Act 73, known as the Economic Incentives Act for the Development of Puerto Rico, was established to provide the adequate environment and opportunities to continue developing a local industry, offer an attractive tax proposal, attract direct foreign investment and promote economic development and social betterment.

To incentive businesses Puerto Rico has created an aggressive tax program, focused on manufacturing sector. Puerto Rico offers excellent conditions for an efficient production process.

Controlling costs is a constant challenge for manufacturers. The potential to save money on taxes with the incentives offered by Puerto Rico under Act 73 has made doing business there irresistible to many types of manufacturing companies. When companies choose to relocate, the tax savings make production more economical and they can pass these savings on to customers, giving them an edge among the competition.

Criterion Advisors Group can educate you on the Puerto Rico tax incentive for manufacturing companies. We can show you how to maximize the number of tax credits and exemptions your business qualifies for.

Our strategies will position your business to receive all of the appropriate tax incentives offered to the manufacturing industry under Act 73. Some of the tax benefits include:

• 4% Fixed Income tax rate on industrial development income
• 1% Fixed income tax rate for pioneer or novel product manufacture
• 12% Fixed income tax rate on intangible property
• 0% Federal income tax
• 100% Tax exemption on dividend distributions
• 100% Tax exemption on excise tax and sales and use tax
• 100% Tax exemption on municipal construction taxes
• 90% Tax exemption from personal property and real estate tax
• 60% Tax exemption from municipal license taxes
• 100% First year accelerated depreciation
• Up to 50% tax credit on purchases of products manufactured or recycled in PR
• Up to 50% tax credit on Research and Development (R&D) Activities
• Up to $5,000 for each job created during the 1st year of operations
• 100% Credit for training activities
• Special deductions on investments for structure, machinery, and equipment
• 15-year tax Government decree

The tax incentives offered under Act 73 benefits food processing companies and other manufacturing businesses producing products like consumer goods, apparel, biotech materials, pharmaceuticals, and medical devices.

To qualify for the Tax Exemption Decress, you must meet the standards of an eligible activity. The following are some, but not all, that qualify:

Industrial units dedicated to manufacturing on a commercial scale:

• Subcontracted services rendered in Puerto Rico that are essential to a manufacturing unit that belongs to “a high economic impact cluster” such as a key supplier of said tax-exempt business that is a group engaged in manufacturing. Key provider services shall be those that are directly related to the manufacturing activities of a tax-exempt business, including the following:
  • Specialized storage
  • Inventory management of raw material, material in process, end product, and inventory of parts, including receipt, storage, and inspection
  • Logistics regarding the distribution of manufactured goods and the export of services by tax-exempt businesses
  • Materials and equipment
  • Insertion and distribution of printed materials
  • Digitalization of documents
  • Sterilization of instruments and clean room garments
  • Quality control and validation of equipment and systems services
  • Rating of equipment, utilities, or facilities and calibration and maintenance of equipment and processes
  • Repair and remanufacture of products
  • Project engineering
  • Programming and data systems
  • Management services
  • Specialized technical training
  • Development and reproduction of educational programs
  • Logistics related to sales functions and purchases, such as those about orders and transportation
• Owners of property used by an exempt business in its exempt operations, such as a lessor of real estate used in operations of an exempt business
• Activities engaged in the breeding of animals for experimental use in laboratories for science and medical research, and other similar applications
• Recycling activities that involve: a transformation of recyclable materials into raw material or ingredients used for the elaboration of a product (partial recycling);  the preparation of such recycled raw material for local sale or use or for exportation; or the transformation of recycled materials mainly collected in Puerto Rico into commercial articles (total recycling)
• Operations engaged in sowing and cultivation through the process of hydroponics
• The development of licensed or patented software that may be reproduced on a commercial scale
• The licensing of intangible property, whether developed or acquired by the exempt business, that has a decree under the Act;
• An industrial unit that produces purified bottled water
• The construction of social interest housing, planning, and development of self-sustainable or partially sustainable communities
• Research and scientific or industrial development labs for the development of new products or industrial processes, for experimental purposes, clinical, epidemiological, and basic science research in mental health projects, scientific research of medicines, and other similar purposes
• Certain research and development activities conducted in laboratories

The Tax Exemption Decree is for 15 years and will be unaffected by any future legislation.

For additional information or questions please contact us at peter@criterionadvisorsgroup.com, call us at 939-391-1680 or complete our Contact Form.