2023 Laws of Puerto Rico › TITLE TWENTY-THREE - Public Planning and Development (§§ 1 — 11273) › PART IX - Economic Development II (§§ 11001 — 11273) › Chapter 251 - Puerto Rico Film Industry Economic Incentives Act (§§ 11001 — 11008c) › Subchapter VII - Tax Treatment (§§ 11007 — 11007c) › § 11007 - Tax treatment of grantees

(a) To fulfill his/her responsibilities under this chapter, the Secretary of Development shall be empowered to issue grants authorizing grantees to enjoy the following tax benefits:
(1) Exemption from the payment of income taxes:
(A) Fixed tax rates on net income.
(i) In general.— Grantee’s net income directly derived from the exploitation of activities covered under a grant shall be subject to a fixed income tax rate of four percent (4%), in lieu of any other tax, if any, provided in the Code or any other Puerto Rico law.
(ii) Large-scale studio operators.— The fixed income tax rate of four percent (4%) established in subparagraph (i) of this paragraph, shall only be available to large-scale studio operators. Any large-scale studio established within the film development zone in the Autonomous Municipality of San Juan shall be eligible for the tax treatment and other benefits established in this subparagraph.
(iii) Studio operators.— A studio operator will be subject to a fixed income tax rate over its net income derived from the activities under the grant ranging from six percent (6%) to ten percent (10%), to be determined by the Secretary of Development. The Secretary of Development shall consider for purposes of his/her determination, in respect to the fixed tax rate applicable to the business described in the preceding sentence, in terms of the nature of the business to be carried out, the amount of employment provided by such business, or any other benefit or basis that at the discretion of the Secretary of Development shall promote the best social and economic interests of Puerto Rico.
(B) Tax exemption on dividends.— The dividends or benefits distributed by a grantee to its investors, stockholders, members, or partners from income derived from the exploitation of activities covered under a grant, including a distribution of the proceeds derived from the sale of the tax credits granted under this chapter, and the distributions made in liquidation shall be totally exempt from taxation, including the alternative minimum tax and the alternate basic tax provided in the Code.
(2) Exemption from municipal and Puerto Rico taxes on real or personal property.
The real or personal property devoted to activities covered by a grant that is otherwise subject to taxation, shall be entitled to a ninety percent (90%) exemption from all municipal and Puerto Rico taxes on real or personal property. Real and/or personal property taxes shall be assessed, imposed, notified, and administered pursuant to the provisions of the Municipal Property Tax Act of 1991, or any subsequent statute in effect as of the date the tax is assessed and imposed.
(3) Exemption regarding municipal license taxes, excise taxes and other municipal taxes:
(A) No grantee shall be subject to municipal license taxes, excise taxes, and other municipal income taxes imposed by a municipal ordinance, as of the effective date of the grant.
(B) Every grantee and its contractors or subcontractors shall enjoy one hundred percent (100%) exemption from any tax, assessment, license, excise tax, rate or tariff for the construction of works that shall be used in activities covered under a grant within a municipality, imposed by any ordinance of any municipality, as of the effective date of the grant. The contractors or subcontractors who work for a grantee shall determine their volume of business for municipal license tax purposes, deducting the payments they are required to make to subcontractors under the primary contract with the grantee. Subcontractors, who, in turn, use other subcontractors within the same project, shall also deduct those payments in the determination of their volume of business. A contractor or subcontractor may deduct the payments described in the preceding paragraph from their respective volumes of business only if said contractor or subcontractor certifies, through a sworn statement, that he/she did not include in the executed contract for works or services to be rendered with regard to the grantee, an item equal to the municipal license fee resulting from the volume of business deducted pursuant to this paragraph.
(4) Tax exemption regarding articles for use and consumption.
(A) Goods and materials for use and consumption introduced or acquired directly or indirectly by a grantee to be used exclusively in activities covered under a grant are hereby exempted from the payment of excise taxes imposed under Subtitle B of the Code, and except in the case of grantees engaged in Film Projects, from the payment of the sales and use taxes imposed by Subtitle BB of the Code or any municipal ordinance.
(B) The exemption granted by this paragraph (4) includes goods and materials acquired by a contractor or subcontractor to be used exclusively by a Grantee in construction works related to the activities covered under a Grant.
(5) Commencement of the exemption.— The tax benefits granted under this section shall be effective as of the date set in the grant.
History —Mar. 4, 2011, No. 27, § 8.1.