P.R. Laws tit. 13, § 10837
(a) Duties of the Secretary; Certificate of Compliance.— In the evaluation, analysis, consideration, award, renegotiation, and revision of any incentives or benefits granted by this chapter, the Department of Economic Development and Commerce and the Secretary thereof shall be required to oversee and ensure compliance with all the provisions of this chapter. The Secretary shall be the sole official responsible for verifying and ensuring that eligible businesses meet the requirements of this chapter; however, the Secretary may receive assistance from the Director of the Industrial Tax Exemption Office to carry out such task.
The Secretary shall be responsible for verifying and ensuring that eligible businesses meet the requirements established in this chapter.
The Secretary shall be required and responsible for preparing a Certificate of Compliance every two years, once eligible businesses validate, in the judgment of said official, that they have met the requirements set forth in this chapter. Every two years, the Secretary shall verify the information submitted by exempt businesses annually so that the Certificate of Compliance is issued not later than the last day of the third (3 rd) month after the close of the taxable year of the applicant.
Upon the filing of an application for a Certificate of Compliance with the Industrial Tax Exemption Office, the Director shall collect the fees for the processing thereof, which shall be payable by certified check, money order, or cashier’s check to the Secretary of the Treasury. The Secretary of Economic Development shall prescribe by regulations the application processing fees. Provided, That said regulations shall be revised every three (3) years after its approval.
The Certificate of Compliance shall include, in turn, the following information regarding the eligible business: the name of the business, the cadastre number of the property or properties connected to the business; the merchant registration number; the account connected to the business as required in the Puerto Rico Internal Revenue Code; the employer identification number; and the information required by §§ 1411 et seq. of Title 23, better known as the “Fiscal Information and Permit Control Act”.
The Certificate of Compliance shall be issued by the Secretary through the Interagency Validation Portal for the Granting of Incentives for the Economic Development of Puerto Rico to the agencies, public corporations, and municipalities responsible for granting benefits or incentives under this chapter. However, during the period in which the Portal is still not operating, it shall be the duty of the Secretary to issue a Certificate of Compliance to the agencies, public corporations, and municipalities responsible for granting benefits or incentives under this chapter following the ordinary process. The filing of the Certificate of Compliance by an eligible business shall be an essential requirement for the agency, public corporation, or municipality to grant the benefit or incentive provided for in this chapter.
Actions taken by the Secretary of the Department of the Treasury, the Executive Director of the Municipal Revenues Collection Center (CRIM, Spanish acronym), or any other government official or body, or public corporation concerned in connection with the qualification process for the granting of the benefits or incentives under this chapter, shall be limited to the taxation aspects of the granting of the benefit or incentive in question, upon the issuance of a valid Certificate of Compliance, as provided in this section. The Secretary shall be responsible, first and foremost, for overseeing eligibility under any and all provisions of this chapter. However, the Secretary of the Department of the Treasury, the Executive Director of the Municipal Revenues Collection Center (CRIM), or any other government official or body, or public corporation concerned with any of the benefits or incentives granted under this chapter may contact the applicant and Secretary should further information be needed to validate the data on the Certificate of Compliance, and shall notify and request the applicant to supply such information in order to rectify the situation. The Secretary of the Department of the Treasury or the Executive Director of the Municipal Revenues Collection Center may deny any tax incentives or benefits requested if, in their judgment, the information requested has not been supplied. Moreover, the provisions of this chapter shall not preclude in any manner the power conferred to the Secretary of the Treasury under § 33202 of this title, known as the “Puerto Rico Internal Revenue Code of 2011”; and, whenever necessary, the power to revoke any incentives previously granted by virtue of a Certificate of Compliance, in accordance with the corresponding act; or the power to refer the case to the pertinent agency or public corporation for the corresponding action.
(b) Ordinary process.—
(1) Applications for decree.— Any person who has established or plans to establish an eligible business in Puerto Rico may request the benefits of this chapter to the Secretary by filing the appropriate duly sworn application at the Exemption Office.
For any applications for decree filed as of December 1 st, 2015, the Secretary shall require applicants to create at least five (5) direct jobs, as an essential requirement to grant the decrees herein provided.
At the time of filing the decree application, the Director shall collect the processing fees, which shall be paid with a certified check, money order, or bank check payable to the order of the Secretary of the Treasury. Such fees shall be provided through regulations.
Rights in effect under §§ 10641 et seq. of this title, shall continue to be in effect until the first regulation promulgated hereunder is approved.
The Secretary may establish special procedures for decrees covering promoter services through regulations, circular letters, or any administrative pronouncement.
(2) Interagency consideration of applications.—
(A) Once the Exemption Office receives any application under this chapter, the Director shall send a copy of the same, within a period of five (5) business days counted from the filing date of such application, to the Secretary, the Secretary of the Treasury, and the Executive Director. Within twenty (20) days counting from the date in which the application was received, the latter shall file an eligibility report on the activity to be carried out, facts related to the application, and his/her recommendations regarding the granting of such decree, including its terms and conditions. When evaluating the application, the Secretary of the Treasury shall verify the compliance of the shareholders, members, or partners of the applicant business with their tax responsibilities under the Code and the Internal Revenue Code of 1994, as amended. This verification shall not be necessary in the case of shareholders who are not residents of Puerto Rico or public corporations. Non-compliance with said tax responsibility shall be a basis for the Secretary of the Treasury to not endorse the requesting business’ exemption application.
(B) After the Executive Director submits his/her eligibility report and recommendation, the Director shall, within five (5) business days of receiving the necessary documentation to process the case, send copy of the decree project to the Executive Director and the Secretary of the Treasury and to the Municipal Revenue Collection Center if there is no unfavorable recommendation or opposition to the decree project, for its evaluation and recommendation in case that such decree project includes the property tax exemption described in § 10833 of this title. Any unfavorable recommendation to the decree project shall include the reasons therefor.
The agencies consulted by the Director shall have twenty (20) days to submit their report or recommendation regarding the decree project referred thereto. In case the agency issues a favorable recommendation, or if the Exemption Office does not receive a recommendation in the aforementioned twenty (20)-day term, the decree will be deemed to have received a favorable recommendation, and the Secretary may take the corresponding action with regards to such application.
In case that any agency has an objection to the decree project referred thereto, the Exemption Office shall proceed to consider said objection, as it deems necessary, and shall notify the parties and the corresponding agencies of the administrative action or decree project review it deems pertinent. Once the controversy brought forward is resolved, the Director shall make the determination he/she deems pertinent and submit the case to the Secretary for his/her final consideration.
(C) In the case of amendments to decrees approved under this chapter, the term for the agencies concerned to submit a report or opinion to the Director shall be of fifteen (15) days.
(D) Once the reports are received or the terms to submit such reports have expired, the Director shall submit the decree project and his/her recommendation for the Secretary’s consideration within the following five (5) business days.
(E) The Director may rest on the recommendations submitted by those agencies that submit reports or opinions, and may request them to supplement said reports or opinions.
(F) The Secretary shall issue a final determination in writing.
(G) In order to facilitate the administration of this chapter, the Secretary may delegate to the Director the duties that, at his/her discretion, he/she deems convenient except for the duty of approving or rejecting decrees.
(3) Additional provisions.—
(A) The Secretary shall, through the Exemption Office, require applicants for decree to submit sworn statements attesting to the facts stated, required, or pertinent, in order to determine whether such applicant’s service operations, or proposed service operations, qualify under the provisions of this chapter.
Beginning on December 1 st, 2015 and every two years thereafter, applicants shall be required to furnish the following information regarding the exempt business: the name of the business, the cadastre number of the property or properties connected to the business; the merchant registration number; the account connected to the business as required in the “Puerto Rico Internal Revenue”; the employer identification number; and the information required by §§ 1411 et seq. of Title 23, better known as the “Fiscal Information and Permit Control Act”.
(B) The Director may hold as many public or administrative hearings as deemed necessary to comply with the duties and obligations imposed by this chapter. Furthermore, he/she may require applicants to submit the evidence that may justify the requested tax exemption.
The Director or any Special Examiner from the Exemption Office designated by the Director, with the Secretary’s approval, may receive the evidence submitted regarding any decree application, and shall have the authority to summon witnesses and take their statements with regards to the alleged facts, or in any other way related to the requested decree, to take oath of any person that testifies before him/her, and to submit a report to the Secretary on the evidence presented together with his/her recommendations regarding the case.
(C) Any person who makes, or attempts to make, by him/herself or on behalf of another person, a false and fraudulent representation in connection with any application for or granting of a decree, or any violation of the provisions related to preceding businesses, shall be deemed guilty of a third-degree felony and, upon conviction, shall be punished according to the penalty provided for this type of crime in the Penal Code of Puerto Rico, as amended.
It is further provided that, in these cases, the decree shall be revoked retroactively and the concessionaire and shareholders shall be responsible for all taxes that would apply without taking this chapter into consideration.
(D) The fees, charges, and penalties provided in clause (1) of this subsection shall be covered into a Special Account created to such effects at the Department of the Treasury, with the purpose of defraying the regular operating costs of the Exemption Office.
(E) The Secretary shall establish through the Exemption Office the systems needed to facilitate the electronic filing and transmission of applications and related documents, in order to expedite the interagency consideration of applications for decrees, validate that the agreements reached under the decrees have been honored, and that the requirements thereof have been met, and streamline processes in general.
(c) Transfer of eligible business.—
(1) General rule.— The transfer of a decree, or of the shares or any other property interest in an eligible business that holds a decree granted under this chapter, requires the prior consent of the Secretary. If the same is carried out without the prior consent of the latter, the decree shall be rendered null as of the date in which the transfer occurred, except in those cases listed in clause (2) of this subsection. However, the Secretary may retroactively approve any transfer carried out without his/her prior consent when, in his/her judgment, the circumstances of the case so warrants, taking into consideration the best interests of Puerto Rico and the economic development purposes of this chapter.
(2) Exceptions.— The following transfers shall be authorized without the need for prior consent:
(A) Transfer of property to a decedent’s estate or transfer by devise or inheritance.
(B) Transfer of stocks or any partner’s shares, when said transfer does not directly or indirectly result in a change of ownership or control of an eligible business that holds a decree granted under this chapter.
(C) Transfer of shares from a corporation that owns or operates an eligible business that holds a decree granted under this chapter, when such transfer occurs after the Secretary has determined that any transfer of shares from a specific corporation shall be allowed without his prior consent.
(D) Pledge, mortgage, or other guaranty with the purpose of settling a bona fide debt. Any transfer in control, title, or interest by virtue of said contract shall be subject to the provisions of subsection (a) of this section.
(E) Transfer by statutory operation, court order, or a bankruptcy judge to a receiver or trustee. Any subsequent transfer to a third-party that is not the previous debtor or has filed for bankruptcy shall be subject to the provisions of subsection (a) of this section.
(F) Transfer of all the assets of an eligible business that holds a decree granted under this chapter to a corporation, limited liability company, or partnership that is an affiliated business. For the purposes of this paragraph, “affiliated businesses” are those businesses whose shareholders, members, and partners own in common eighty percent (80%) or more of the vested stocks of said eligible business and affiliated business.
(3) Notice.— An eligible business that holds a decree granted under this chapter shall notify any transfer included in the exceptions of the clause (2) of this subsection to the Secretary, Executive Director, Director, and Secretary of the Treasury.
(d) Permissible and mandatory revocation procedures.—
(1) Permissible revocation.—
(A) When the concessionaire fails to comply with any obligation imposed by this chapter or the regulations promulgated thereunder, or by the terms of the decree, or
(B) when the concessionaire fails to comply with his/her tax responsibility under the Code and other tax laws of Puerto Rico.
(2) Mandatory revocation.— The Secretary shall revoke any decree granted under this chapter when the same has been acquired through fraud and misrepresentation regarding the nature of the eligible business, the nature of the service, or any other facts or circumstances that justified, in whole or in part, the granting of the decree.
In the case of this revocation, all the net income calculated and previously reported as income from the export of services, whether distributed or not, as well as all distributions thereof, shall be subject to the tax imposed by the provisions of the Code. Moreover, the taxpayer shall be deemed to have filed a false or fraudulent return with the intent of evading tax payment and, consequently, shall be subject to the penal provisions of the Code. The tax owed in such cases, as well as unpaid personal and real property taxes subject to the provisions of this chapter shall become due and payable as of the date in which they would have been due and payable, if not for the decree, and shall be charged and collected by the Secretary of the Treasury, in accordance with the provisions of the Code and, as applicable, by the Municipal Revenue Collection Center, in accordance with the Property Tax Act.
(e) Procedure.— In case of revocation of a decree granted under this chapter, the concessionaire shall have the opportunity to appear and be heard before the Special Examiner of the Exemption Office designated for such purposes, who shall report his/her conclusions and recommendations to the Secretary, with the prior recommendation of the agencies that submit reports on the eligibility of decrees.
History —Jan. 17, 2012, No. 20, § 9;, renumbered as § 10 on July 11, 2012, No. 138, § 6; Nov. 17, 2015, No. 187, § 103; Dec. 28, 2016, No. 208, § 30.