2023 Laws of Puerto Rico › TITLE TWENTY-ONE - Municipalities (§§ 1-4 — 6756) › Subtitle 3 - General Provisions (§§ 621-639 — 1100a) › Chapter 71 - Municipal License Taxes (§§ 621-639 — 652y) › § 651h - Exemptions

The following shall be exempted from the payment of the license tax levied by authority of law:
(1) Any business or industry executed or operated by and for any agency, subdivision or instrumentality of the federal or Commonwealth Government and its municipalities. This exemption shall not include the sugar or molasses mill businesses or industries operated by or on behalf of the Puerto Rico Sugar Corporation.
(2) Services, sales, financial businesses and/or any industry or business subject to the license tax levied hereunder when their volume of business does not exceed five thousand dollars ($5,000).
(3) Income received or earned from the rendering of services as employee of an employer as defined in § 141(a)(3)-1 of the 1954 Income Tax Act Regulations.
(4) Sale at retail or wholesale of agricultural products directly sold by the farmer.
(5) Any natural or juridical person on whom the Commonwealth of Puerto Rico hereby preempts the field of imposing tax as provided in § 706 of Title 26.
(6) Labor, agricultural and horticultural organizations.
(7) Fraternal and benevolent societies, orders or associations which:
(a) Operate under the lodge system or for the exclusive benefit of the members of a fraternity which in turn operates under the lodge system, and
(b) provide for the payment of life, health or accident benefits or other benefits to members of said society, order or association or to their dependents.
(8) Cemetery companies owned and operated exclusively for the benefit of their members or which are not operated for profit; and any corporation authorized exclusively for burial purposes as a cemetery corporation and not authorized by its articles of incorporation to engage in any business not necessarily incidental to such purposes, and where no part of its net utilities results in the benefit of any stockholder or private individual.
(9) Corporations and any community fund, fund or foundation, created and administered exclusively for religious, charity, scientific, literary or educational purposes or for the prevention of cruelty to children or to animals, where no part of its net utility results in benefit of any stockholder or private individual.
(10) Commercial leagues, chambers of commerce, boards of realtors or commercial boards which are not organized for profit, where no part of its net utilities results in the benefit of any stockholder or private individual.
(11) Civic leagues or organizations which are not organized for profit, but which operate exclusively for the promotion of the social welfare or local employee associations whose membership is limited to the employees of a particular person or persons in a particular municipality, and whose net utilities are devoted exclusively to charitable, educational or recreational purposes.
(12) Clubs organized and administered exclusively for pleasure or recreational purposes and other nonprofitable purposes, in which no part of its net utilities results in the benefit of any stockholder or private individual.
(13) Subject to the requirements of Act No. 291 of April 9, 1946, as amended, known as “General Cooperative Association Act of Puerto Rico”, the cooperative societies organized and operated under the provisions of said sections, but limited only to the income received or earned by the persons or entity members of said cooperatives.
(14) Subject to the requirements of Act June 15, 1973, No. 1, §§ 1–32, credit cooperatives organized and operated under the provisions of said sections.
(15) Corporations organized for the exclusive purpose of retaining title to property, collecting income derived therefrom and delivering its total amount, less expenses, to an organization which in turn is exempted from the tax levied by the 1954 Income Tax Act.
(16) Voluntary or benevolent employees associations which provide for the payment of life, health or accident benefits, or other benefits, to members of said association of their dependents, if:
(a) No part of their net utilities results (other than through said payments) in benefit of any stockholder or private individual.
(b) Eighty-five percent (85%) or more of their income is derived from amounts charged to the members and amounts contributed to the association by the employer of the members for the sole purpose of making such benefit payments and covering expenses.
(17) Teacher’s retirement fund associations of a purely local nature, if:
(a) No part of their net utilities results (other than the retirement benefit payment) in benefit of any stockholder or private individual.
(b) Their income consists exclusively of amounts received from public contribution, amounts received from quotas assessed on the teachers’ salaries and from income derived from investments.
(18) Employees’ voluntary and benevolent associations which provide for the payment of life, health and accident benefits, or other benefits, to members of said association, to their dependents or to their designated beneficiaries if:
(a) The admission to membership of said association is limited to individuals who are officers or employees of the Commonwealth of Puerto Rico or any instrumentality or political subdivision thereof, or of the United States or of its agencies or instrumentalities, rendering service in Puerto Rico.
(b) No part of the net utilities of said association results in benefit of any stockholder or private individual, unless it is through such payments.
(19) Subject to the requirements of § 192 of Title 13, any institution, college, academy or school accredited by the Department of Public Education for the instruction of fine arts.
(20) Any trust which forms part of an employer share bonus, retirement or profit sharing plan for the exclusive benefit of its employees or the latter’s beneficiaries and any public or private employee association which provides similar benefits to its members and no part of the net utilities of which results, in a way other than through the payment of said benefits, in the benefit of any stockholder or private individual, constituted or organized under the laws of any state of the United States of America, provided said trust or association qualifies as an entity exempted from income tax under the Federal Internal Revenue Code.
(21) Nonprofit associations that provide rental housing to low or moderate-income families that qualify as such under §§ 221(d)(3) or 236 of the National Housing Act (Public Law 73-479, 48 Stat. 1246, Public Law 90-448, 82 Stat. 476, 498) when thus certified by the Department of Housing of Puerto Rico.
(22) Nonprofit associations that provide rental housing to persons over 62 years of age provided said corporations qualify under § 202 [203] of the National Housing Act as amended, (Public Law 86-372, 73 Stat. 654) when thus certified by the Department of Housing of Puerto Rico.
(23) Artisanry workshops and plastic arts workshops when their gross annual income does not exceed fifty thousand dollars ($50,000), when they are operated directly by the artisan or artist in the performance of his/her trade even though more than one artisan or artist participates, and whether the sales are wholesale or retail.
(24) An international banking entity which has been duly authorized under §§ 232 et seq. of Title 7, known as the “International Banking Center Regulating Act”.
(25) Interest on obligations of the Commonwealth of Puerto Rico, its instrumentalities and municipalities, as well as on obligations of the Government of the United States, the states of the United States, and its respective instrumentalities and political subdivisions.
(26) Profits earned from transactions exempted from payment of income taxes under § 112 of Act No. 91 of June 29, 1954, known as Income Tax Act of 1954.
(27) Income not attributable to Puerto Rican operations of corporations exempted under §§ 10038 et seq. of Title 13, and former industrial incentives acts, pursuant to the provisions of §§ 936 and 482 of the Federal Internal Revenue Act.
(28) Income described in § 10039 of Title 13, and the prior industrial incentives acts, received or earned by tax exemption concessionaires under said acts.
(29) Development of construction or rehabilitation of social interest housing projects as provided in §§ 891 et seq. of Title 17, known as the “Public and Private Sector Copartnership for New Housing Operation Act”. The municipalities shall be empowered to grant said exemption, and if it is granted, it shall be total or partial, as approved by the municipal legislature, by ordinance.
(30) Owners’ associations of timeshare or vacation club rights, organized under the provisions of §§ 1251 et seq. of Title 31, regardless of whether timeshare rights are of a contractual nature or if they constitute a special type of property.
(31) That income derived exclusively from the export activity generated by enterprises located in the foreign trade zones, including income generated by the product used in the manufacturing, mixing or baling process within the zone, established pursuant to the 1934 Foreign Trade Zones Act (19 U.S.C. 819a), by an entity incorporated under the laws of the Government of Puerto Rico or by a company authorized to do business in Puerto Rico, excluding companies engaged in the purchase and sale of crude oil and its byproducts whose operations are conducted pursuant to the provisions of the Trade Zones Act, supra.
(32) All volume of business generated through the purchase and resale (transfer) of goods to the voluntary chains of retailers and services that constitute the retail entity organized under the provisions of §§ 257 et seq. of Title 10, and duly certified by the Commercial Development Administration. This exemption is solely to the effect of avoiding the double taxation for municipal license taxes since the retailer that is a member of the entity shall be paying taxes on said income when selling them at retail.
(33) Any plant or industry engaged in the processing of tuna that has three hundred (300) or more employees in the same facility.
(34) Rent revenues received by owners of properties acquired from the Department of Housing of Puerto Rico or the Public Housing Administration on or after August 1, 2008, for the rehabilitation of such properties under the mixed-finance program provided in Subpart F of Part 941 of Title 24 of the Code of Federal Regulations (24 C.F.R. 941 Subpart F), insofar as these continue to operate pursuant to the federal regulations cited above and the Department of Housing so certifies.
(35) Rent revenues received by owners of affordable housing projects or public housing projects acquired from the Department of Housing of Puerto Rico or the Public Housing Administration, which have been financed under the New Market Tax Credits program, under federal law provisions set forth in Public Law 106-554 and any subsequent law that extends its effectiveness, insofar as these continue to operate pursuant to the federal law cited herein and the Department of Housing so certifies.
History —July 10, 1974, No. 113, Part 1, p. 371, § 9; Aug. 9, 1974, No. 25, Part 2, p. 670, § 1; Mar. 7, 1983, No. 3, p. 7; July 24, 1985, No. 23, p. 749, § 9; Aug. 30, 1991, No. 82, § 5; Nov. 17, 1992, No. 93, § 4; Aug. 19, 1994, No. 93, § 1; Dec. 17, 1997, No. 148, § 1; June 17, 1999, No. 131, § 1; Dec. 21, 1999, No. 350, § 1; June 17, 2000, No. 104, § 1; Dec. 25, 2002, No. 304, § 1; Oct. 6, 2005, No. 126; Nov. 19, 2009, No. 145, § 1.