2023 Laws of Puerto Rico › TITLE TWENTY-THREE - Public Planning and Development (§§ 1 — 11273) › PART II - Economic Development (§§ 231-241 — 695i) › Chapter 43 - Tourist Incentives (§§ 693 — 693k) › § 693c - Income tax exemption

(a) The income derived from activities related to tourist development of every eligible business, as such term is defined by subsection (a)(6) of § 693a of this title, shall be exempted from payment of the income tax of, as well as the dividends or profits distributed by it to its shareholders or partners or pursuant to the following terms and conditions:
(1) If the eligible business is a guest house, the exempted percentage of such income shall be one half of the percentages mentioned in clauses (2), (3) and (4) of this subsection.
(2) If the eligible business is established in an area designated as developed tourist zone (Zone I), ninety percent (90%) of said income shall be exempted from the payment of income taxes.
(3) If the eligible business is established in an area designated as a tourist zone under development (Zone II), or as a new tourist zone (Zone III), ninety-five percent (95%) of said income shall be exempted from the payment of income taxes.
(4) If the eligible business is established in Vieques or Culebra, one hundred percent (100%) of said income shall be exempted from the payment of income taxes.
The Governor of Puerto Rico shall designate by Executive Order the geographic areas to be included in the various tourist development zones, upon the recommendation of the Chairman of the Planning Board, the Secretary of the Treasury, the Secretary of Labor and Human Resources and the Chairman of the Board of Directors of the Puerto Rico Tourist Company.
(b) In those cases in which a corporation or a partnership, hereinafter referred to as an “investor corporation or partnership”, owns stock or shares in one (1) or more exempted corporations or partnerships, and, in turn, the stockholders or partners of the investor corporation or partnership, and those of intermediate corporations or partnerships, shall be considered separately as if they were the stockholders or partners of the corporation or partnership that is, or was, carrying out the exempted activity or operation. When the distributions are made by a corporation or partnership that is not exempted, it shall have the same power to select the exempted or taxable nature of its distributions of dividends or profits provided in § 10014(b) of Title 13, with regard to the businesses that are or were exempted.
The term partnership also means two (2) or more persons who are engaged in a common, for profit enterprise, under a common name, or not. This provision shall not affect the vested rights acquired by those firms that availed themselves of the existing provisions of this subsection (c) of this section prior to the effective date of this amendment.
(c) If there is any sale or barter of the stock and/or shares of an eligible business, as the term is defined in the act:
(1) During its exemption period, the profit or loss resulting from said sale or barter shall be recognized in the same proportion that the income derived from the tourist development activities of the exempted business is subject to the payment of taxes.
The base of the stock involved in the sale or barter shall be determined for purposes of establishing the profit or loss, pursuant to the applicable provisions of §§ 8006 et seq. of this title, known as the Income Tax Act of 1994, in effect on the date of the sale or barter.
(2) After the termination date of the exemption, the loss or profit shall be recognized in the manner provided by clause (1) above, but only up to the total value of the stock on the books of the corporation or partnership on the date of termination of the exemption (reduced by the amount of any exempted distributions that are received on the same stock after said date) less the base of said stock. Any remainder, if any, of the profit or loss shall be recognized pursuant to the provisions of §§ 8006 et seq. of this title, known as the Income Tax Act of 1994, in effect on the date of the sale or barter.
(d) The exemption granted under subsection (a) of this section is hereby conditioned on the eligible business having met the requirements established by the Puerto Rico Tourism Company regulations. Said regulations shall contain standards and criteria to require the following from the eligible business:
(1) A promotion, publicity and marketing plan for its tourist activities according to the particular circumstances and needs of the eligible business.
(2) Compliance with adequate safety, health and protection standards for its clientele.
(3) A personnel training and retraining program.
(4) A reasonable percentage of facilities for persons with physical disabilities and specific access to them.
(5) A conservation, improvement and maintenance plan for its buildings and environmental and aesthetic infrastructure.
These regulations shall establish that the proportion of the net income to be invested by the eligible businesses in the previously specified items shall not be less than twenty percent (20%). In the event that the operation of the eligible business is shared by the owner and its operator, the proportion of the net income of each one and of both collectively shall be taken into account. It shall be understood that both qualify for the tax exemption benefit if one, or both, comply with the requirements of this section, as approved by the Tourism Company.
Provided further, That a copy of the regulations adopted by virtue of this section shall be sent to each Legislative Body no less than thirty (30) days prior to their effective date.
(e) The Tourism Company, after duly inspecting the eligible business, may issue a certificate of compliance, or request the Secretary of the Treasury to cancel the exemption granted by virtue of this section, if it is found that the concessionaire has not maintained the structures and facilities of the business within the operational standards established by the Tourism Company, and/or it has not met the promotional requirements established for such purposes.
History —June 2, 1983, No. 52, p. 94, § 4; July 24, 1985, No. 20, p. 727, § 1; May 31, 1988, No. 35, p. 132, § 3.