Doing Business in Puerto Rico

Doing Business in Puerto Rico

Everyday there is more evidence that points to Puerto Rico as a world-class investment destination. Structural reforms, economic programs, and an all-star lineup of incentives have positioned the island as one of the most competitive jurisdictions in the world. The time to do business, work, live, and play in Puerto Rico is now. Here’s a brief summary of why The All-Star Island is also a stellar location for investment.

Puerto Rico’s Business Star Proposition

Many favorable conditions come together in Puerto Rico to make The All-Star Island a premier location for business and investment:

  • First-rate workforce
  • Global experience
  • Advanced infrastructure
  • Attractive tax incentives
  • United States legal framework

Top 10 Reasons to Invest in Puerto Rico

1. Strategic Location

  • Puerto Rico is strategically located between the Caribbean Sea and Atlantic Ocean, midway between North and South America, making it the perfect bridge between both continents.
  • It’s a 2.5-hour direct flight away from Miami and a 3.5-hour direct flight away from New York. There are direct international flights to Bogotá, Frankfurt, and Panama City.

2. Pro-Business Tax Climate

  • Puerto Rico offers the benefits of operating within a United States jurisdiction while providing the tax benefits of a foreign tax structure.
  • Strategic industries in manufacturing activities and services as well as in export services enjoy a 4% fixed income tax rate. Pioneer activities receive a preferential tax rate of 0% to 1%.

3. Aggressive Incentives

  • Several incentive acts have been approved to stimulate economic development and attract Foreign Direct Investment (FDI) in the following sectors: manufacturing, tourism, export services, insurance, financial services, agriculture, hospitality and hotel development, and renewable energy.
  • Puerto Rico was ranked among the top 15 Foreign Trade Zones by the US National Association of Foreign Trade Zones 2011 report.

4. Legal System and Political Stability

  • Part of the US free trade zones and customs system.
  • PR is under the US legal framework and intellectual property protection.
  • Benefits from the protection of the Homeland Security Act
  • PR’s banking system is regulated under US laws (FDIC).
  • It has access to US federal programs and funds.

5. Strong Business Ecosystem

  • The U.S. Dollar is the official currency.
  • No passport is required for United States citizens.
  • The official languages are English and Spanish.
  • There is full presence of international banks.
  • Key suppliers provide support to life science, electronics, technology, and others.
  • Sophisticated logistics capabilities and major couriers including UPS, FedEx, Crowley, and Horizon

6. World-Class Infrastructure

  • 24,000 miles of highways and mass-transit system recognized by the U.S. Federal Transit Administration as the safest and most efficient in the United States.
  • Busiest airport in the Caribbean and state-of-the-art port facilities, including the 8th busiest port in the United States
  • Most technologically advanced convention center in the Caribbean and Latin America
  • Island-wide broadband service, undersea fiber optic cable, and a robust satellite system

7. Global Competitiveness

  • The World Economic Forum’s (WEF) 2012-2013 Competitiveness Report ranked Puerto Rico 30 out of 142 countries in the world, first in Latin America and third in all of the Americas.
  • The WEF’s 2012 Global Information Technology Report ranked Puerto Rico 36 out of 142 countries.

8. Low Cost of Doing Business

  • Hourly earnings in manufacturing average 65% to 80% of the U.S. average.
  • It also has the lowest labor costs of any region under United States jurisdiction.
  • San Juan has the lowest cost of doing business among the largest cities in the United States.

9. Skilled Workforce

  • Highly educated, productive, and bilingual workforce
  • The World Economic Forum’s (WEF) 2012-2013 Competitiveness Report ranked Puerto 3 out of 142 countries in the world in terms of Availability of Scientists and Engineers.
  • The University of Puerto Rico at Mayagüez, the premier engineering and science institution of the Caribbean and Latin America, ranks 1st in graduating Hispanic engineers and 2nd in graduating female engineers.

10. Superior Lifestyle

  • Average year-round temperature is 82ºF (28º)
  • San Juan’s quality of life and visitor experience was ranked 3 among 35 top U.S. cities by Travel & Leisure magazine, ahead of Miami, New York City, Los Angeles, San Diego, and Honolulu.
  • Culebra was ranked among the 25 best secret islands on Earth by Travel & Leisure magazine.
  • Over 23 golf courses designed by legendary architects like Robert Trent Jones, Greg Norman, and Tom Kite.

Incentives and Reforms by Industry

No matter the type of your business or investment, Puerto Rico offers a comprehensive, all-star set of incentives and reforms tailored to the nuances of your operation.

MANUFACTURE AND AGRICULTURE

Manufacturing, Key Supplier Services, Research & Development

  • 4% income tax on industrial development income
  • 0% to 1% tax rate on income for pioneer or novel products manufactured in Puerto Rico
  • Up to 50% tax credit on purchases of products manufactured or recycled locally
  • Up to $5,000 for each job created during the first year

Agriculture

  • 100% exemption on taxes for agricultural equipment
  • 100% exemption on property taxes (land, buildings, vehicles, etc.)
  • 100% exemption on municipal taxes
  • 100% exemption on stamp payments

SERVICES

Export Services

  • 4% corporate tax rate, which may be reduced to 3%
  • 100% tax exemption on dividends from export services businesses
  • Decree of 20 years, renewable for an additional 10 years

International Financial Entities (IFE)

  • 4% income tax
  • 0% on dividends or other distributions of profits to non-Puerto Rico residents
  • 100% exemption on municipal taxes
  • 100% exemption on property taxes

Film and Creative Services

  • 40% tax credit on all payments to Puerto Rico residents
  • 20% tax credit on all payments to non-resident talent (including stunt doubles)
  • 25% tax credit on development or expansion costs of studios, laboratories, facilities for the international transmission of television images or other media and related infrastructure

TRADE AND COMMERCE

Foreign Trade Zones (FTZ)

  • Largest non-contiguous FTZ system in the United States
  • Deferment of federal customs duties
  • Deferment of Puerto Rico excise taxes
  • 100% exemption of exports from the zone

Renewable Energy (Green Energy Fund)

  • Rebates of up to 60% of eligible costs for Tier 1 (0-100 kW) and up to 50% for Tier 2 (101 kW-1MW)
  • 60% refund on acquisition and installation costs incurred during the installation of renewable energy equipment for residential properties and small businesses (50% for other businesses).

TOURISM

Tourism and Hospitality

  • 10% tax credit on the total project cost
  • 100% exemption on municipal construction excise tax, taxes on imported goods, and sales tax
  • 100% exemption on municipal licenses
  • 90% exemption on income tax and property tax