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) › § 10112 - Administration, granting of tax exemption

(a) Industrial Tax Exemption Office. — The Industrial Tax Exemption Office shall be attached to the Department of State. Said Tax Exemption Office shall be directed by a Director, who shall be appointed by the Secretary of State, with the approval of the Governor. The Director shall exercise the powers, perform the duties and comply with the obligations imposed by this part. The Secretary of State shall appoint the necessary personnel and shall administer this Office.
(b) Sworn statements required by the Industrial Tax Exemption Office. — The Tax Exemption Office shall require all tax exemption applicants to present whatever sworn statements concerning the pertinent or required facts are needed to determine whether the operations or intended operations of said applicants qualify under the provisions of this part.
(c) Hearings. — The Director may hold such public and/or administrative hearings as he/she may deem necessary and shall require the applicants for tax exemption decrees to present any evidence that will justify the requested tax exemption.
The Director, or any Special Examiner of the Tax Exemption Office thus designated by the Secretary of State, may receive the evidence presented in connection with any application for a tax exemption decree, and shall have the power to summon witnesses and take their statements with regard to the alleged facts or of those facts otherwise related to the tax exemption decree requested, take the oath of any person who makes a statement before him/her, and submit a report to the Secretary of State regarding the evidence presented, together with his/her recommendations on the case.
(d) Penalties. — Any person who makes or attempts to makes, per se or on behalf of another person, any false or fraudulent representation with regard to any tax exemption application or grant, or commits or attempts to commit any violation of the provisions regarding exempted, predecessor or successor businesses, shall be deemed to be guilty of a felony and upon conviction thereof shall be punished with a fine not to exceed ten thousand dollars ($10,000.00), or by imprisonment for a term of not more than five (5) years, or both penalties, plus fees, at the discretion of the court.
(e) Tax exemption applications; fees to be collected, review of rates. — Any person who has established or intends to establish an eligible business in Puerto Rico, shall apply to the Secretary of State for the benefits of this part by filing the corresponding duly sworn application with the Tax Exemption Office.
At the time of filing, the Director shall collect the following fees for the applications filed, which shall be paid by certified check, or postal or bank money order, issued to the Secretary of the Treasury:
(1) For filing original cases, five hundred dollars ($500.00).
(2) For filing cases to be renegotiated, consolidations, applications for special waivers and for additional exemptions, three thousand dollars ($3,000.00).
(3) For filing transfers of stock and control, or of assets of exempted businesses between corporations or affiliated entities as this term is defined in § 10108(b)(7) of this title, five hundred dollars ($500.00).
(4) For filing transfers of stock and control, or of assets of exempted businesses to businesses that are not affiliated businesses, as this term is defined in § 10108(b)(7) of this title, three thousand dollars ($3,000.00).
(5) For filing applications for amendments and extensions of various types, three hundred dollars ($300.00).
(6) For filing or issuing any certificate, sworn statement or any document for which different fees are not distinctly stated, twenty-five dollars ($25.00).
(7) For the presentation of documents in opposition to the tax exemption applications, twenty-five dollars ($25.00).
The fees established in this subsection and other sections of this part shall be subject to review every three (3) years from its date of approval. The increases in the cost of living shall be taken into account for said review. The Tax Exemption Office shall be responsible for submitting the recommendations for amendments to this subsection.
(f) Nature of the grants. — The tax exemption granted under this part shall be deemed to be in the nature of a contract between the grantee, its stockholders, partners or owners, and the Government of Puerto Rico, and shall include those terms and conditions that are consistent with the purposes of this part and that will promote the creation of jobs for the social and economic development of Puerto Rico, taking into consideration the nature of the petition or action requested, as well as the related facts and circumstances that may apply to each particular case.
(g) Obligation to comply with the representation made in the application. — All exempted businesses shall conduct their exempted operations substantially as represented in the application, except when these have been changed under amendments authorized by the Secretary of State as requested by the grantee, pursuant to the provisions of this part.
(h) Commencement of operations. — The exempted business shall commence operations on a commercial scale within the term of one year from the date the grant was signed. Said term may be extended at the request of said business, for just cause, but no extension shall be granted that will extend the date to commence operations for a term greater than five (5) years from the date the grant was approved.
(i) Regulations under this part. — The Director shall draft, in consultation with the Secretary of the Treasury and the Administrator, those regulations needed to enforce the provisions and purposes of this part. Said regulations shall also be subject to the provisions of §§ 2101 et seq. of Title 3, known as the “Commonwealth of Puerto Rico Uniform Administrative Procedures Act”.
(j) Interagency consideration of the applications. — Upon receipt of any application under this part by the Tax Exemption Office, the Director shall remit a copy thereof to the Secretary of the Treasury and the Administrator within a term of five (5) days from the date the application is filed. The latter shall issue an eligibility report on the manufactured product or the designated service, as the case may be, and on other facts related to the application. Upon evaluation of the application for exemption, the Secretary of the Treasury shall verify the compliance of the stockholders or partners who hold twenty-five percent (25%) or more of the stock or shares of the exempted business with their tax responsibility under the Puerto Rico Internal Revenue Code, or any similar preceding law. Noncompliance with said tax responsibility shall be taken into account by the Secretary of the Treasury when issuing his/her recommendation for exemption on the application of the exempted business. In the case of applications for exemption under subsections (d)(10) and (e)(24) of § 10101 of this title, the Director shall remit a copy of the application to the Executive Director of the Solid Waste Authority within a term of five (5) days as of the date the application was filed. The Administrator shall remit his/her recommendation to the Director and the Secretary of the Treasury within forty (40) days after the Director remits a copy of said application, provided it contains all the information needed for the corresponding evaluation. Should the Administrator fail to submit his/her recommendation to the Director within the term of forty (40) days from the date the Director remitted a copy of the application, it shall be deemed that the Administrator has favorably recommended the application. Any unfavorable recommendation shall include the reasons for said recommendation.
(1) The Director shall remit a copy of the application to those agencies that, in the judgment of the Secretary of State, should have copies thereof, in view of the nature of the industry.
(2) Once the eligibility report from the Administrator is received, or the term of forty (40) days has elapsed without the recommendation of the Administrator having been received, the Director shall draw a draft decree to be circulated among the agencies concerned, including the Secretary of the Treasury, within a term of twenty (20) days after all the documentation needed to handle the case has been received, or unless a petition in opposition thereof has been filed, so that the agencies may submit a report with their recommendations. Copies shall also be sent to the municipality concerned and to the Municipal Revenues Collection Center (CRIM, Spanish acronym), for the corresponding economic and fiscal evaluation. Any unfavorable recommendation shall include the grounds for such a recommendation. Should any of said agencies or municipalities fail to submit the corresponding report or opinion within a term of thirty (30) days after having been notified of said draft decree, said draft decree shall be deemed to have received a favorable recommendation from the agencies or municipalities notified, and the Secretary of State shall take corresponding action with regard to the application for exemption.
In the case of amendments to grants approved under this part, the term for the agencies and municipalities concerned to submit a report or opinion to the Director shall be reduced to twenty (20) days.
The Director shall also remit an informative copy of the draft decree to the Secretaries of Justice and of Labor and Human Resources.
(3) Once the reports have been received, and in no case more than ninety-five (95) days after the application has been duly filed, the Director shall submit the draft decree and his/her recommendation to the consideration of the Secretary of State within the following ten (10) days.
(4) The Director may rely on the recommendations furnished by those agencies or municipalities that issue reports or opinions and may ask them to supplement these.
(5) The Secretary of State shall issue a final determination in writing within a term not to exceed five (5) days from the day the draft decree was submitted for his/her consideration.
(6) The Secretary of State may delegate to the Director those functions which in his/her discretion he/she deems convenient in order to expedite the administration of this part, except the function of approving or denying the original applications for tax exemption, and excepting the exemptions granted under subsections (b) and (d)(5) of § 10101 of this title.
(k) Periodic reports to the Governor and the Legislature. — The Director and the Administrator shall render a yearly report to the Governor and the Legislature on the activities and achievements of the economic development program which shall include the tax exemption applications submitted and approved, the businesses established, their compliance with the commitments contracted by exempted businesses, the jobs committed to and created, and the effects of the tax exemption on the reduction of the unemployment rate, as well as any other matters needed to inform the Governor and the Legislature as to the scope and effects of implementing this part. These reports shall include an analysis and evaluation of the factors related to the industrial development of Puerto Rico, such as the government processing of permits, licenses, authorizations, grants and any other similar matters, the availability of land for industrial purposes, the availability of skilled manpower and infrastructure, and the manner in which said factors promote or affect the industrial development of the country. These reports shall also encompass the dynamics of the progress of the economic development program from the perspective corresponding to each official, and to this effect, shall include an analysis of the relative competitiveness of Puerto Rico, taking into account all of the factors that are evaluated by industrialists to establish their businesses on the Island.
The Secretary of State, in consultation with the Administrator and the Secretary of the Treasury, shall submit a report to the Legislature on the economic and fiscal impact of this part within ninety (90) days following the close of each fiscal year.
The Secretary of the Treasury shall likewise render a report to the Legislature indicating the manner in which the exempted businesses have filled their tax obligations, including a comparison with the previous year and a projection of said conduct for the next three (3) years following the year to which the report corresponds.
History —Dec. 2, 1997, No. 135, § 13, eff. Jan. 1, 1998.