P.R. Laws tit. 13, § 10831
For purposes of this chapter, the following terms, phrases, and words shall have the meaning and scope stated below, except when it is otherwise clearly indicated, and terms used in the singular form shall also include the plural form, and vice versa:
(a) Shares.— Shall mean shares in a corporation, or proprietary interests in a partnership, limited liability company, or other entity.
(b) Decree.— Shall mean a decree approved by the Secretary of the Department of Economic Development and Commerce, pursuant to the provisions of this chapter, and which is in effect in accordance with the rules and conditions that the Secretary may establish.
(c) Entity.— Shall mean any corporation, limited liability company, partnership, or other juridical person.
(d) Affiliated entities.— Shall mean two (2) or more entities of which fifty percent (50%) of the shares or more are directly or indirectly owned by the same natural or juridical person, estate, or trust.
(e) Income derived from the export of services.— Shall mean the net income derived from rendering an eligible service, or from promoter services for an eligible business, calculated pursuant to the Internal Revenue Code for a New Puerto Rico of 2011. In the case of promoter services, the net income derived from promoter services rendered during the twelve (12) month period ending the day before any of the following options occurs first, shall be the only income considered income from export of services:
(1) The beginning of the construction of facilities in Puerto Rico to be used by a new business;
(2) the beginning of such new business’ activities, or
(3) the acquisition or execution of a contract to acquire or lease facilities in Puerto Rico by such new business.
(f) Eligible business.— Any entity with an office or bona fide establishment located in Puerto Rico which carries out or may carry out, eligible services that are, in turn, considered services for export or promoter services shall be considered an eligible business.
An eligible business that renders eligible services or promoter services may also engage in any other activity, trade, or business insofar as it keeps, at all times, a system of books, records, documentation, accounting, and billing that clearly shows, to the satisfaction of the Secretary of the Treasury, all income, costs, and expenses incurred while rendering eligible services or promoter services. An activity consisting of rendering services as an employee does not qualify as an eligible business.
An eligible business that has been operating in Puerto Rico before submitting its decree application shall be subject to the limitations regarding base period income established in § 10832(c) of this title.
The Secretary shall establish, through regulations, the circumstances and conditions under which any applicant who receives or has received tax benefits or incentives under §§ 10641 et seq. of this title, §§ 10101 et seq. of this title, §§ 10038 et seq. of this title, any previous or subsequent tax incentives law, or any other special law of the Commonwealth of Puerto Rico that provides benefits or incentives similar to those provided herein, as determined by the Secretary in consultation with the Secretary of the Treasury, may be considered as an eligible business under this chapter. Under no circumstance may an applicant be considered an eligible business when claiming tax benefits or incentives in connection with the services covered under this chapter.
Notwithstanding the provisions of any other act, licensing requirements related to professional services shall not apply to eligible businesses, their partners, shareholders, employees, or officials, insofar as the services offered are not rendered to Puerto Rico residents. Eligible businesses shall comply with the licensing laws and requirements applicable in the jurisdiction where their services are exported.
(g) New business.— An entity that complies with the following parameters:
(1) Has never carried out a trade or business in Puerto Rico;
(2) the trade or business to be carried out in Puerto Rico was not acquired from a business that carried out a trade, business, or activity for profit in Puerto Rico;
(3) it is not an affiliate of an entity that carries out or has carried out a trade, business, or activity for profit in Puerto Rico;
(4) for a period of two (2) years, counting from the beginning of operations that qualify a promoter for a decree, not more than five percent (5%) of its shares have been owned directly or indirectly by one or more residents of Puerto Rico;
(5) begins operations in Puerto Rico as a result of promoter services according to the criteria to be determined by the Secretary with the advice of the Secretary of the Treasury through regulations, circular letter, or any other document;
(6) shall not engage in the retail sale of items or products, and
(7) carries out an activity, trade, or business designated by the Secretary and the Secretary of the Treasury through regulations, circular letter, or any other document.
(h) Connection to Puerto Rico.— Services will be deemed as having a connection to Puerto Rico when they are somehow related to Puerto Rico, including services associated with the following:
(1) Business or profitable activities which have been or will be carried out in Puerto Rico;
(2) the sale of any property for use, consumption, or disposal in Puerto Rico;
(3) advise regarding the laws and regulations of Puerto Rico, procedures and administrative orders of the Government of Puerto Rico, its agencies, public corporations, instrumentalities, and/or municipalities, as well as the precedents of the Courts of Puerto Rico;
(4) lobbying with respect to the laws of Puerto Rico, regulations, and other administrative orders. For these purposes, lobbying shall mean any direct or indirect contact with elected officials, employees, or agents of the Government of Puerto Rico, its agencies, instrumentalities, public corporations, or municipalities with the intent of influencing any action or determination of the Government of Puerto Rico, its agencies, instrumentalities, public corporations, or municipalities, or
(5) any activity, situation, or circumstance that the Secretary, with the advice of the Secretary of the Treasury, designates through regulations or other orders, administrative determination, or circular letter as having a connection to Puerto Rico.
(i) Promoter.— Shall mean an entity that is engaged in rendering promoter services.
(j) Resident of Puerto Rico.— Shall mean an individual who is a resident of Puerto Rico according to § 30041(a)(30) of this title.
(k) Eligible services.— Eligible services include the following services which are, in turn, considered services for export:
(1) Research and development.
(2) Advertising and public relations.
(3) Economic, environmental, technological, scientific, managerial, marketing, human resources, computer, and auditing consulting services.
(4) Advise on issues related to any trade or business.
(5) Creative Industries defined by law as those business with potential for creating jobs and wealth, mainly through the export of creative goods and services in the following sectors: design (graphic, industrial, fashion, and interior design); arts (music, visual arts, performing arts, and publishing); media (application, videogames, online media, digital, and multimedia content development); creative services (architecture and creative education).
(6) Drafting of construction plans and engineering, architectural, and project management services.
(7) Professional services such as legal, tax, and accounting services.
(8) Centralized management services that include, but are not limited to strategic location, planning, and budgetary services carried out at the headquarters or similar regional offices of an entity engaged in rendering such services.
(9) Electronic data processing centers.
(10) Computer program development.
(11) Voice and data telecommunications between persons located outside Puerto Rico.
(12) Call centers.
(13) Shared service centers that include, but are not limited to accounting, finance, tax, auditing, marketing, engineering, quality control, human resources, communications, electronic data processing, and other centralized management services.
(14) Storage and distribution centers of companies engaged in the business of transportation of items and products that belong to third parties, known as “hubs”.
(15) Educational and training services.
(16) Hospital and laboratory services.
(17) Investment banking and other financial services, including, but not limited to:
(A) Asset management services;
(B) alternative investment management;
(C) management of activities related to private capital management;
(D) management of hedge funds and high risk funds;
(E) management of pools of capital;
(F) management of trusts that serve to turn different types of assets into stocks, and
(G) management services for escrow accounts, insofar as these services are provided to foreigners.
(18) Any other service that the Secretary, with the advice of the Secretary of the Treasury, determines that must be treated as an eligible service for understanding that it is in the best interest and for the social and economic wellbeing of Puerto Rico, taking into account the demand that there may be for such services outside Puerto Rico, the total number of jobs to be created, its payroll, the investment that the proponent would make in Puerto Rico, or any other factor that warrants special consideration.
(l) Promoter services.— Promoter services are those eligible services related to establishing a new business in Puerto Rico and which are designated by the Secretary, with the advice of the Secretary of the Treasury, as services that may be treated as services for exportation regardless of whether these services have a connection to Puerto Rico.
(m) Services for export.— An eligible service may be deemed a service for export when such service is rendered for the benefit of:
(1) An individual who is not a resident of Puerto Rico; or
(2) a trust whose beneficiaries, trustors, and trustees are not residents in Puerto Rico; or
(3) an estate whose testator, heir, legatee, or executor is not, or in the case of the testator, was a resident of Puerto Rico, or
(4) a foreign entity;
insofar as the services do not have a connection to Puerto Rico. The Secretary, with the advice of the Secretary of the Treasury, may establish through regulations any other criterion, requirement, or condition for a service to be considered a service for export, taking into consideration the nature of the services rendered, the direct or indirect benefits of such services, and any other pertinent factor to achieve the objectives of this chapter.
(n) Other terms.— For the purposes of this chapter, “Governor” means the Governor of Puerto Rico; “Secretary” means the Secretary of the Department of Economic Development and Commerce; “Executive Director” means the Executive Director of the Economic Development Company; “Director” means the Director of the Industrial Tax Exemption Office; “Exemption Office” means the Industrial Tax Exemption Office; “Secretary of the Treasury” means the Secretary of the Department of the Treasury; “Code” means the Internal Revenue Code for a New Puerto Rico of 2011, §§ 30011 et seq. of this title, or any other subsequent act that supersedes it.
History —Jan. 17, 2012, No. 20, § 3; July 11, 2012, No. 138, § 4; Oct. 13, 2014, No. 173, § 16; Nov. 17, 2015, No. 187, § 102; Dec. 28, 2016, No. 208, § 29.