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 901 - Puerto Rico Industrial Incentive Act of 1954 (§§ 10001 — 10011) › § 10008 - Denial of tax exemption to successors of predecessor exempted businesses

(a) Denial or forfeiture of exemption in certain cases. — No person shall be entitled to any tax exemption under §§ 10001—10011 of this title if:
(1) A predecessor exempted business, as defined in subsection (b) of this section, is dissolved, liquidated, or otherwise ceases to operate prior to the filing by such person of an application for tax exemption, or shall, at any time after the filing of such application but prior to the close of the tax exemption period otherwise applicable to such person, be dissolved, liquidated, or otherwise ceases to operate for more than six (6) consecutive months for any cause except strikes, war, action of a government or of the elements, or other cause beyond the control of such predecessor exempted business. Provided, however, That in the cases of eligible businesses under § 10002(d)(7) of this title, the Governor may direct, whenever it is to the best interests of the Commonwealth of Puerto Rico in view of the payroll involved, that the provisions of this paragraph shall not apply if the predecessor exempted business has, upon its liquidation, enjoyed less than ten years of exemption; but in computing the exemptions provided under §§ 10001 and 10003 of this title, the period during which the predecessor exempted business enjoyed the exemption shall be deducted; or if
(2) at any time after the filing of such application but prior to the close of the tax exemption period otherwise applicable to such person, the annual production, output, or the operations of a predecessor exempted business shall be diminished for any cause except strikes, war, action of a government or the elements, or other cause beyond the control of such predecessor exempted business, by twenty-five percent (25%) or more as compared with its average annual production output, or operations during the three-year period ending with the close of the taxable year of such predecessor exempted business preceding the filing of such application for tax exemption, or for such part of such period as may be applicable, or if
(3) such person, through the industrial unit or hotel established or to be established, uses or will use physical facilities including, but without limitation, land, buildings, machinery, equipment, inventory or supplies having a value of five thousand dollars ($5,000) or more which have been previously used by the predecessor exempted business. Provided, however, That this subsection shall not apply in cases where the Governor determines that the use of the physical facilities previously utilized by the predecessor exempted business will be in the best interest of the Commonwealth of Puerto Rico in view of the nature of the facilities, the investment, the number of workers and employees involved, and the amount of the payroll. Provided, That the provisions of this clause shall not apply to additions to a property devoted to industrial development, referred to in subsection (b) and in § 10002(d)(4) of this title, even when said additions use physical facilities, including land, foundations and roofs of buildings, water, drainage and gas pipes, electric installations and other services, having a value of five thousand dollars ($5,000) or more, and which are being used by the main property devoted to industrial development or have been used by the main property devoted to industrial development or predecessor exempted business.
(b) Definition. — For the purposes of this section, a predecessor exempted business shall mean any business which:
(1) Is enjoying or has enjoyed tax exemption under either Act No. 184 of May 13, 1948, as amended, or §§ 10001—10011 of this title; and
(2) which, as the source of its industrial development income, produced a manufactured product or conducted hotel operations substantially similar to the manufactured product or hotel operations to be produced or conducted by the person filing the subsequent application for tax exemption, and
(3) which, for the purposes of applying clauses (1) and (2) of subsection (a) but not subsection (a)(3) above, is or was owned to the extent of ten percent (10%) or more of its outstanding stock or any other proprietary interest by such person filing the subsequent application for tax exemption or by any of its stockholders or proprietors owning stock or other proprietary interest to the extent of ten percent (10%) or more. For the purposes of this subsection, the ownership of stock or any other proprietary interest shall be determined in the manner provided by the rules concerning the ownership of stock of corporations or of participation in partnerships under the income tax laws in force in Puerto Rico.
(c) Disclosure of facts. — The Office of Tax Exemption shall require every applicant for tax exemption to make full disclosure, under oath, of facts required or appropriate to determine whether or not the applicant’s operations or proposed operations shall be in violation of the preceding provisions of this section; furthermore, every grant of tax exemption under §§ 10001—10011 of this title shall require that at no time during the life of the grant shall the grantee violate such preceding provisions.
(d) Penalties. — Any person or persons who shall willfully commit, or attempt to commit, on their own behalf or on behalf of any other person or persons, a breach of the provisions of this section, shall be guilty of a felony, and, upon conviction, shall be subject to a fine of not more than $10,000, or imprisonment for not more than five years, or both, together with the costs of prosecution; furthermore, any tax exemption previously granted to any one or more of such persons shall be subject to mandatory revocation by the Governor of Puerto Rico, following for such purposes the procedure established by § 10005(d)(2) of this title; all net income theretofore reported or earned as industrial development income by such person or persons whether or not distributed and the distributions therefrom shall be subject to normal tax and surtax as of the date or dates when such taxes were otherwise due and payable but for such tax exemption; similarly, all other taxes exempted pursuant to § 10001 of this title shall become due and payable as of the date or dates when, but for such tax exemption, they would have become due and payable; all such taxes shall be assessed and collected in accordance with the provisions of the tax laws in force.
(e) Cases of facilities and industrial units used in common in accordance with the provisions of § 10002(h)(3) and (5) of this title. — The provisions of subsection (a)(3) of this section shall not apply to cases where facilities are used in common by two or more industrial units pursuant to the provisions of subsection (h)(3) of § 10002 of this title, and the provisions of clauses (2) and (3) of subsection (a) of this section shall not apply to cases of industrial units pursuant to the provisions of subsection (h)(5) of § 10002 of this title.
History —Dec. 15, 1953, No. 6, p. 12, § 8; Apr. 13, 1956, No. 9, p. 16; June 22, 1956, No. 83, p. 520, § 2; June 28, 1956, No. 105, p. 786, § 5; June 26, 1959, No. 86, p. 243, § 3; June 30, 1959, No. 98, p. 277, § 4; June 2, 1960, No. 18, § 2, retroactive to June 1, 1959.