Puerto Rico’s natural beauty and world-class attractions make it a must-visit vacation spot, but these are not the only attractive selling points for the global tourism industry. The Island’s incentive package for the tourism and hospitality industry is equally enticing.  One of the key objectives of the Code is to convert Puerto Rico into a tourist destination of the first order at a global level by strengthening the Island’s economy through the tourism industry.

While tourism is not new to Puerto Rico, there are still solid tax incentives offered through Act 74 that make starting a tourism business here very inviting. Under the Act, the following business activities are eligible Tourism Activities:

• Owning and/or operating (a) hotels, condo hotels, timeshares/vacation clubs, hostels or guesthouses, excluding the operations of casinos; (b) theme parks, golf courses, marinas for tourism purposes or port facilities in areas that promote tourism activities; (c) natural resources as a source of entertainment value; and (d) other entertainment or recreational tourism-related facilities Operating a rental/leasing business which rents or leases property to be used in carrying out these activities and

• Acquiring an existing Act No. 74 Business and making substantial renovations there to Hotels, small inns, timeshares, golf courses, theme parks, and marinas all may qualify.

The Act No. 74 Decree grants the Act No. 74 Business the following tax exemptions, among others:

• A 90 percent exemption on the net income derived from Act No. 74 Eligible Activities11
• A 12 percent withholding tax on royalty payments made to non-Puerto Rico residents as a result of Act No. 74 Eligible Activities12
• Distributions that the Act No. 74 Business makes out of its earnings and profits derived from the Act No. 74 Eligible
• Activities are subject to a one-time tax in Puerto Rico at the regular Puerto Rico income tax rates applicable to such distribution; any further distributions will not be subject to tax
• 90 percent exemption on real and personal property taxes
• A 100 percent exemption on municipal license taxes for new businesses; and a 90 percent exemption for existing businesses
• A 100 percent exemption on municipal construction excise taxes and
• A 100 percent exemption on sales and use tax on the acquisition certain items used in the Act No. 74 Eligible Activities.

If you are in the Tourism Industry now or planning to be involved, Puerto Rico is a prime location.

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