2023 Laws of Puerto Rico › TITLE THIRTEEN - Taxation and Finance (§§ 1 — 33423) › Subtitle 15 - Puerto Rico Industrial Incentives Generally (§§ 10001 — 10855) › PART I - Industrial Incentives (§§ 10001 — 10052) › Chapter 904 - Puerto Rico Tax Incentives Act of 1987 (§§ 10038 — 10052) › § 10041 - Option regarding income tax for exempted businesses

Every exempted business under the provisions of this chapter or under the provisions of prior industrial incentive acts, may choose the option of paying the tax provided under subsection (a) of this section, subject to certain credits for its industrial development income investments, in lieu of the income tax applicable pursuant to the law under which it enjoys the exemption and for the remainder of the exemption period provided in the decree. This option notwithstanding, those exempted businesses operating under the provisions of this chapter shall continue to be subject to the special surtax provided for in § 10040(a) of this title.
(a) Optional tax. — The tax provided for in this section shall be equal to fourteen percent (14%) of the net industrial development income subject to taxes generated by the exempted business during that particular tax year, including the income received on account of the investments described in § 10039(j) of this title, except for the interest on obligations issued by the Commonwealth of Puerto Rico, or any of its instrumentalities or political subdivisions. This tax shall apply to every exempted business enjoying an exemption of ninety percent (90%) for income tax purposes. In the case of those exempted businesses which enjoy an income tax exemption of less than ninety percent (90%), the applicable optional tax percentage shall be adjusted proportionally, adding to the fourteen percent (14%) rate an additional rate which shall be determined by multiplying by forty-five percent (45%) each percentage point of the difference between the ninety percent (90%) rate and the income tax percentage which is enjoyed by said exempted business.
(b) Credit for investments. — The tax type provided for in subsection (a) of this section may be reduced by the following:
(1) Five percent (5%) if the exempted business invests fifty percent (50%) or more of its industrial development income for that particular tax year, after paying the corresponding taxes, in those activities covered by § 10039(j) of this title for a fixed period of five (5) years or more.
For the purpose of this subsection, the exempted business may invest up to fifty percent (50%) of the investment required in property, physical facilities and equipment with a useful life of ten (10) years or more for purposes of depreciation, as long as these are acquired after December 31, 1992.
(2) Three percent (3%) if the exempted business invests at least twenty-five percent (25%) of its industrial development income for that particular tax year, after paying the corresponding taxes, in the activities covered by § 10039(j) of this title for a fixed period of five (5) years or more.
For the purposes of clauses (1) and (2) of this subsection, the industrial development income of the exempted business shall not include income received on account of the investments described in § 10039(j) of this title.
The exempted business shall provide a yearly notice, together with its income tax return, as to the investment credit which will reduce the tax type provided for in subsection (a) of this section.
(c) Term to carry out investments. — Those investments required by subsection (b) shall be carried out not later than ninety (90) days following the date prescribed by law for filing the income tax return for that particular tax, year, including any extension granted.
(d) Noncompliance with the investment requirement. — In case the exempted business fails to invest or to comply with the requirement of maintaining the investment for the fixed term of five (5) years, the total amount of the tax for the taxable year affected by said noncompliance shall be increased by an amount equal to the total amount of the previously claimed credit, including interest, surtaxes and penalties determined pursuant to the provisions of Act June 29, 1954, No. 91. The amount thus determined shall be reported and remitted to the Secretary of the Treasury on the fifteenth day of the month following the date prescribed by law to make the investment, or on the fifteenth day of the month following the date in which it incurs the noncompliance of the investment requirement. In case the investments described in subsection (b) were redeemed, withdrawn or prepaid prior to the fixed term of five (5) years, the total amount of the tax shall not be increased, provided the exempted business reinvests, on or before ninety (90) days from the date of redemption, withdrawal or prepayment, the principal of the said investment in eligible activities as described in § 10039(j) of this title, for the remainder of the original investment period.
(e) Form of payment. — The exempted business which chooses to avail itself of the tax provided in subsection (a) shall pay the tax in excess of the corresponding credit provided in subsection (b) as follows:
(1) The exempted business shall make a yearly estimate of and report and remit to the Secretary of the Treasury, nine percent (9%) of the net industrial development income subject to taxes generated by the exempted business during the specific taxable year, including the income received on account of the investments described in § 10039(j) of this title, except for the interest on obligations issued by the Commonwealth of Puerto Rico or any of its instrumentalities or political subdivisions, by means of an estimated tax return. This return shall be subject to the provisions of § 61 of Act June 29, 1954, No. 91, except that the provisions of subsection (j)(4)(A) of said section shall not apply for the first year covered under the option.
(2) In case the exempted business does not meet the investment requirement provided for in subsection (b)(1) of this section, any insufficiency in the payment of the optional tax shall be covered on or before the fifteenth day of the fourth month following the close of that particular tax year.
(3) Any payment in excess of the optional tax may be reintegrated or credited against the estimated tax provided for in this subsection which corresponds to the following tax year, at the option of the exempted business.
(f) Manner of and time for exercising the option. — The option to take advantage of the provisions of this section shall be exercised through a sworn statement. In case the exempted business should enjoy the exemption under more than one decree, the option shall be exercised on all decrees. The sworn statement must be filed with the Secretary of the Treasury and the Director of the Industrial Tax Exemption Office on or before the fifteenth day of the fourth month of the tax year within which the option is applicable. The aforementioned notwithstanding, in the case the exempted business chooses to avail itself of the optional tax for the first tax year beginning after December 31, 1992, it must choose to do so on or before the date prescribed by § 61(f) of Act June 29, 1954, No. 91, in order to make the next payment of the estimated tax term, together with the amount of the terms due to that date. The option, once exercised, shall be irrevocable unless the consent of the Secretary of the Treasury has been obtained, and it shall apply to all subsequent tax years. The sworn statement shall include the following information:
(1) The name, address and account number of the exempted business;
(2) the act and the case number or numbers under which the exempted business enjoys tax exemption, and
(3) a statement attesting that the exempted business chooses to irrevocably avail itself of the provisions of this section.
(g) Distribution of dividends. — Accrued industrial development income on which the optional tax provided for in this section has already been paid shall not be subject to any other tax levied by law at the time of the distribution.
(h) Other tax benefits. — The exempted business which avails itself of the choice provided for in this section shall continue enjoying the tax exemption percentages on real and personal property, on municipal license, excise and other taxes it has been enjoying at the time the choice is made.
History —Jan. 24, 1987, No. 8, p. 949, added as § 3A on Nov. 19, 1993, No. 95, § 4; Oct. 27, 1995, No. 218, § 3, eff. Jan. 1, 1996.