Puerto Rico Tax Credits

Overview

Puerto Rico offers a wide range of tax credits to support economic development across key sectors such as tourism, manufacturing, research, and film. These credits, many of which fall under Act 60-2019, are designed to encourage investment, create jobs, and stimulate local industry.

Eligible Tourism investments

Under Act 60-2019, Puerto Rico provides the following tax credits to incentivize investment in tourism-related projects:

Up to 10% of total project costs or 50% of investors’ cash investment, whichever is lower.
40% credit on eligible investments, distributed in the second year of operation and thereafter.
30% credit: 10% at financing, 20% at first paying guest.
100% exemption from municipal construction excise taxes (75% in Vieques and Culebra).
Up to 100% exemption from sales, use, excise, and municipal taxes for new projects (up to 90% for existing projects).
Income tax exemptions up to 90% (or 100% for projects in Vieques/Culebra).
Up to 90% exemption on personal and real property municipal taxes.

These tourism credits are transferable, non-taxable, and provide flexible financing benefits.

Purchase of Products Manufactured in Puerto Rico

Tax incentives support businesses that prioritize local procurement:

Sales & Use Tax Credit: Partial credit on local product purchases.
Manufacturing Investment Credit: Based on investments in equipment/facilities tied to job creation or expansion.
Raw Materials Exemptions: Credits or exemptions on raw materials used in Puerto Rico-based manufacturing.

Research and Development (R&D) Credits

Act 60 offers up to a 50% credit on qualified R&D investments:

Applies to facilities, equipment, and qualifying expenditures in Puerto Rico.
Available to exempt businesses in manufacturing, export services, and strategic sectors.
Credits may be split into multiple installments for planning flexibility.

Film Industry Credits under Act 60

To support media production, Puerto Rico allocates up to $100 million in film credits annually:

40% credit on local expenses (excluding foreign persons).
20% credit on foreign payments (e.g., actors, consultants).
15% credit for smaller productions (≤$4 million budget, excluding foreign expenses).
Credits are available in multiple installments.

Opportunity Zone Investments

Roughly 98% of Puerto Rico is designated as an Opportunity Zone. Investors may qualify for:

5% base credit on eligible investments.
Up to 25% total credits based on job creation, environmental, and community impact.
Credits distributed over four years to encourage sustainable growth.

Employee Reimbursement for Training

Puerto Rico employers can access wage reimbursements for eligible training programs:

Up to 90% reimbursement for small businesses (≤50 employees).
75% for mid-sized; 50% for large employers.
Special 90% rate for hiring individuals with disabilities or criminal backgrounds.

Programs are locally managed by the Puerto Rico Department of Labor and vary by municipality.

How Are Puerto Rico Tax Credits Sold?

Act 52-2022 created the Tax Credits Manager (TCM) system (effective Jan 1, 2023 pursuant to Administrative Determiniation 22-11), which:

Regulates credit registration, reporting, and utilization.
Credits pre-2023 valid for up to 3 tax years.
Post-2023 credits must be registered in TCM.
Usage caps apply for credits under Sections 1051.12 and 1051.13.

It is essential for buyers and sellers to follow all procedural and tax compliance guidelines when transferring or claiming Puerto Rico tax credits.

Whether you’re planning a new project, expanding operations, or seeking guidance on compliance and credit transfers, we can help you unlock the full value of Puerto Rico’s tax incentives: