Puerto Rico is a self-governing United States territory, which means that they do not have to pay federal taxes like all the 50 states and DC must. Over the last decade, the island has made great strides to bolster its economy by creating aggressive tax incentives for businesses.
Puerto Rico has multiple tax incentives for manufacturing companies, services companies, doctors and health companies, tourism companies, agriculture, energy, etc. The most commonly known are the incentives passed in 2012 Acts 20 and 22.
- Act 20-2012 – ELIMINATES taxes on profit distributions and dividends, 90% reduction on personal and real property taxes, 60% reduction on municipal taxes and corporate tax rate of 4%. It allows companies that export services from Puerto Rico to receive multiple tax benefits.
- Act 22-2012 – ELIMINATES taxes on dividends, interest income and capitals gain tax of an individual resident.
- Act 73-2008 – ELIMINATES taxes on profit distributions and dividends, reduced tax rate of 4% on income tax and on gains for sale of exempt business; 90% reduction on personal and real property taxes, 60% reduction on municipal taxes; 12% withholding tax on royalty payments; “Pioneer” industries can have their taxes be eliminated or pay 1% if the intangible property was created or developed in Puerto Rico; and receive multiple credits. This is currently only used for manufacturing businesses.
All of this means that Puerto Rico can be an extremely effective part of a proactive tax strategy, especially for businesses that spend a large portion of their revenue on goods and services.
However, with the robust package of incentives that the island offers, there are many types of companies that can improve their tax liability situation by including Puerto Rico and TLS in their plans, including:
- Accounting Services
- Advertising Services
- Business Services
- Consulting Services
- Call centers, telecommunications, and service centers
- Employment and Staffing Services
- Educational and Training Services
- Financial Services
- Hedge Funds
- Laboratory Services
- Public Relations
- Remodeling/Renovation Services
- Software Development
- Web-Site Services
Even if your business type is not on that list or you are tied to a geographical area, there are still ways that your enterprise can benefit by outsourcing to Puerto Rico centralized management services or having shared service centers – like accounting, finance, tax, auditing, marketing, quality control, human resources, communications, electronic data processing and hosting, etc..
Many business owners are simply not aware of all the tax advantages available to them. The incentives that Puerto Rico offers are substantial, which is why Tax Law Solutions has our headquarters there, and why we offer our clients several unique strategies that involve the island (our proprietary Puerto Rico Strategies). These Strategies can increase efficiency in your operations and in turn create availability in lines of credits, reduce cost, and reduce your tax liability. TLS can assist in evaluating your business to eliminate inefficient impacts your wealth, business, and income taxes, while providing you access to these Puerto Rico incentives.
TLS expertise in business strategies and tax law has allowed us to create more than 6,000 tax-planning strategies tailored to our client’s business and personal situation. TLS designs and implements unique proprietary Puerto Rico Strategies that allow clients to take as much advantage of the incentives as they desire. The variety of the Puerto Rico Strategies that can be applied to your business provide wiggle room for the individual aspects of your business, comfort level, current tax situation, and operations. You don’t even have to move to Puerto Rico.
Call our tax experts today to get a free analysis and find out whether your company can benefit from a proactive tax strategy involving Puerto Rico. The analysis process is quick, and regardless of whether a USP-focused plan makes sense for your firm, we offer more than 50 different strategies that can minimize your tax liability and help create a more secure future for your company.