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) › § 10645 - Credits

(a) Credit for purchasing products manufactured in Puerto Rico.—
(1) If a tax-exempt business that holds a decree granted under this chapter or under preceding tax incentives laws purchases products manufactured in Puerto Rico, including components and accessories, the same shall be entitled to take a credit against the tax on industrial development income as provided for in § 10643(b) of this title, or against the tax on income under the preceding tax incentives law which applies, to be equal to twenty-five percent (25%) of the purchases of such products, during the taxable year in which the aforementioned credit is taken, up to a maximum of fifty percent (50%) of the aforementioned tax. This credit shall be granted solely for purchasing products manufactured by enterprises that are not related to said tax-exempt business.
(2) In the event that the tax-exempt business that holds a decree granted under this chapter or under preceding tax incentives laws, purchases or uses products converted into commercial articles made from recycles materials, or with raw materials derived from materials which have been recycled or collected and/or reconditioned by tax-exempt businesses which have been granted a tax exemption decree under § 10642(d)(1)(I) of this title or under similar provisions in preceding laws, the credit provided for in the preceding clause shall be equal to thirty-five percent (35%) of the total of the purchases of such products or of the amount paid for the use thereof, as the case may be, during the taxable year for which the credit is claimed, up to a maximum of fifty percent (50%) of the tax against which said credit is claimed, as provided for in clause (1) of this subsection. This credit shall be granted only for purchases of products manufactured by enterprises that are not related to said tax-exempt business.
(3) The credit provided for in this subsection shall be nontransferable, except in the case of an exempted reorganization. The amount of the credit not used by the tax-exempt business within a taxable year may be carried over to subsequent taxable years, until the same is used in its entirety. This credit shall not generate a refund.
(4) In the case of a tax-exempt business whose decree has been granted under a preceding tax incentives law, the credit provided for in this subsection shall not be available, and no credit whatsoever shall be granted under this subsection for the taxable year, if said tax-exempt business claims any special deduction or credit of an similar nature under said preceding tax incentives law for said taxable year.
(b) Credit for the creation of jobs.—
(1) Any tax-exempt business that begins operations after July 1, 2008, shall be granted a credit for each job created during its first year of operations. The amount of this credit shall depend on the industrial development zone where the operations of said tax-exempt business are located, as provided below:
Credit
Vieques and Culebra $ 5,000
Low Industrial Development Zone $ 2,500
Medium Industrial Development Zone $ 1,000
High Industrial Development Zone $ 0
(2) In the cases in which a tax-exempt business that holds a decree granted under this chapter establishes operations in more than one zone, the amount of the credit shall correspond to the location of the operations where the job which warranted the credit was created.
(3) For purposes of this subsection, the employment of the aforementioned tax-exempt business shall consist of the number of individuals residing in Puerto Rico who work as employees on regular business hours on a full-time basis in the tax-exempt business, but shall not include individuals such as freelance contractors or consultants. The tax-exempt business shall be required to maintain an employment average for each of the three (3) consecutive years following the year in which the credit equal to or greater than the number of jobs that generated the credit was originated. The Secretary of the Treasury shall establish, through regulations, the mechanism for the applicable proportional recovery based on the time elapsed and the employment levels maintained, in the event that said tax-exempt business fails to meet the employment level requirement.
(4) Said tax-exempt business may only claim the credit provided for in this subsection against the tax on industrial development income as provided for in § 10643(a) of this title. Said credit may not be sold, assigned or transferred, nor may the same create a refund for the tax-exempt business. However, the credit provided for in this subsection which has not been used during the first year of operations may be carried over for a period not to exceed four years as of the first taxable year in which the tax-exempt business generates net income.
(c) Credit for investment in research and development, clinical tests, toxicological tests, infrastructure, renewable energy, or intangible property.—
(1) Any tax-exempt business that holds a decree granted under this chapter or under preceding tax incentives laws may claim a credit for investment equal to fifty percent (50%) of the special eligible investment made in Puerto Rico after the date of approval of this act by said tax-exempt business or by any entity affiliated thereto. Any special eligible investment made before the date of filing the income tax return, as provided for in the Puerto Rico Internal Revenue Code, including any time extension granted by the Secretary of the Treasury for filing said return, shall qualify for the tax credit under this clause in the taxable year for which the aforementioned returned is being filed. Said credit may be applied, at the option of the tax-exempt business, against the tax on industrial development income as provided for in § 10643(a) of this title or against the tax on income applicable under the preceding tax incentives law under which the tax-exempt business was granted the decree, and/or against the operating costs of the tax-exempt business relative to electric power, water, and sewer systems.
(2) For purposes of the credit provided for in this section, the term “special eligible investment” means the amount of cash used by the tax-exempt business that holds a decree granted under this chapter, or by any entity affiliated to said tax-exempt business, in activities such as research and development, including operating expenses, clinical tests, toxicological tests, infrastructure, renewable energy or copyrights. The term special eligible investment shall include an investment of the tax-exempt business, made with the cash obtained from a loan that is secured by the tax-exempt business itself or by its assets, or by any entity affiliated to the tax-exempt business or by its assets. The Secretary of the Treasury shall establish, through regulations, the costs which shall qualify as special eligible investments.
(3) Use of the credit.— The tax credit granted by this subsection may be taken in two (2) or more installments: up to fifty percent (50%) of said credit may be taken in the year in which the eligible investment is made, and the balance of said credit, in subsequent years until used in its entirety; provided, that said limitation shall not apply as to operating expenses of said tax-exempt business which are related to electric power, water, and sewer systems. Provided, further, That thirty (30) days after the effective date of this act, no exempt business may apply this tax credit against operating expenses related to electric power, water, and/or sewer, unless a certification of the Department of the Treasury attesting to the availability of such funds to cover said operating costs is provided. This credit shall not generate a refund.
(4) Assignment of credit for special eligible investment.—
(A) The credit for special eligible investment provided for in this subsection may be entirely or partially assigned, sold or otherwise transferred by the tax-exempt business to any other person and shall be governed by the provisions of clauses (1) and (3) of this subsection, except that if the assignor is not a tax-exempt business, the credit against the income tax established in Subtitle A of the Puerto Rico Internal Revenue Code may be used.
(B) The money or the value of the property received in exchange for the credit for investment shall be exempted from the payment of taxes under Subtitle A of the Puerto Rico Internal Revenue Code, and under the Municipal License Fees Act, §§ 651—652y of this title, up to an amount equal to the amount of the credit for investment thus assigned.
(C) The buyers of tax credits for investment shall be exempted from the payment of taxes under Subtitle A of the Puerto Rico Internal Revenue Code for the difference between the amount paid to acquire said credits and the value of the same, and said buyers shall not be subject to the provisions of Chapter I of Subtitle F of the Puerto Rico Internal Revenue Code.
(5) Adjustment to the base.— The base of any asset for which the credit provided for in this subsection is claimed, shall be reduced by the amount of the credit claimed.
(6) The tax-exempt business may not claim this credit in relation to that portion of the eligible investment over which the same takes or has taken the deduction established in § 10644(b) of this title, or an similar special deduction under preceding tax incentives laws, or over which the same claims or has claimed any of the credits provided for in this section or in § 10646 of this title, or similar special deductions or credits under preceding tax incentives laws. This credit shall not generate a refund.
(7) In the case of a tax-exempt business whose decree has been granted under a preceding tax incentives law, the credit provided for under this subsection shall not be available, and no credit whatsoever shall be granted under this subsection for the taxable year, if said tax-exempt business claims any special deduction or credit of an similar nature under said preceding tax incentives law for said taxable year.
(d) Investment in machinery and equipment for the generation and efficient use of energy.—
(1) Any tax-exempt business that holds a decree granted under this chapter or under preceding laws may claim a credit of fifty percent (50%) of its eligible investment made after the date of approval of this act. Any eligible investment made before the date the income tax return is filed as provided for by the Puerto Rico Internal Revenue Code, including any time extension granted by the Secretary of the Treasury for filing the same, shall qualify for the tax credit provided for in this subsection in the taxable year for which the aforementioned return is being filed. Said credit may be applied, at the option of the tax-exempt business, against the income tax levied by § 10643(a) of this title or the income tax that apply under said preceding tax incentives laws.
(2) Eligible investment.— For the purposes of this clause, “eligible investment” shall mean the amount of cash used for the acquisition of machinery and equipment for the generation of power with fuels other than oil. Provided, That as of the third year of effectiveness of this act, only the acquisition of machinery and equipment used to generate power from renewable sources shall qualify for this credit. The acquisition by a tax-exempt business that holds a decree granted under this chapter or under preceding laws, of this kind of equipment, regardless of whether the equipment shall generate power for sale, whether or not on a commercial scale, or only for the consumption of the tax-exempt business itself, shall qualify as an eligible investment. The term “eligible investment” shall not include an investment made with the cash obtained from a loan secured by the tax-exempt business itself or by its assets. The Department of the Treasury, together with the Energy Affairs Administration, shall establish through regulations the equipment and machinery that qualifies as an eligible investment.
(3) Maximum amount of credit.—
(A) In the case of an eligible investment made by a tax-exempt business that holds a decree granted under this chapter or under preceding laws, to generate power for its own consumption, the credit shall not exceed twenty-five percent (25%) of the income tax established in § 10643(a) of this title, or of the income tax that applies under said preceding laws.
(B) In the case of an eligible investment made by a tax-exempt business described in § 10642(d)(1)(H) of this title or an similar section under preceding tax incentives laws, to establish or make a substantial expansion in its power-generating operation, the maximum amount of tax-exempt credit to be granted shall be eight million (8,000,000) dollars per tax-exempt business, up to a maximum aggregate per fiscal year of twenty million (20,000,000) dollars.
(4) In the case described in clause (3)(B) of this subsection, the provisions of § 10646(d) of this title shall apply. The provisions of § 10646(e)(1) shall apply in the case of the credit established in this subsection. For purposes of applying said provisions, the word “investor” shall be replaced with “tax-exempt business”.
(5) The tax-exempt business may not claim this credit in relation to that portion of the eligible investment over which the same takes or has taken the deduction established in § 10644(b) of this title, or an similar special deduction under preceding tax incentives laws, or over which the same claims or has claimed any of the credits provided for in this section or in §§ 10646 of this title, or similar special deductions or credits under preceding tax incentives laws. This credit shall not generate a refund.
(e) Tax credit to reduce the cost of electric power.—
(1) Base credit.— Any tax-exempt business that is an industrial client of the Electric Power Authority and which holds a decree under this chapter or under preceding tax incentives laws, may only take a credit against the income tax under § 10643(a) of this title or against the income tax that applies under preceding tax incentives laws, equal to three percent (3%) of the payments made to the Electric Power Authority for net electric power consumption in relation to the operation of the eligible business during the corresponding taxable year.
(2) Additional credits.— In addition to the credit provided for in clause (1) of this subsection, the following credits for net electric power consumption shall be granted:
(A) Any tax-exempt business that is an industrial client of the Electric Power Authority and which holds a decree granted under this chapter or under preceding laws and which has maintained an average of twenty-five (25) employees or more during the taxable year, may take an additional credit of three point five percent (3.5%) of the payments made to the Electric Power Authority in relation to the operation of the eligible business.
(B) Any tax-exempt business that is an industrial client of the Electric Power Authority and which holds a decree granted under this chapter or under preceding laws and which has maintained an average payroll of five hundred thousand (500,000) dollars or more during the taxable year, may take an additional credit of three point five percent (3.5%) of the payments made to the Electric Power Authority in relation to the operation of the eligible business.
(C) Any tax-exempt business that is an industrial client of the Electric Power Authority and which holds a decree granted under this chapter or under preceding tax incentives laws and which meets the requirements provided for in paragraphs (A) and (B) of this clause within the same taxable year, may claim both tax credits together with the base credit for a maximum annual credit of ten percent (10%) of the payments made to the Electric Power Authority in relation to the operation of the eligible business. The maximum amount of credit to be claimed as of taxable year 2013 shall be reduced by one percent (1%) annually, as follows:
Taxable Maximum Credit
Year to be claimed
2013 9 %
2014 8 %
2015 7 %
2016 6 %
2017 5 %
(3) The credits provided for in this subsection shall be nontransferable. However, the amount of the credits for power cost which has not been used during the taxable year in which the same was originated, may be carried over to subsequent taxable years. Provided, That the amount of credit generated and not used at the closing of Fiscal Year 2017-2018, may only be carried over during the next four (4) taxable years. These credits shall not generate a refund.
(4) The Executive Director of the Electric Power Authority shall issue, by request of said tax-exempt business which is an industrial client of the Electric Power Authority, a certification indicating the total amount paid by said business to said agency for net electric power consumption during the corresponding taxable year.
(5) Effectiveness and fiscal provisions.— The credits provided for in this subsection shall be effective for ten (10) years as of July 1, 2008. During the ten (10) years that the credits are in effect, the maximum to be granted shall be seventy-five million (75,000,000) dollars annually, up to a maximum of six hundred million (600,000,000) dollars, during said ten (10) -year period. Costs relative thereto shall be covered by the General Fund of the Government of Puerto Rico and the Puerto Rico Electric Power Authority in the following proportions: Electric Power General Fund 2008-2009 0 % 100 % 2009-2010 4 % 96 % 2010-2011 8 % 92 % 2011-2012 12 % 88 % 2012-2013 16 % 84 % 2013-2014 20 % 80 % 2014-2015 35 % 65 % 2015-2016 50 % 50 % 2016-2017 65 % 35 % 2017-2018 80 % 20 %
(6) Thirty (30) days after the effective date of this act, no new decree or renegotiation of decree under this chapter shall include or consider any tax credit for reducing the cost of energy.
(f) Credit for investments on technology transfers.— Any tax-exempt business that holds a decree granted under this chapter (except for those subject to § 10643(b)(4) of this title or which enjoy the benefit provided for in § 10643(b)(3) of this title), may only take a credit against the fixed tax on industrial development income provided for in § 10643(a) of this title, equal to twelve percent (12%) of the payments made to corporations, partnerships or nonresident persons, for the use or privilege to use in Puerto Rico, intangible property in its exempted operation, provided the income for such payments is derived from sources within Puerto Rico. In the case of tax-exempt businesses that are subject to the alternate levy provided for in § 10643(b)(4), the percentage applicable for purposes of the preceding sentence shall be two percent (2%). Tax-exempt businesses that have availed themselves of the benefit for existing businesses provided for in § 10643(b)(3) of this title shall not be entitled to claim the credit established herein. The tax credit established in this subsection shall be nontransferable, but may be carried over until used in its entirety. However, said carryover shall never exceed a period of eight (8) taxable years, counted as of the closing of the taxable year in which the credit was originated. This carryover shall never result in a lesser tax than that provided for in subsection (h)(3) of this section. This credit shall not be refundable.
(g) Credit for investment in strategic projects.—
(1) Any tax-exempt business that holds a decree granted under this chapter or under preceding laws may claim a credit for investment equal to fifty percent (50%) of the eligible investment made in strategic projects in Puerto Rico after the approval of this act by the tax-exempt business or by any entity affiliated to the tax-exempt business. Any eligible investment made before the date on which the income tax return is to be filed, as provided for in the Puerto Rico Internal Revenue Code, including any time extension granted by the Secretary of the Treasury to file said return, shall qualify for the tax credit of this section in the taxable year for which the aforementioned return is being filed. Said credit may be applied, at the option of the tax-exempt business, against the fixed tax on industrial development income as provided for in § 10643(a) of this title, or against the income tax that applies under the preceding tax incentive law under which the tax-exempt business was granted the decree, and/or against the operating costs of the tax-exempt business relative to electric power, water or sewer systems.
(2) For purposes of the credit provided for in this section, the term “eligible investment in strategic projects” means the amount in cash obtained from any financing source, used by the tax-exempt business or by any entity affiliated to the tax-exempt business, in activities such as the design, development and construction of reservoirs and/or dams and all infrastructure needed for their operation, as well as all infrastructure needed for the operation of a strategic project. The term “eligible investment” shall include an investment made with the cash obtained from a loan secured by the tax-exempt business itself or by its assets, or by any entity affiliated to the tax-exempt business or by its assets.
(3) Use of the credit.— The tax-exempt business may use the credit for eligible investment to pay up to fifty percent (50%) of the amount of the income tax provided for in § 10643(a) of this title, or the income tax that applies under the preceding tax incentives law under which the tax-exempt business was granted the decree for the taxable year of the tax-exempt business. Provided, That said limitation shall not apply regarding the operating costs of the tax-exempt business related to electric power, water, and sewer. Provided, further, That thirty (30) days after the effective date of this act, no new decree or renegotiation of decree under this chapter shall include or consider any tax credit for investment in strategic projects.
(4) Credit carryover.— Any credit for eligible investment, including the credit in excess of the percentage established in § 10643(a) of this title, which has not been used in a taxable year, may be carried over to subsequent taxable years until it is used in its entirety. This credit shall not generate a refund.
(5) The tax-exempt business may not claim this credit in relation to that portion of the eligible investment in strategic projects over which said business takes or has taken the deduction established in § 10644(b) of this title, or over which said business claims or has claimed any of the credits provided for in this section or in § 10646 of this title.
(6) Adjustment to the base.— The base of any asset for which a credit provided for in this subsection is claimed, shall be reduced by the amount of the credit thus claimed.
(7) Assignment of credit for eligible investment in strategic projects.—
(A) The credit for investment provided for in this subsection may be totally or partially assigned, sold or otherwise transferred by the tax-exempt business to any other person and shall be governed by the provisions of clauses (1) and (3) of this section, except that if the assignor is not a tax-exempt business, the same may use the credit against the income tax established in Subtitle A of the Puerto Rico Internal Revenue Code.
(B) The money or the value of the property received in exchange for the credit for investment shall be exempted from the payment of taxes under Subtitle A of the Puerto Rico Internal Revenue Code and under the Municipal License Fees Act, §§ 651—652y of Title 21, up to an amount equal to the amount of the credit for investment thus assigned.
(C) The buyers of tax credits for investment shall be exempted from the payment of taxes under Subtitle A of the Puerto Rico Internal Revenue Code, for the difference between the amount paid to acquire said credits and the value of the same, and said buyers shall not be subject to the provisions of Chapter I of Subtitle F of the Puerto Rico Internal Revenue Code.
(D) Adjustment to the base.— The base of any asset for which claim is made of the credit provided for in this subsection, shall be reduced by the amount of the credit thus assigned.
(h) Application of credit and minimal tax.— The application of the tax credits established under this section and in § 10646 of this title, shall be subject to the following rules:
(1) Tentative tax.— The tax-exempt business shall initially compute its tax obligation according to the fixed income tax rate that applies pursuant to § 10643(a) of this title.
(2) Application of credits.— The total of the sum of tax credits granted under § 10646 of this title and under subsections (a), (b), (c), (d), (e), (f), and (g) of this section, subject to the limitations that apply to each credit claimed by the tax-exempt business, shall be reduced from the tax obligation computed in clause (1) of this subsection.
(3) Minimal tax.— The tax assessed over industrial development income computed after having applied the credits pursuant to clause (2) of this subsection, shall never be less than that amount which, after having been added to the amounts deposited under § 10643(b) of this title in respect of the taxable year, results in:
(A) One percent (1%) of the net industrial development income of the tax-exempt business, for small or medium businesses.
(B) Three percent (3%) of the net industrial development income of the tax-exempt business, for local investment businesses.
(C) The fixed income tax rate as provided for in § 10643(a) of this title applicable to the tax-exempt business, multiplied by net industrial development income of the tax-exempt business, without including the income described in § 10642(j) of this title, for all other businesses.
(4) The tax-exempt business that holds a decree granted under this chapter, shall pay whichever amount is greater between clause (2) and clause (3) of this subsection.
In the cases described in paragraphs (A) and (B) of clause (3) of this subsection, the minimal tax provided for therein shall cease to apply, and paragraph (B) or (C), whichever one applies, shall be applicable, for taxable years in which the tax-exempt business ceases to qualify as a small or medium business or as a local investment business, as the case may be.
A tax-exempt business that holds a decree granted under a preceding tax incentives act and which claims special deductions or credits under said preceding tax incentives act, may not claim tax credits of an similar nature under this section and § 10646 of this title.
History —May 28, 2008, No. 73, art. 1, § 5, eff. July 1, 2008; Apr. 7, 2016, No. 22, § 3.1.