About 1,000 people expected to move next year
Next year, 1,000 people are expected to move to Puerto Rico under Acts 20/22 tax incentives— with 400 people moving under Act 20 export incentives and 600 under Act 22 individual-investment incentives, said Alberto Bacó Bagué, secretary of the Economic Development & Commerce Department (DDEC by its Spanish acronym).
These tax incentives are expected to attract 5,000 new residents—2,500 people under Act 20 and 2,500 people under Act 22—to Puerto Rico by 2017, Bacó projects.
New businesses opened under Act 20 export incentives should generate 75,000 new jobs by 2017, while Act 22 individual tax incentives should fuel another 7,500 new jobs on the island, Bacó estimates.
“These incentives make us more competitive than Miami or Singapore, and we are a lot closer than Singapore,” Bacó told a group of potential tax decree recipients who are clients of the Equipoise International Fund, which provides residential & commercial mortgage loans throughout the U.S. and Puerto Rico.
“There is no other place that can offer something like this. It’s not a tax haven. It’s a tax-free zone because this is a program to create jobs and economic growth,” he said.
Former Gov. Luis Fortuño passed the incentives with little publicity in 2012. Gov. Alejandro García Padilla’s administration began touting these tax breaks—which include 0% tax on investment income and 4% tax on service income, such as a hedge fund’s management fees— to promote investments in real estate, boost consumption, and attract foreign businesses to the island.
U.S. citizens, even when they live abroad, have to file U.S. federal income tax, with the sole exception of Puerto Rico, which is the only place in the world U.S. citizens don’t have to pay federal income tax, unless they report stateside income.
Investments under these tax incentives are now entering the second stage—developing new businesses on the island, Bacó said. The DDEC secretary envisions growth fueled by these tax incentives in three stages: capital investment by early adopters, which has been completed; business development; and the creation of local capital and entrepreneurial culture throughout Puerto Rico, at which time “Puerto Rico will become a vibrant island of joy.”
“We have awful fiscal problems, so we are doing what were have to do,” Bacó said.
Act 20 provides a corporate income- tax rate of 4%, no tax on dividends paid to Puerto Rico residents and no withholding tax on outbound dividends to nonresident owners. There are also exemptions, or partial exemptions, on local real estate and municipal taxes and licenses. Act 20 encourages the formation of companies that export services from Puerto Rico to locations elsewhere around the world. Examples of companies that can benefit from these incentives are advertising, R&D, consulting, call centers, data processing, telecommunications, computer programming and training.
Act 22 is designed to attract new residents to Puerto Rico, and it does so by exempting these residents from commonwealth taxes on investments and passive income, namely, interest, dividends and capital gains.
|Issued : Wednesday, December 24, 2014 12:00 AM|