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) › § 10650 - Tax exemption period

(a) Exemption.— A tax-exempt business that holds a decree issued under this chapter shall enjoy exemption from taxes for a period of fifteen (15) years. In the case of an exempt business described in § 10642(d)(1)(S) of this title, the exemption period shall be twenty (20) years, which may be extended for an additional ten (10) years at the same income tax rate and the same exemption percentages and benefits, terms and conditions of the original decree.
(b) Flexible tax exemption.— Tax-exempt businesses that hold a decree granted under this chapter shall have the option of choosing the specific taxable years to be covered under their decrees in terms of their industrial development income, provided that they so notify to the Secretary of the Treasury and the Executive Director not later than the date provided by law for filing its income tax return for said taxable year, including the time extensions granted for this purpose. Once said tax-exempt businesses opt for this benefit, their exemption term shall be extended for the number of taxable years in which they have not enjoyed the exemption under their decrees.
(c) Provisions applicable to business tax exemptions on property devoted to industrial development.—
(1) The period during which a property devoted to industrial development belonged to any political subdivision, agency or instrumentality of the Government, shall not be deducted from the period referred to in subsection (a) of this section. Provided, That in such cases, the property shall be deemed, for the purposes of this chapter, as not having been previously devoted to industrial development.
(2) When the tax-exempt business that holds a decree granted under this chapter is property devoted to industrial development, the period referred to in subsection (a) of this section shall not cover those periods in which the property devoted to industrial development is in the market for leasing to a tax-exempt business, or is not occupied, or is leased to a non-exempt business, except as provided further. Said periods shall be computed based on the total period during which the property was at the disposal of a tax-exempt business, provided the total number of years is not greater than the number of years provided under the aforementioned subsection (a) of this section, and the tax-exempt business that qualifies as property devoted to industrial development gives written notice to the Secretary of the Treasury and the Executive Director of the date on which the property becomes vacant and is re-occupied by another tax-exempt business.
In the event that the exemption of a tax-exempt business that holds a decree as property devoted to industrial development expires while the same is being used under a lease by an exempted manufacturing business, said tax-exempt business which is property devoted to industrial development may enjoy a fifty-percent (50%) exemption on property taxes while the exempted manufacturing business continues to use said property under lease.
(3) When the tax-exempt business that holds a decree granted under this chapter is property devoted to industrial development, the period referred to in subsection (a) of this section shall continue its normal course, even if the exemption decree of the tax-exempt business using the aforementioned property, as a result of the expiration of its normal period or due to the revocation of its decree, lapses before the exemption period of the property devoted to industrial development, unless, in the event of revocation, it is proven that at the time in which said property was made available to the tax-exempt business, the property owners knew about the facts which caused the later revocation of the decree.
(d) Establishment of operations in other municipalities.— A tax-exempt business that holds a decree granted under this chapter may establish additional industrial units as part of the operations covered by an exemption decree in effect, in the same municipality where the main office is located, or in any other municipality of Puerto Rico, with no need to request a new exemption decree, provided it notifies the Tax Exemption Office within thirty (30) days as of the beginning of the operations of the additional industrial unit. The additional industrial unit shall enjoy the exemptions and benefits provided for in this chapter for the remainder of the exemption period under the decree in effect.
(e) Interruption of the exemption period.— A tax-exempt business that holds a decree granted under this chapter, which has ceased operations and which subsequently wishes to resume operations, shall not have the time it was not operating deducted from its corresponding exemption period and may enjoy the remainder of its exemption period, while its tax exemption decree is in effect, provided the Secretary of Development determines that said operations ceased due to justified causes and that the reopening of said tax-exempt business would serve the best social and economic interests of Puerto Rico.
(f) Fixing of the dates when operations start and the exemption periods.—
(1) The tax-exempt business that holds a decree granted under this chapter may choose the date on which to start operations for purposes of § 10643 of this title by filing a sworn statement with the Tax Exemption Office, with a copy for the Secretary of the Treasury, stating the unconditional acceptance of the grant made to the tax-exempt business under this chapter. The date on which operations start, for purposes of § 10643 of this title, may be the date of the first payroll for training or production of the tax-exempt business that holds a decree granted under this chapter, or on any other date within a period of two (2) years following the date of the first payroll.
(2) The tax-exempt business that holds a decree granted under this chapter may defer the application of the fixed tax rate provided for in § 10643 of this title for a period not greater than two (2) years from the date operations start as fixed under clause (1) of this subsection. During the deferral period, said tax-exempt business shall be subject to the tax rate that applies under Subtitle A of the Puerto Rico Internal Revenue Code.
(3) The exemption period provided for in § 10647(a) of this title for real and personal property tax exemption, shall begin on the first day of the fiscal year of the Government of Puerto Rico following the last fiscal year in which the tax-exempt business that holds a decree granted under this chapter was totally exempted pursuant to the provisions of § 10647(b) of this title. The partial exemption for said fiscal year shall correspond to the tax on the property owned by the tax-exempt business as of January 1st prior to the beginning of said fiscal year.
(4) The period for the partial exemption provided for in § 10648(d) of this title, for purposes of the exemption on municipal license fees and on any other municipal taxes, shall begin on the first day of the first semester of the fiscal year of the Government of Puerto Rico following the expiration of the period for the total exemption provided for in said subsection. Provided, That in the case of tax-exempt businesses that have been operating on a commercial scale before requesting the benefits of this chapter, the date on which operations start, for purposes of municipal license fees, shall be the first day of the semester following the date of filing the application for tax exemption.
(5) In the case of tax-exempt businesses that hold a decree granted under this chapter and which have been operating on a commercial scale before applying for the benefits of this chapter, the date on which operations start, for purposes of the fixed income tax rate provided for in § 10643 of this title, shall be the date on which said application is filed with the Tax Exemption Office, but the starting date may be deferred for a period not greater than two (2) years as of that date.
(6) The tax-exempt business that holds a decree granted under this chapter shall start operations on a commercial scale within a term of one (1) year as of the date the grant was signed, the term of which may be deferred at the request of said business when there is a justified cause therefor, but no time extensions shall be granted to delay the date on which operations start for a term greater than five (5) years from the date the grant was approved.
History —May 28, 2008, No. 73, art. 1, § 10, eff. July 1, 2008; Feb. 27, 2014, No. 32, § 5.