III. INVESTMENT CLIMATE
For more than 50 years, the Puerto Rico government has promoted investment in Puerto Rico through financial and tax incentives aimed at establishing new businesses in Puerto Rico with a primary goal of creating new jobs. Until the late 1990s, the U.S. Congress provided special tax exemptions to new businesses from the U.S. established in Puerto Rico. Federal exemptions ended in 2005, and the Puerto Rico government has redoubled its efforts to create new employment by encouraging domestic and foreign investment. Tax incentives include exemptions or partial exemptions from income, property, municipal gross receipts, construction and excise taxes for certain agricultural activities; qualifying manufacturing activities, tourism development, motion picture film production, and service industries, such as banking, financial, insurance, auditing, computer, distribution and laboratories, when services are rendered in Puerto Rico exclusively for non-residents of Puerto Rico, provided that 80% of the employees of such service industries are residents of Puerto Rico. As a general rule, in the case of most exempt corporations, dividends paid to shareholders are tax exempt in Puerto Rico. For more detailed information on tax incentives, credits and eligible businesses, see Taxation, infra, subhead Tax Incentives and Exemptions. Among financial incentives offered are rentals of government manufacturing buildings at reasonable rates, payroll incentives and financing through tax exempt industrial revenue bonds and direct loans. The Puerto Rico Industrial Development Company (PRIDCO)* is the government agency primarily responsible for assisting companies relocating to or expanding in Puerto Rico. PRIDCO coordinates and administers the government’s incentives and other promotional programs and provides the following services to new or expanding businesses: (1)
Serves as a liaison with government agencies offering incentives for new businesses or expansions;
*
See Appendix infra, for reference information on PRIDCO and other agencies marked with an asterisk below.
3