Puerto Rico combines a low corporate tax rate with an attractive package of tax credits, exemptions and special deductions. Depending on their location on the island, companies may benefit from income and property tax reductions for a period of 10, 15, 20 and up to 25 years. Additional deductions and credits are also available to corporations located in areas of high unemployment and to companies committed to growth and employee development.

Companies relocating to or expanding their operations to Puerto Rico benefit from these and other tax incentives:

• 7% maximum income tax rate, with some companies paying as little as 2%.
• 2-0% for "Pioneer Industry".
• No tax on dividend distributions.
• A super-deduction of up to 200% for R&D expenses and job training costs.
• Accelerated depreciation on the cost of office and plant buildings, and new manufacturing machinery and equipment with unlimited loss carry forwards.

• Excise taxes on raw materials, machinery and equipment for manufacturing; fuels for power co-generation and chemicals used to treat wastewater, equipment for call centers.
• Municipal license taxes during plant construction and for the next three quarters, 60% exemption thereafter.
• Real and personal property taxes during initial construction and the first year of operation. 90% exemption thereafter.
• Taxes on passive income derived from eligible Puerto Rican Investments.
• Any property tax on intangible assets, such as patents, production licenses and trademarks.

Payroll Incentives and Special Deductions and Credits

• Additional deduction of 15% of production payroll to manufacturers whose industrial development income is less than $30,000 per production employee.
• Credit for purchases of locally manufactured goods.
• Stockholder tax credit of 30% of the tax paid by the exempt business commensurate to its participation in the ownership of the exempt business.
• 4% one-time capital gains tax derived from sales of stock of exempted businesses.

Act No. 135