2023 Laws of Puerto Rico › TITLE THIRTEEN - Taxation and Finance (§§ 1 — 33423) › Subtitle 15 - Puerto Rico Industrial Incentives Generally (§§ 10001 — 10855) › PART III - Other Tax Incentives (§§ 10401 — 10855) › Chapter 953 - Economic Incentives Act For The Development Of Puerto Rico (§§ 10641 — 10673) › Subchapter I - Economic Incentives (§§ 10641 — 10661) › § 10646 - Credit for industrial investment

(a) For the purposes of this section, the following terms shall have the meaning stated below:
(1) Investor. — Shall mean any person who makes an eligible investment.
(2) Eligible investment. — For the purposes of this subsection, any of the following investments shall be deemed to be an eligible investment:
(A) The amount in cash used for the purchase of the majority (fifty percent (50%) or more) of the equity shares or the operating assets of a tax-exempt business that holds a decree granted under this chapter or preceding acts, which is in the process of closing operations in Puerto Rico, in order to continue operating the same, or the cash contributed to said business in exchange for corporate stocks or equity shares used by the business to:
(i) Build or make improvements to the physical facilities, and
(ii) buy machinery and equipment.
(B) The amount in cash contributed in exchange for corporate stocks or equity shares in the establishment of a tax-exempt business that holds a decree granted under this chapter or preceding acts, deemed to be a small or medium business pursuant to the provisions of § 10642(i) of this title, which is used by the tax-exempt business to:
(i) Build or make improvements to the physical facilities, and
(ii) buy machinery and equipment to be devoted exclusively to industrial development.
(C) The amount in cash thus contributed in exchange for capital stocks or equity shares of a tax-exempt business deemed to be a small or medium business pursuant to the provisions of § 10642(i) of this title, which is used by the tax-exempt business to:
(i) Build or make improvements to the physical facilities, and
(ii) buy machinery and equipment to be devoted exclusively to industrial development within a substantial expansion. In order to qualify as a substantial expansion under this paragraph, the investment shall be equal to, at least, fifty percent (50%) of the book value of the operating assets of the tax-exempt business upon the closing of the accounting books for the year before the date of the expansion.
Any other investment which is not directly and totally used for the purposes described in this subsection, shall be excluded from the definition of eligible investment of this chapter.
The term “eligible investment” shall not include an investment made with the cash proceeding from a loan secured by the tax-exempt business itself or by its assets.
(3) Operating assets. — Means any plot of land, structure, machinery, equipment and intellectual property, such as copyright, patents, trade names and licenses. Accounts receivable, the cash, the goodwill, and the inventory are hereby expressly excluded from this term.
(4) Corporate stocks or equity shares. — The shares of a corporation issued in exchange for a contribution in cash may be common shares, preferred shares, or convertible preferred shares. The contribution in cash made in exchange for shares of a corporation or equity interest with rights so restricted that these constitute no other than a debenture of the corporation.
(b) General rule. —
(1) Subject to the provisions of clause (2) of this subsection, any investor may claim a credit for industrial investment equal to fifty percent (50%) of his/her eligible investment made after the date of approval of this act, to be taken in two (2) or more installments: the first half of said credit, in the year in which the eligible investment is completed, and the balance of said credit, in the following years. Any eligible investment made before the date on which the income tax return is to be filed, as provided for in the Puerto Rico Internal Revenue Code, including any time extension granted by the Secretary of the Treasury for the filing thereof, shall qualify for the tax credit of this section in the taxable year for which the aforementioned return is being filed, provided all requirements set forth under this Section are met. Said credit for industrial investment may only be applied against the tax determined under Subtitle A of the Puerto Rico Internal Revenue Code for the investor, including the alternate minimal tax of Section 1017 and the alternate individual tax of Section 1011(b) of the Puerto Rico Internal Revenue Code. If the investor is a tax-exempt business, the same may claim this credit against the tax levied under § 10643(a) of this title.
(2) Maximum credit amount. — The maximum amount of credit for industrial investment shall not exceed eight million (8,000,000) dollars for each tax-exempt business that holds a decree granted under this chapter.
(3) The Secretary of the Treasury shall authorize the investment credits claimed by the investors, up to the limit of twenty million (20,000,000) dollars per fiscal year. The preceding notwithstanding, in the event that it were convenient and necessary to serve the best interests of the Government, the Executive Director may request that the Secretary of the Treasury authorize a greater amount of credits during a fiscal year, or an amount exceeding the limit provided for a specific business.
(c) Credit carryover. — The credit for industrial investment not used in a taxable year may be carried over to subsequent taxable years, until it is used in its entirety.
(d) Any investor interested in requesting an administrative determination of the Secretary of the Treasury in order to generate a credit under subsection (a)(2)(A) of this section, shall first obtain a certification from the Executive Director by sworn statement, attesting that the investment to be made answers to the acquisition of a tax-exempt business in the process of closing, so as to be able to claim the credit for industrial investment, in order for the latter to determine whether the investment made or to be made qualifies for the tax credit. The Secretary of the Treasury may require, as a condition for his/her endorsement or approval, that the investor post a bond or another form of security in favor of the Secretary of the Treasury in order to respond in the event the credits are revoked.
(e) Adjustment of the base and recovery of the credit for industrial investment. —
(1) The base of any eligible investment shall be reduced by the amount taken as credit for industrial investment, but it may never be reduced to an amount of less than zero.
(2) If any tax-exempt business, which originates the credit for industrial investment to generate a credit under subsection (a)(2)(A) of this section, ceases operations as such before the lapsing of a term of ten (10) years counted as of the date of the eligible investment, the investor shall owe, as income taxes, an amount equal to the credit for industrial investment claimed by such investor, multiplied by a fraction whose denominator shall be ten (10) and whose numerator shall be the balance of the ten (10) -year period as required under this subsection. The amount thus owed as income taxes shall be paid in two (2) installments, starting in the first taxable year after the date the industrial activity ceases.
(f) Assignment of the credit for industrial investment. —
(1) The credit for industrial investment provided for in this section may be partially or entirely assigned, sold or otherwise transferred by an investor to any other person.
(2) The base of the eligible investment shall be reduced by the value of the credit for industrial investment thus assigned, sold or otherwise transferred.
(3) The investor who has assigned all or part of his/her credit for industrial investment, as well as the acquirer of the credit for industrial investment, shall notify the Secretary of the assignment through a statement to that effect, which shall be enclosed with his/her income tax return for the year in which the assignment of the credit for industrial investment is made. The statement shall contain the information which the Secretary of the Treasury deems pertinent, through regulations promulgated to that effect.
(4) The money or value of the property received in exchange for the credit for industrial investment, shall be exempted from taxes under Subtitle A of the Puerto Rico Internal Revenue Code, as well as from any kind of municipal taxes, up to an amount equal to the amount of credit for industrial investment thus assigned.
(5) The buyers of tax credits for industrial investment shall be exempted from taxes under §§ 8401 et seq. of this title for the difference between the amount paid to acquire such credits and the value thereof.
History —May 28, 2008, No. 73, art. 1, § 6, eff. July 1, 2008.