits adjusted under this Chapter.
(v) The Secretary of Economic Development shall establish the terms and conditions that it deems necessary and convenient to the best interests of Puerto Rico, within the limits set forth in this Chapter, and may at its discretion, upon recommendation of the agencies that report on tax exemption, impose special employment requirements, limit the period and percentage of exemption, limit contributions to be exempted, and require and provide any other term or condition that is necessary for the purposes of economic development proposed by this Chapter.
(vi) When the exempt business, which is interested in renegotiating its decree, does not comply with the requirements for increase in employment or investment set forth in this section, the Secretary of Economic Development may, upon the favorable recommendation of the Secretary, and the agencies that render tax exemption reports, impose a fixed rate of tax on income greater than that imposed in the exempt business decree.
(c) Denial of Applications.-
(1) Denial if it is not in Benefit of Puerto Rico. - The Secretary of Economic Development will deny any request when it determines that the concession does not result in the best economic and social interests of Puerto Rico, after considering the nature of the physical facilities, the number of jobs, the amount of the payroll and the investment , the location of the project, its environmental impact, or other factors that in its opinion merit such determination, as well as the recommendations of the agencies that report on tax exemption.
(A) The petitioner, after being notified of the denial, may request a reconsideration from the Secretary of Economic Development, within sixty (60) days of receiving the notification, adducing the facts and arguments regarding his request that he understands to do, including the offer of any consideration for the benefit of Puerto Rico that it deems worthy of its request for reconsideration.
(B) In case of reconsidering the request, the Secretary of Economic Development may accept any consideration offered for the benefit of Puerto Rico and may request and provide any other term or condition that is necessary to ensure that said concession will be in the best interests of Puerto Rico and the economic development purposes proposed by this Chapter.
(2) Refusal for Conflict with Public Interest.- The Secretary of Economic Development will deny any request when determined, based on the facts presented for its consideration and after the applicant has had the opportunity to offer a full presentation on the issues in dispute , that the request is in conflict with the public interest of Puerto Rico because the requesting business has not been organized as a bona fide business on a permanent basis, or in view of the moral or financial reputation of the persons that constitute it, the plans and methods to obtain financing for the requesting business, the proposed nature or use of the products or services of the requesting business, or any other factor that may indicate that there is a reasonable possibility that the granting of exemption will result in prejudice to the economic and social interests of Puerto Rico.
Section 6070.61.- Transfer of the exempt business applicable to the Opportunity Zones.
(a) Exempt Business Transfer. -
(1) General Rule. - The transfer of a decree, or of the shares, property or other ownership interest in an exempt business must be previously approved by the Director. If it is carried out without prior approval, the decree will be annulled from the date on which the transfer occurred, except in the cases listed in paragraph (2) of this section. Notwithstanding the foregoing, the Director may retroactively approve any transfer made without his prior approval, when in his judgment, the circumstances of the case warrant, taking into consideration the best interests of Puerto Rico and the purposes of this Chapter.
(2) Exceptions.- The following transfers will be authorized without prior consent:
(A) The transfer of the assets of a decedent to his estate or the transfer by legacy or inheritance.
(B) The transfer within the provisions of this Chapter.
(C) The transfer of shares or any social participation when such transfer does not directly or indirectly result in a change in the ownership or control of an exempt business that has a decree granted under this Chapter.
(D) The transfer of shares of a corporation that owns or operates an exempt business, when it occurs after the Secretary of Economic Development has determined that any transfer of shares of such corporation will be allowed without prior approval.
(E) The pledge, mortgage or other guarantee for the purpose of responding to a bona fide debt . Any transfer of control, title or interest under said contract shall be subject to the provisions of section (a) of this Article.
(F) The transfer by operation of this Chapter, by order of a court or by a bankruptcy judge to a trustee or fiduciary. Any subsequent transfer to a third person that is not the same debtor or bankrupt above will be subject to the provisions of section (a) of this Section.
(G) The transfer of all the assets of an exempt business that has a decree granted under this Chapter to an affiliated business. For the purposes of this paragraph, affiliated businesses are those whose shareholders or partners have in common eighty (80) percent or more of the shares, or of the voting shares, issued and in circulation of said exempt business.
(3) Notification.- Any transfer included in the exceptions of this section will be informed by the exempt business that has a decree granted under this Chapter to the Director, with a copy to the Secretary of Economic Development and the Secretary, within thirty (30) following days, except those included under subsection (D) of paragraph (2) that do not become a shareholder in a holder of ten percent (10%) or more of the issued capital of the corporation, and those included under subsection (G ) of paragraph (2), which must be informed by the exempted business to the Director, with a copy to the Secretary, prior to the date of the transfer.
Section 6070.62.- Permit and Mandatory Revocation applicable to the Opportunity Zones.
(a) Permit Revocation.- A decree may be revoked by the Secretary of Economic Development:
(1) When the exempt business does not comply with any of the obligations imposed on it by this Chapter of this Code or its regulations, or by the terms of the exemption decree.
(2) When the exempt business does not start, or does not finish the construction of the facilities necessary for the activities that it proposes to carry out, or the provision of the services it intends to provide, or when the activity does not begin within the period set for those purposes in the decree.
(3) When the exempt business suspends its operations for more than thirty (30) days without the express authorization of the Secretary of Economic Development. Provided that the Secretary of Economic Development may authorize such suspensions for periods greater than thirty (30) days when they are motivated by extraordinary circumstances.
(b) Mandatory Revocation.-
(1) The Secretary of Economic Development will revoke any decree granted under this Chapter when it has been obtained by false or fraudulent representations about the nature of the eligible business, or any other facts or circumstances that, in whole or in part, motivated the concession. of the decree.
(2) It will be grounds for revocation under this paragraph, in addition, when any person commits, or tries to commit, on its own behalf or in the name of any other person, a violation of the provisions concerning successor businesses or exempt predecessor businesses.
(3) When the exempt business ceases to comply with its tax liability under the Internal Revenue Code and other tax laws of Puerto Rico, when the breach is duly certified by the Secretary.
(c) Procedure.- In cases of revocation of a decree granted under this Chapter, the concessionaire shall have the opportunity to appear and be heard before the Director or any Special Examiner of the Exemption Office designated for that purpose, who shall inform his conclusions and recommendations to the Secretary of Economic Development, prior to the recommendation of the agencies that render tax exemption reports.
(d) Effect of the Revocation.- In the case of revocation, all computed net income, previously reported as net income of opportunity zones, which has or has not been distributed, as well as all distributions thereof, will be subject to the taxes imposed under the provisions of the Internal Revenue Code. The taxpayer will also be considered as having filed a false or fraudulent return with the intention of evading the payment of contributions and, consequently, will be subject to the penal provisions of the Internal Revenue Code. The tax due in such case, as well as any other contributions hitherto exempted and unpaid, shall be due and payable from the date on which such contributions have expired and have been payable except by decree,
Section 6070.63.-Nature of the Decrees, applicable to the Opportunity Zones. -
(a) In general.- The decrees issued under this Chapter shall be considered a contract between the exempt business, its shareholders, partners or owners and the Government of Puerto Rico, and said contract shall be the law between the parties. Said contract shall be interpreted liberally, in accordance with the purpose of this Chapter to promote the socioeconomic development of Puerto Rico. The Secretary of Economic Development has discretion to include, on behalf of and on behalf of the Government of Puerto Rico, those terms and conditions, concessions and exemptions that are consistent with the purpose of this Chapter and that promote the creation of jobs through socio-economic development of Puerto Rico, taking into consideration the nature of the petition or action requested,
(b) Obligation to Comply with the Representation in the Application. - Any exempt business that has a decree granted under this Chapter, will carry out its substantially exempt operations as represented in its application, except when they have been varied by means of amendments authorized by the Secretary of Economic Development in accordance with the provisions of this Chapter.
Section 6070.64.- Administrative Decisions applicable to Opportunity Zones - Purpose.
(a) All decisions and determinations of the Committee, regarding the designation of an activity as a Priority Project in Areas of Opportunity, or of the Secretary of Economic Development, regarding the granting of the decree and its content, shall be final and against the they will not proceed with judicial or administrative review or other appeal, unless specifically provided otherwise. Provided that, once a decree has been granted under this Chapter, no agency, public instrumentality, political subdivision, public corporation, or municipality, whether autonomous or not, of the Government of Puerto Rico that is not the Secretary of Economic Development or the Governor, may challenge the legality of said decree or any of its provisions.
(b) Any concessionaire adversely affected or harmed by any action taken by the Secretary of Economic Development, revoking and / or canceling an exemption decree in accordance with section (b) of Section 6070.54 of this Code, shall be entitled to judicial review. of the same by means of the presentation of a resource of revision before the Court of Appeals of Puerto Rico, within thirty (30) days after the decision or final adjudication of the Secretary of Economic Development. During the processing of the judicial review, the Secretary of Economic Development is authorized, when in his judgment the justice requires it, to postpone the effective date of any action taken by him under those conditions that are required and to the extremes that are necessary. to avoid irreparable damage.Finance for the amount of contributions not paid until then, plus interest and penalties, plus interest computed for the period of one (1) year at the prevailing legal rate. Any decision or judgment of the Court of Appeals of Puerto Rico shall be subject to review by the Supreme Court of Puerto Rico through certiorari requested by any of the parties in the manner provided by law.
(c) The members of the Committee and the employees and employees with functions related to the Committee shall not incur civil liability for any action or omission in the performance of their duties under this Chapter of this Code, except when there is conduct constituting a crime or I suffered gross negligence.
Section 6070.65.- Periodic Reports to the Committee applicable to the Opportunity Zones.
(a) In General.- Annually, and independently of any other report required by law, the Director, in consultation with the Secretary, the Secretary of Economic Development and the Planning Board, will report to the Committee on the economic and fiscal impact of this Chapter. Said report must be submitted within one hundred eighty (180) days after the close of each fiscal year. The aforementioned report will contain the information that the Committee publishes by means of a circular letter or other publication of general circulation.
Section 6070.66.-Reports Required for Exempt Businesses and their Shareholders or Partners applicable to the Opportunity Zones.
(a) Every exempted business shall file an income tax return annually with the Secretary, regardless of the amount of its gross or net income, separated from any other return that for other reasons is required to file in relation to the operations of the industry covered by the benefits provided in this Chapter, and in accordance with the Internal Revenue Code for a New Puerto Rico. The Secretary may share with the Tax Exemption Office the information thus received, provided that the confidentiality of said information is protected.
(b) Every shareholder or partner of an exempt business that has a decree granted under this Chapter shall submit annually an income tax return to the Department of Finance in accordance with the provisions of the Internal Revenue Code, provided that under said Code it had the obligation to do so.
(c) The exempt business shall have the obligation to maintain in Puerto Rico, separately, the accounting related to its operations, as well as the records and files that are necessary, in addition to providing and submitting those affidavits and complying with the rules and regulations in force for the due fulfillment of the purposes of this Chapter and that the Secretary may prescribe from time to time in relation to the imposition and collection of all kinds of contributions.
(d) All exempt business shall be filed annually at the Exemption Office, with a copy to the Secretary, not later than thirty (30) days after the date prescribed by law for filing the corresponding income tax return, including extensions. granted for this purpose, an authenticated report signed by the President, managing partner, or his authorized representative. Said report must contain a list of data that reflects compliance with the conditions established in the decree with the information that may be required in the form promulgated for these purposes or that is required by Regulation. This report must be accompanied by the rights provided by Regulation and they will be paid by a postal or bank draft or certified check or by electronic means in the name of the Secretary of the Treasury. The information offered in this annual report will be used for statistical purposes and economic studies, as provided in this Chapter. Likewise, the Exemption Office shall carry out every two (2) years, at least, a compliance audit with respect to the terms and conditions of the decree granted under this Chapter.
(e) The Director may impose an administrative fine of ten thousand (10,000) dollars on any exempt business that fails to file any of the reports that the Secretary or the Director may require, pursuant to the provisions of paragraphs (a) to (e) of this Article, or to file them after the expiration date. The Exemption Office may initiate a civil action for the collection of said administrative fine in the General Court of First Instance of Puerto Rico, Superior Section, San Juan Chamber, which shall have exclusive jurisdiction to understand that procedure. The filing of an incomplete report will be considered as not filed,
Section 6070.67.- Regulations applicable to the Opportunity Zones.
To enforce the provisions and purposes of this Chapter, the Secretary of Economic Development, in consultation with the Secretary of the Treasury, shall approve those regulations that are necessary to govern all matters concerning the manner and manner in which the decrees shall be requested and granted here. contemplated The Secretary of the Treasury shall approve regulations, in consultation with the Secretary of Economic Development, regarding the granting and assignment or sale of tax credits under Section 6070.56 of this Code. These regulations will also be subject to the provisions of Law 38-2017, known as the "Uniform Administrative Procedure Act of the Government of Puerto Rico."
The Secretary may issue regulations, administrative determinations, circular letters or general newsletters on everything related to compliance with the exempt business and the Fund with the provisions of the Internal Revenue Code and this Code.
Section 6070.68- Application of the Internal Revenue Code of Puerto Rico.
The Internal Revenue Code will apply in a supplementary manner to the extent that its provisions are not in conflict with the provisions of this Code.
Article 6070.69.- Special Process for the Evaluation and Granting of Permits.
(a) Special Process.- Government agencies with interference in the processing of permits, consultations, licenses, franchises, or certifications for Priority Projects in Areas of Opportunity, will be governed by the provisions of this Chapter and will be exempted from compliance with the terms and procedures established in Act 161-2009, as amended, known as the “Law for the Reform of the Permit Process of Puerto Rico,” Act No. 75 of June 24, 1975, as amended, known as “ Organic Law of the Puerto Rico Planning Board, "Law 81-1991, known as the" Autonomous Municipalities of the Commonwealth of Puerto Rico Act of 1991 ", and Law 38-2017, as amended, known as the" Law of Uniform Administrative Procedure of the Government ”, and the regulations promulgated under them.The substantive requirements applicable to permits, consultations, licenses, franchises, consultations or certification will be those established by the law or regulation governing the said procedure.
(b) Jurisdiction.- Regardless of the provisions of any other law, any request for permission for a Priority Project in Areas of Opportunity will be evaluated by the Office of Permit Management (OGPe), regardless of the location of the same and any agreement of transfer of hierarchies that exist with the municipality where it is located. Provided, however, that the OGPe will be obliged to request the municipality where the Priority Project in Opportunity Zones, comment on the proposal.
(c) Deadline for Comments.- The agencies or municipalities to which the OGPe requests comments will have the non-extendable term of ten (10) working days from the request for comments to submit them. If no reply is received, after said term of ten (10) working days, the proposal will be understood as favorable.
(d) Term to Process Environmental Documents.- A term of twenty (20) working days is established, from the moment the environmental document is filed for a Priority Project in Areas of Opportunity for the OGPe to express its agreement or objection to according to the provisions of Article 4 (B) (3) of Law 416-2004, as amended, known as the "Law on Environmental Public Policy". This term may be extended by the OGPe when the environmental document presented is incomplete, when additional information is required or for other meritorious reasons.
(1) The final evaluation and determination regarding the environmental document will be carried out by an Inter-Agency Subcommittee on Environmental Compliance to be created by the Governor through an Executive Order, whose representatives will have the power to evaluate and adjudicate the possible environmental impacts that the projects to be developed. In extraordinary situations, the majority vote of the Interagency Subcommittee may extend the term to evaluate and award the possible environmental impacts up to a period not exceeding thirty (30) days. If the Inter-Agency Subcommittee on Environmental Compliance has not been created, the Inter-Agency Subcommittee on Environmental Compliance is authorized that has been created by the Governor under Act 76-2000, as amended, to carry out the procedures authorized under this Article.
(e) Term to evaluate Location Consultation.- Once the Priority Project in Opportunity Zones has obtained the environmental compliance certification in accordance with Article 4 (B) (3) of Law 416-2004, as amended, the OGPe will have twenty (20) working days to evaluate the location query submitted for said project, if any.
(f) Term for other Development Permits.- The permits for urbanization, construction, segregation (lotification) and others for the development of the Priority Project in Opportunity Zones, other than a location consultation and other individual, general or consolidated permits under the jurisdiction of OGPe, they will be evaluated by the OGPe, which will have ten (10) working days to evaluate them once the corresponding permit application has been satisfactorily filed.
(g) Notifications.- In any procedure in which it is required to notify interested parties, the publication of a single notice in two (2) newspapers of general circulation will be sufficient. In addition, a sign will be placed in a place with prominent exposure indicating, among other things, the object of the work or project, the address on the Internet and the telephone number of the relevant agency.
(h) Regulations and Administrative Orders.- The Permit Management Office (OGPe) is empowered to establish alternate procedures to issue the granting of permits, licenses, endorsements, consultations or certifications related to Priority Projects in Opportunity Zones, persons with the requirements of this Chapter. During the period that such procedures have not been established, the OGPe is authorized to apply the procedures established in the regulations that it has adopted pursuant to Law 76-2000, as amended, applying the deadlines established in this Law. to government agencies to issue the administrative orders that are necessary to enforce and fulfill the purposes of this Law.
(i) Priority.- The projects that will be carried out under the provisions of this Law will have priority in the programming of all government agencies. However, projects that qualify as emergency pursuant to Law 76-2000, as amended, will have priority over Priority Projects in Opportunity Areas to be presented at the same time.
(j) Request for Review and Order of Paralysis.- The party adversely affected by any resolution or order issued by OGPe or any other agency with interference shall have the sole remedy to submit a request for review before the Court of Appeals. Any request for judicial review of the administrative agency concerned must be submitted to said court, within the jurisdictional term of twenty (20) calendar days, counted from the date on which a copy of the notification of the resolution or final order is filed in the file. from the agency. The appellant shall notify the submission of the request for review to the agency under appeal and to all interested parties within the established term; provided, that compliance with said notification shall be jurisdictional.
(1) If the Court of Appeals so requests, the administrative agency in question shall submit the case files to the Court of Appeals within ten (10) calendar days following the order of the Court. The Court of Appeals will handle the review as provided in Articles 13.1 (b) and 13.1 (c) of Act 161-2009, as amended.
(2) The issuance of a review car will not paralyze the authorization or the performance of a work or the implementation of a rule, regulation, order, resolution, determination, processing, grant or validity of any permit, license, endorsement or certification of an agency or official; the award of an auction or the granting of a contract issued or arising around the projects to be carried out, unless the court expressly orders it to prevent irreparable damage, after considering a motion in aid of jurisdiction to such effects. For the court to issue such an order, the appellant must prove that it is essential to protect the jurisdiction of the court; which has a high probability of prevailing in the merits; that the stop order will not cause substantial damage to the other parties; that will not harm the public interest; that there is no reasonable alternative to avoid the alleged damages; and that the damage cannot be compensated by granting a monetary remedy or any other appropriate remedy in law, all in accordance with the provisions of the Civil Procedure Code of 1933.
(3) Any court order may only affect that component or components of the project that is the subject of controversy in the case and where substantial damage is involved.
(k) For the purposes of this Section, the term Priority Projects in Opportunity Zones shall include projects agreed in a Partnership Contract in accordance with Act 29-2009, as amended, known as the “Law for Public Private Alliances of Puerto Rico "
Section 6070.70- Supremacy of this Code
The provisions of this Code and the regulations or norms that are adopted in accordance will prevail over any other provision of law, regulation or norm that was not in harmony with the former, except for the provisions of Law 26-2017, as amended, known as "Law of Compliance with the Fiscal Plan".
Section 6070.71.- Severability
If any clause, paragraph, subparagraph, sentence, word, letter, article, provision, section, subsection, title, chapter, subchapter, section or part of this Law were annulled or declared unconstitutional, the resolution, the opinion or the sentence handed down to such effect shall not affect, harm, or invalidate the remainder of this Law. The effect of such judgment shall be limited to the clause, paragraph, subparagraph, sentence, word, letter, article, provision, section, subsection, title, chapter, subchapter, section or part of it that would have been annulled or declared unconstitutional. If the application to a person or a circumstance of any clause, paragraph, subparagraph, sentence, word, letter, article, provision, section, subsection, title, chapter, subchapter, section or part of this Law will be invalidated or declared unconstitutional, the resolution, the opinion or the sentence passed will not affect or invalidate the application of the remainder of this Law to those people or circumstances to which it can be validly applied. It is the express and unequivocal will of this Legislative Assembly that the courts enforce the provisions and application of this Law to the greatest extent possible, even if it is nullified, annulled, invalidated, harms or declares any of its parts unconstitutional or, although it is left without effect, invalidates or declares its application unconstitutional to any person or circumstance. This Legislature would have approved this Law regardless of the determination of separability that the Court may make. The opinion or sentence issued will not affect or invalidate the application of the remainder of this Law to those persons or circumstances to which it may be validly applied. It is the express and unequivocal will of this Legislative Assembly that the courts enforce the provisions and application of this Law to the greatest extent possible, even if it is nullified, annulled, invalidated, harms or declares any of its parts unconstitutional or, although it is left without effect, invalidates or declares its application unconstitutional to any person or circumstance. This Legislature would have approved this Law regardless of the determination of separability that the Court may make. The opinion or sentence issued will not affect or invalidate the application of the remainder of this Law to those persons or circumstances to which it may be validly applied. It is the express and unequivocal will of this Legislative Assembly that the courts enforce the provisions and application of this Law to the greatest extent possible, even if it is nullified, annulled, invalidated, harms or declares any of its parts unconstitutional or, although it is left without effect, invalidates or declares its application unconstitutional to any person or circumstance. This Legislature would have approved this Law regardless of the determination of separability that the Court may make. It is the express and unequivocal will of this Legislative Assembly that the courts enforce the provisions and application of this Law to the greatest extent possible, even if it is nullified, annulled, invalidated, harms or declares any of its parts unconstitutional or, although it is left without effect, invalidates or declares its application unconstitutional to any person or circumstance. This Legislature would have approved this Law regardless of the determination of separability that the Court may make. It is the express and unequivocal will of this Legislative Assembly that the courts enforce the provisions and application of this Law to the greatest extent possible, even if it is nullified, annulled, invalidated, harms or declares any of its parts unconstitutional or, although it is left without effect, invalidates or declares its application unconstitutional to any person or circumstance. This Legislature would have approved this Law regardless of the determination of separability that the Court may make. invalidates or declares its application unconstitutional to any person or circumstance. This Legislature would have approved this Law regardless of the determination of separability that the Court may make. invalidates or declares its application unconstitutional to any person or circumstance. This Legislature would have approved this Law regardless of the determination of separability that the Court may make.
Section 6070.72.- Validity
This Act will become effective as of July 1, 2019. Provided that the validity of Section 6070.28 of this Code shall be retroactive to November 7, 2018. Provided, further, that the validity of Section 6070.53 of this Code shall be retroactive. as of November 17, 2015.
The Secretary of the DDEC may take transitional measures between the effective date set forth above and December 31, 2019, including but not limited to enforcing new incentives provided in this Code through regulations, to ensure the achievement of the objectives set forth in this Law. It is also provided that any request for incentives and tax benefits that is duly submitted and pending as of December 31, 2019 will be processed under the previous law under which it was submitted, notwithstanding that the applicant may choose to accept to the benefits provided in this Law. Likewise, it is provided that as of January 1, 2020, any request for incentives and tax benefits must be submitted under the provisions of this Law.