Economic Transformation and Tax Incentives
Puerto Rico is transforming its economic landscape, aiming to replicate the success of knowledge-based economies like Singapore or the UAE. This transformation is backed by some of the most favorable tax incentives in the world, designed to attract entrepreneurs and foster business growth. Residents of Puerto Rico, while retaining U.S. citizenship, are exempt from U.S. federal taxes provided they live on the island for at least 183 days a year. These conditions offer a unique financial advantage, especially when compared to the high tax rates in states like California and New York.
Attractive Business Environment in the U.S.
The business climate in Puerto Rico is particularly favorable for sectors like manufacturing and export services, which benefit from a fixed 4% income tax rate. These businesses also enjoy full exemptions on distributions from earnings and profits and up to 90% exemption on real property taxes. For startups, the island offers additional incentives such as a complete property tax exemption for the first five years and substantial municipal tax exemptions ranging from 60-90%. These benefits make Puerto Rico an appealing option for business owners looking to maximize profitability and growth.
Support for Innovation and Talent Retention
Puerto Rico is committed to becoming a hub for innovation and technology. The government offers a 50% tax credit on research and development expenditures to encourage companies to invest in innovation. Despite producing 22,000 STEM graduates annually, a significant portion of these skilled individuals leave the island. Through legislation like Act 73, Puerto Rico aims to retain this critical workforce, ensuring that the local economy benefits from its investment in education and training. This strategic focus on retaining talent is pivotal in Puerto Rico’s efforts to solidify its status as a competitive player in the global knowledge economy.