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Act 43 & 45 - Amendments To Incentive Acts 20 & 22

August 04 2017


On July 11, 2017, the Governor of Puerto Rico signed into law House Bill 878 as Act 43 (“Act 43”). Act 43 amends Act 20 of 2012, as amended, known as the “Act to Promote the Export of Services” (“Act 20”). These amendments include “Medical Tourism Services” and “Telemedicine Facilities” as “Eligible Services” under Act 20. Also, Act 43 eliminates the minimum employment requirement of five employees, and eliminates bureaucratic restrictions and requirements that limit the concession of tax incentives, in order to increase the growth of the service sector in the economy, in lieu of said requirements the Secretary of the Department of Economic Development and Commerce (the “Secretary”) is awarded the authority to impose requirements for employment, financial investment and economic development measures at his own discretion. 

Additional Eligible Services Under Act 20 

Act 43 adds “Medical Tourism Services” and “Telemedicine Facilities” to the list of Eligible Services of Article 3(k) under Act 20. Besides, Act 43 broadens the definition of “Trading Companies”. Previously, a Trading Company had to derive 80% of their gross income solely from trading activities to be considered as such. The amendment allows the inclusion of other export eligible services’ gross income to meet the 80% threshold. 

Ordinary Procedure for the Act 20 Decree 

Act 43 eliminates the fixed employment requirement and empowers the Secretary to establish by regulation the criteria to evaluate applications. These criteria will include, but are not limited to: 

  1. Job creation; 
  2. Capital investment; or 
  3. Direct or indirect contributions to the economy. 

The Secretary may require that a certain number of employees or independent contractors, (residents of Puerto Rico or domestic entities dedicated to trade or business in Puerto Rico) are hired to conduct its operations. With respect to Telemedicine Facilities, at least 30% of the hired doctors must be residents of Puerto Rico. 

Those businesses with a tax exemption decree or with submitted applications pending approval, that already have direct employees under contract, will not be allowed to dismiss such employees in view of Act 43. 


The Governor of Puerto Rico also signed into law, on July 11, 2017, Senate Bill No. 369 as Act 45 (“Act 45”), which amends Act 22 of 2012, as amended, known as “Act to Promote the Relocation of Individual Investors to Puerto Rico” (“Act 22”) by establishing new requirements to the Annual Report. 

Annual Report Requirements

Act 45 requires that with the Exempt Annual Report for the first year as a bona fide resident of Puerto Rico, the grantee include evidence of Form 8898 (Statement for Individuals Who Begin or End Bona Fide Residence in a U.S. Possession) filed with the Internal Revenue Service, or its equivalent filed with a foreign jurisdiction in the case of residents of a foreign jurisdiction other than the United States, notifying the intention to become a bona fide resident of Puerto Rico.

Furthermore, every year after becoming a bona fide resident of Puerto Rico, the grantee shall submit evidence of annual contributions of at least $5,000 to non-profit entities operating in Puerto Rico and duly certified by the Puerto Rico Treasury Department under Section 1101.01(a)(2) of the Puerto Rico Internal Revenue Code, that is not controlled by the grantee.


The Secretary shall establish, through regulations, the necessary guidelines for the interpretation and implementation of the provisions of Act 43 & 45.

BDO is the subject matter expert in tax incentives and we can help you to navigate through the evolving Puerto Rico tax field and identify risks and opportunities suited for your particular circumstances. For further information contact a BDO professional.