TAX INCENTIVE FOR ACT 20 & ACT 22 BENEFICIARIES
On March 2, 2017, the Mayor of the Autonomous Municipality of Guaynabo (“the Municipality”), approved Ordinance No. 44, Series 2016-2017, to provide a special municipal tax rate to entities and individuals that hold tax exemption grants under Acts 20 and 22 of 2012, as amended, known as “Act to Promote the Export of Services” and “Act to Promote the Relocation of Individual Investors”, respectively. Through this Ordinance, the Municipality is offering a municipal tax decree contract providing a 50% reduction to the municipal license tax rates in force as of the approval of the ordinance, for Act 20 companies and Act 22 individuals that establish their operations within certain designated geographical areas in the Municipality.
Following is a summary of the benefits, conditions, and requirements under the Ordinance:
WHO CAN REQUEST THE INCENTIVE UNDER ORDINANCE NO. 44?
- Any Eligible Business that possess an Act 20 decree and principal business location is within the designated geographical areas.
- An Eligible Business is defined under Section 3(f) of Act 20 as any entity with an office or bona fide establishment located in Puerto Rico which carries out, or may carry out, eligible services that, at the same time, are considered services for export or promoter services. The activity that consists of rendering services as an employee does not qualify as an eligible business.
- Benefits Limitation
Notwithstanding the above, in the case of eligible businesses that have been operating in the Municipality during the 3 years preceding the date of the Ordinance, will be subject to Base Period Volume of Business.The eligible business will benefit of the reduced special rate only in the volume of business increment that generates over the average volume of business during the base period.
- Any “Resident Individual Investor” that possess a valid Certification of Compliance under Act 22 and business location is within the designated geographical areas.
MUNICIPAL DECREE TERMS AND CONDITIONS
The 50% reduction in the applicable municipal license rates will be granted through a municipal tax decree contract for a period of 10 years, and extendable for an additional 10-year period. During the extension period, the grantee will be subject to 75% of the municipal license tax rate applicable at the time of the extension.
The term for Resident Individual Investors will expire by the year ending December 31, 2035, regardless of the date of commencement of operations.
DESIGNATED GEOGRAPHICAL AREAS
Initially, the municipal tax incentive will be available to those businesses that commence or move their operations to the following designated areas:
- Amelia Industrial Park
- City View Plaza
- Metro Office Park
Entities and individuals under Act 20 and Act 22, respectively, must comply with the following requirements:
- Certification of Compliance under the respective Act.
- Establish the principal place of business and carry out commercial activities within any of above-mentioned designated areas.
- Duly filed and paid the Volume of Business Declaration with the Municipality.
- In compliance with all municipal, state, personal and real property taxes.
- Resident Individual Investors must purchase at least one residential or commercial property within the Municipality and must open a personal or a business account in a financial institution located within the Municipality.