2023 Laws of Puerto Rico › TITLE THIRTEEN - Taxation and Finance (§§ 1 — 33423) › Subtitle 15 - Puerto Rico Industrial Incentives Generally (§§ 10001 — 10855) › PART II - Tax Incentives Act of 1998 (§§ 10101 — 10117) › Chapter 905 - Tax Incentives Act of 1998 (§§ 10101 — 10117) › § 10102 - Fixed tax rate on industrial development income

(a) Fixed tax rate. —
(1) Exempted businesses that hold a decree granted under this part shall be subject to a fixed income tax rate of seven percent (7%) on their industrial development income, excluding income from investments described in § 10101(j) of this title, for the entire corresponding period as provided, and from the date of commencement of operations determined under subsections (d) and (i) of § 10105 of this title, respectively, in lieu of any other tax, if any, provided by law. In the absence of any provision to the contrary, said tax shall be paid in the form and manner provided in the Puerto Rico Internal Revenue Code for the payment of income taxes in general. Exempted businesses that hold a decree granted under this part may enjoy a fixed rate of less than the seven percent (7%) rate provided in this clause, which shall not be less than two percent (2%), provided that the Secretary of State, upon the favorable recommendation of the Secretary of the Treasury and the Executive Director of the Industrial Development Company, determines that said reduced tax rate would be of benefit to the best economic and social interests of Puerto Rico, in consideration of the special nature of the specific exempted business, the technology involved, the substantial number of jobs provided, or of any other benefit or factor that, in his/her judgment, merits such a determination.
(A) Notwithstanding the provisions of clause (1), the fixed rate may be reduced to less than two percent (2%), provided that the Secretary of State, upon the favorable recommendation of the Secretary of the Treasury and the Executive Director of the Industrial Development Company and its Board of Directors, determines that the exempted business constitutes a pioneering core industry in Puerto Rico, with novel or innovative technology that has not been used in Puerto Rico prior to January 1st, 2000, which shall have a significant economic impact on the industrial and economic development of the Island. The determination as to whether a pioneering core industry shall have a significant economic impact, shall be made on the basis of real factors, such as the nature of the jobs to be created and the substantial investment in the plant, machinery and equipment, the substantial concentration of the production of one or more products for the international market, the development of high levels of scientific, technological and managerial skills of its employees, and the integration of research and development and technological improvements as an important part of such industrial operations, as well as the tax impact in general, including the payment of taxes withheld at the source on royalties when the new technology is transferred to be used in Puerto Rico, and on the payment of license fees, leases and rents.
(B) The fixed rate of less than two percent (2%) shall be granted initially for five (5) years, which period may be extended for five (5) additional years if the exempted business has complied substantially with the parameters stated above, provided it is so recommended by the Executive Director of the Industrial Development Company and the Secretary of the Treasury. The remainder of the exemption period of the exempted business, if any, shall pay taxes at the minimum rate of two percent (2%), pursuant to the provisions of subsections (d) and (i) of § 10105 of this title.
(2) Any exempted business holding a decree granted under this part which manufactures textiles, wearing apparel made of cloth or other materials, leather or imitation leather articles and footwear, and/or is engaged in canning fish, shall be subject to a fixed income tax rate of four percent (4%) on its industrial development income, excluding the income from the investments described in § 10101(j) of this title, during the entire corresponding period as provided, and as of the date of commencement of operations as determined under subsections (d) and (i) of § 10105 of this title, respectively, in lieu of any other tax levied by law, if any. Exempted businesses under this clause may enjoy a fixed rate of less than four percent (4%) provided in this clause, which shall not be less than two percent (2%), provided the Secretary of State, after favorable recommendation of the Secretary of the Treasury and the Administrator, determines that said reduced rate would be of benefit to the best social and economic interests of Puerto Rico, in consideration of the special nature of the particular exempted business, the technology involved, the substantial number of jobs provided, or any other benefit or factor that in his/her judgment merits such a determination.
(3) Any exempt business covered under this part, which is located or will locate its operations on Vieques or in Culebra, or any other municipality with an economic or unemployment situation similar to said municipalities, shall be completely exempt from the payment of revenue tax over industrial development income originating from said operations during the first ten (10) years of the corresponding period as provided and as from the date of commencement of operations as determined under subsections (d) and (i) of § 10105 of this title. The remainder of the business exempt period shall be subject to a fixed rate of two (2%) in lieu of any other tax, if any.
(4) Any exempted business, which is a service unit that has a tax exemption decree granted under § 10101(i)(16) of this title, shall be subject to a fixed tax rate of four percent (4%) on the industrial development income originating from operations that cover the markets of Central America and South America (the Latin American region) exclusively, or of two percent (2%) over the industrial development income originating from operations that cover the markets from North America to South America (hemispheric region) or the world market. To be entitled to the tax rate herein provided, the service unit, in addition to comply[ing] with all the requirements in subsections (d) to (i) of § 10101 of this title and with the terms and conditions of its tax exemption decree, must create and maintain at all times an average employment of fifteen (15) people for rendering the service subject to the special rate provided in this clause. These jobs cannot include employees of any other business, if any, carried out or that may be carried out by the service unit, its affiliates, related firms, its shareholders or members nor employees who render these services for Puerto Rican markets.
(5) Industrial development income from eligible investments under § 10101(j) of this title shall be completely exempted from income taxes.
(b) Credit for stockholders who are individuals. — Stockholders or partners of exempted businesses holding a decree granted under this part who are individuals shall be entitled to a credit on the income tax levied under the Puerto Rico Internal Revenue Code equal to thirty percent (30%) of their proportional share of the fixed tax rate on industrial development income paid by the exempted business under this section. Credit which is not used in a taxable year by stockholders or partners who are individuals may be carried over to subsequent taxable years, until said credit is exhausted.
History —Dec. 2, 1997, No. 135, § 3; Oct. 4, 2001, No. 145, § 1; Mar. 3, 2002, No. 43, § 1; Aug. 29, 2002, No. 225, § 1; Aug. 29, 2002, No. 226, § 1.