Act 27 of March 4, 2011, known as the Puerto Rico Film Industry Incentives Act of 2011 (“Act 27”), as amended by Act 140 of July 13 of 2012 (“Act 140”)
- Act 27 presents Puerto Rico as a viable option as a destination for the production of certain film projects (including: feature films, short films, documentaries, television programs, including pilots, series in episodes, mini-series, music videos, commercials, video games, recorded live performances, and original sound track recordings and dubbing, among others) by providing innovative and competitive tax and economic incentives to eligible film projects that:
- carry out their production and/or post-production in whole or in part within Puerto Rico;
- is intended for airing, commercial distribution or exhibition outside of Puerto Rico;
- has Puerto Rico production expenses of at least $100,000 .
- Act 27 allows persons that are developing eligible film and infrastructure projects within Puerto Rico to obtain a Tax Exemption Grant that provides for (a) transferable tax credits for film projects, infrastructure projects, film or television studio operators, and large scale film or television operators; and for (b) reduced income tax rates and tax exemptions for film projects, infrastructure projects and studio operators.
- Act 27 also authorizes the Department of Economic Development and Commerce to designate certain geographic areas to be determined in the future as Film Development Zones. These designated zones will be subject to (a) special zoning regulations to be jointly approved by the Secretary of Economic Development and Commerce and the President of the Puerto Rico Planning Board; and to (b) other conditions, restrictive covenants, governance systems, rules, regulations, architectural design and construction guidelines, and general or special charges, quotas or fees established by the Secretary of Economic Development.
- Act 27 established the first Film Development Zone in the Municipality of San Juan.
Some incentives provided under Act 27 are:
- 40% transferable tax credit on payments made to residents of Puerto Rico for services physically performed in Puerto Rico that are directly attributable to the development, preproduction, production and postproduction of an Eligible Film Project.
- 20% transferable tax credit on payments to “Above-the-Line” Non-Resident Talent for services physically performed in Puerto Rico.
- 25% transferable tax credit on the amounts disbursed in connection with the development or substantial expansion of studios, laboratories, facilities for the international transmission of television images or other media and other permanent facilities to carry out Film Projects within Puerto Rico, whose budget of hard costs exceed $1,000,000 dollars.
- 4% flat income tax rate in lieu of any other income taxes imposed by the Internal Revenue Code for a New Puerto Rico (the “Code”).
- 100% income tax exemption on dividends paid from income derived from eligible projects.
- 90% exemption from real and personal property taxes
- 100% exemption from municipal license taxes, excise taxes, and other municipal taxes levied by a municipal ordinance.
- 100% exemption from excise taxes imposed by the Code.
- Except for grantees engaged in film projects, 100% exemption from the sales and use taxes imposed by the Code.