Welcome back, fellow readers! For those of you that are new here, thank you for joining us today at Coffee with INCANTO.
Make sure to take a moment to grab a coffee, tea, or drink of choice, and settle in as we get started! As mentioned last week, today we will be covering Puerto Rico’s Code 60, specifically Chapters 2 and 3, formerly known as Act 20 and Act 22. When conversations about buying a vacation home in Puerto Rico or relocating altogether take place, these two specific laws have always been a common topic that is brought up as an incentive to make such a move, and here are the reasons why.
In 2019, Puerto Rico’s Department of Economic Development and Commerce enacted Code 60, “Ley 60”, to simplify the requirements and process of obtaining tax benefits by investing in the island’s economy. Since Puerto Rico is a U.S. territory and not a state, its government has additional flexibility when creating innovative laws apart from that of U.S. Federal laws. In previous years, Act 20 & 22, “Ley 20 y 22[, were separate laws that dictated specific tax benefits for individuals and businesses. These have been slightly changed and written into Code 60 as Chapter 2 (Act 22) & Chapter 3 (Act 20).
Let’s dive into why these two incentives are some of the reasons your relocation to Puerto Rico is the best decision you can make!
Starting off with Chapter 2: Individuals, previously referred to as Act 22, the law focuses on providing tax incentives (0% tax on capital gains and dividends; up to 5% tax on capital gains prior to obtaining the decree) to investors, entrepreneurs, and others who will bring their services to Puerto Rico.
Am I Eligible for Code 60’s Chapter 2?
Here’s the breakdown on the requirements to attain Chapter 2 tax incentives:
You will need to become a Bona-Fide Resident of Puerto Rico and live on the island for at least 183 days of the full year.
You must purchase the property you will live in within the first 2 years of your relocation.
There is an annual $10,000 non-profit charitable donation.
Continuing with Chapter 3: Exportation of Goods & Services, previously referred to as Act 20, the law focuses on providing tax incentives (up to 75% exemption in property taxes; 100% exemption in property taxes within the first 5 years for small and medium businesses; 50% exemption in municipal taxes) for businesses exporting services from Puerto Rico.
Puerto Rico tax incentiveact20 y act 22s
Am I Eligible for the Code 60’s Chapter 3?
Here’s the breakdown on the requirements to attain Chapter 3 tax incentives:
If combining with Chapter 2, you must follow the residential requirements shown above (Bullet #1).
Your business must be operating in Puerto Rico.
At least 80% of the company’s revenue must come from external customers.
If you would like to know more about eligibility for Chapter 2 & 3 or have any additional questions, please send us an email at: info@incantopr.com.
Thank you for tuning in! Next week, we will be covering “Moving Companies: Getting Started & What to Consider”.
Puerto Rico tax incentives act 20 y act 22
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