Acts 232 and 241 of December 2014 (Amendments to Acts 20 and Act 22 of 2012)
During the month of December, 2014, the Governor of Puerto Rico signed Acts 232 and 241, which amend the Act to Promote Export Services (Act 20 of 2012) and the Act to Promote the Transfer of Individual Investors to Puerto Rico (Act 22 of 2012), respectively. In essence, the amendments broaden the definition of eligible services under Act 20, and expand eligibility of individual investors under Act 22, among others further detailed below.
Act No. 232 of December 19, 2014
Act 232 amends Act 20 of 2012 to, among other amendments, add the following eligible services:
- Distribution and logistics services provided by headquarters or similar regional offices (in addition to other centralized management services already eligible, such as strategic planning and budgeting).
- Strategic and organizational planning services related to processes, distribution and logistics, conducted for
- people outside of Puerto Rico.
- Commercial and mercantile distribution of products manufactured in Puerto Rico for jurisdictions outside
- Puerto Rico.
- Assembly, bottling and packaging operations of products for exportation.
- Marketing centers primarily engaged in providing, through leasing, service fees or other charges, space and
- services such as: secretarial, translation and information processing services, communications, marketing services, telemarketing and other consulting services to businesses outside of Puerto Rico, including export and marketing companies, adjunct offices of commercial attaches, government agencies responsible for foreign trade, trade and product and service exhibition centers.
- Trading companies, defined as entities that derive not less than eighty percent (80%) of their gross income from:
- the purchase of products manufactured in or outside of Puerto Rico and the resale of such products for use, consumption or disposition outside of Puerto Rico; and
- commissions derived from the sale of products for the use, consumption or disposal outside Puerto Rico; provided, that no part of the income derived from the sale or resale of products for their use, consumption or disposition in Puerto Rico shall be deemed to be industrial development income and that the property used for the generation of income is not used for other activities besides those authorized by the decree.
Other amendments were made to Act 20 to expedite the evaluation process. As a result, the Eligibility Report will now be prepared by the Office of Industrial Tax Exemption.
Act No. 241 of December 22, 2014
Act 241 amends the definition of a “Resident Individual Investor” under Act 22 of 2012 to reduce the required number of years of non-residence in Puerto Rico for an investor to gain eligibility. The term is reduced from 15 years prior to the enactment of Act 22, to a new shortened term of 6 years prior to Act 22.
The Act also imposes a requirement for the filing of annual reports by the Resident Individual Investor and the payment of annual fees.
Finally, the Act provides certain benefits with respect to transfers in trusts and through gifts with respect to Resident Individual Investors, including: (a) ability to establish grantor trust for Puerto Rico tax purposes (including the past-through of Act 22 tax benefits to such investors); (b) flexibility to establish revocable trusts in Puerto Rico (otherwise not allowed in Puerto Rico); (c) validation of trust executed outside Puerto Rico (which could otherwise be contrary to Puerto Rico law); and (d) expanded access to gift-giving in life, irrespective of legal or regulatory provision in Puerto Rico that is contrary or inconsistent with such transfer (including certain harsh limitations otherwise applicable under the Puerto Rico Civil Code).
This document has been prepared for information purposes only and is not intended as, and should not be relied upon, as legal advice. If you have any questions or comments about the above-mentioned statutes and wish to obtain more information related thereto, please contact us.