2023 Laws of Puerto Rico › TITLE SEVEN - Banking (§§ 1 — 3116) › PART III - Other Financial Institutions (§§ 551 — 1390) › Chapter 81 - Investment Capital Fund (§§ 1241 — 1260a) › § 1250 - Taxation—Fund; disposition of risk-free investment income

(a) Tax exemption. — Every fund with a valid license issued by the Commissioner for its entire taxable year or that part of said period that is applicable to the first or last year of operations, shall be exempted from the income tax levied by §§ 8401 et seq. of Title 13.
(b) Exemption from filing a return. — A Fund with a valid license issued by the Commissioner for its entire taxable year or that part of said period that is applicable to the first or last year of operations, shall be exempted from filing the corresponding income tax return required by §§ 8401 et seq. of Title 13.
(c) Withholding in distributions of industrial development income. — Notwithstanding what has been established above, every investment capital fund with a valid license or permit issued by the Commissioner during its entire taxable year or that part of said period that is applicable to the first or last year of operations, and receives distributions of industrial development income, as said term is defined in § 1242 of this title, shall be subject to the tax levied by the Incentive Act, §§ 10038 et seq. of Title 13, on such distributions, through the withholding at source by the exempted business.
(d) Notice to investors. — The fund shall inform those persons who are investors in the fund of the total amount of the tax withheld on the portion of any distribution of industrial development income or part thereof, attributable to each one of them, on or before the last day of the month of February of each year.
(e) Disposition of risk-free activities investment income. —
(1) At the close of the fund’s fiscal year that includes the third anniversary of the closing of each offer, the fund shall have invested a minimum of seventy percent (70%) of the restricted use capital funds derived from that offer in venture businesses, projects or activities, allowing the investment of a maximum of thirty percent (30%) in risk-free activities authorized by the Bank pursuant to § 1243(c) of this title. If for said fiscal year, or for any subsequent fiscal year, the fund exceeds the limit allowed for the investment in authorized risk-free activities, the fund shall be bound to transfer to the Secretary a sum equal to seventy-five percent (75%) of the net income derived from those authorized risk-free investments in excess of the authorized limit of thirty percent (30%).
(2) For each fiscal year after the operations have begun, the fund shall be bound to transfer to the Secretary a sum equal to ninety percent (90%) of the net income derived from the investments in those activities that are not authorized by this chapter nor by the Bank, under § 1243(c) of this title.
(3) The fund shall deposit with the Secretary the corresponding sum determined pursuant to the provisions of this subsection within a ninety (90) day period following the closing date of its taxable year.
(4) Every sum owed to the Secretary under this section shall be deemed as an income tax levied by the “Internal Revenue Code” subject to the provisions of §§ 8045 et seq. of Title 13.
(5) To the effects of this section, net income shall mean the gross income received by the fund, reduced by the fund’s operating and management expenses, both incomes and expenses determined under the cash basis accounting method (known in English as the cash basis accounting method), in the case of expenses, the provisions of § 8444 of Title 13, known as the “Internal Revenue Code”, shall be applicable. In order to determine how much of the fund’s net income for a specific taxable year was derived from restricted use capital investments in authorized risk-free activities in excess of the authorized limit of thirty percent (30%), the total sum of the fund’s net income for said year shall be multiplied by a fraction whose numerator shall be the fund’s gross income received during the year in which the restricted use capital investments in excess of the authorized limit of thirty percent (30%) were made, and whose denominator shall be the total amount of the fund’s gross income received during the year. The net income derived from restricted use capital in unauthorized risk-free activities shall also be determined based on this formula, except that the numerator shall be the gross income received by the fund during the year in which restricted use capital investments in unauthorized risk-free activities were made.
History —Oct. 6, 1987, No. 3, p. 840, § 10; July 11, 1996, No. 70, § 10.