Unlocking Puerto Rico’s Tax Incentives: A Game-Changer for Commercial Builders
Puerto Rico’s construction sector is booming, fueled by a powerful combination of strategic location, economic development initiatives, and one of the most attractive tax incentive programs in the United States.
For commercial builders, the island offers a rare opportunity to reduce costs, boost profitability, and streamline project execution, all under the umbrella of the Puerto Rico Incentives Code, also known as Act 60.
Whether you're a developer, contractor, or investor, understanding how to leverage these tax benefits can significantly impact your bottom line.
This guide breaks down the key incentives, eligibility requirements, and application steps, helping you make the most of Puerto Rico’s builder-friendly tax landscape.
Why Puerto Rico? The Strategic Advantage for Commercial Builders
Puerto Rico is more than just a tropical paradise, it’s a U.S. jurisdiction with a unique tax system designed to attract investment and stimulate economic growth.
For commercial builders, this translates into:
- Lower corporate tax rates compared to mainland U.S.
- Generous property and municipal tax exemptions
- Access to Opportunity Zones and other federal incentives
- A growing demand for commercial infrastructure, including retail, hospitality, and industrial projects
The Puerto Rico Incentives Code (Act 60) consolidates various tax incentives into a single, streamlined framework, making it easier for businesses to understand and apply for benefits.
Key Tax Incentives Under Act 60 for Commercial Builders
1. Reduced Corporate Income Tax
Eligible businesses can benefit from a fixed 4% corporate income tax rate, significantly lower than the average U.S. federal rate.
This applies to income derived from eligible activities, including construction and development services.
2. Property Tax Exemptions
Act 60 offers a 75% exemption on real and personal property taxes for businesses with a volume over $3 million.
For smaller businesses (under $3 million), the exemption is 100% for the first five years, and 75% thereafter.
3. Municipal License Tax Exemptions
Commercial builders can enjoy a 50% exemption on municipal license taxes.
For businesses operating in Vieques or Culebra, the exemption is 100% for the first five years and 50% thereafter.
4. Construction Excise Tax Exemptions
Act 60 provides a 75% exemption from construction excise taxes, reducing the cost burden on materials and equipment.
5. Tax Credits for Infrastructure Investment
Builders investing in eligible infrastructure projects can access tax credits of up to 30% on purchases of manufactured products in Puerto Rico, incentivizing local sourcing and economic development.
Eligibility Requirements for Commercial Builders
To qualify for these incentives, commercial builders must:
- Register as an eligible business under the Puerto Rico Incentives Code.
- Obtain an Exempt Business Decree from the Department of Economic Development and Commerce (DDEC).
- Maintain a minimum number of full-time employees, depending on business volume.
- Comply with annual reporting and compliance obligations, including financial statements and tax filings.
It's important to note that both new construction and renovation projects can qualify, provided they meet the criteria set forth by Act 60.
Application Process: Steps to Secure Tax Incentives
- Business Structuring and Planning: Determine the optimal legal structure for your business and develop a comprehensive business plan.
- Online Application Submission: Apply through the Single Business Portal (SBP), providing necessary documentation and fees.
- Obtain Exempt Business Decree: Upon approval, receive a decree outlining the specific tax benefits and obligations.
- Compliance and Reporting: Adhere to ongoing compliance requirements, including annual reports and audits.
The application process can be quite complex, involving multiple steps and interactions with government agencies.
Engaging experienced professionals, like DEV Builders Group, can streamline the process and ensure compliance.
Leveraging Opportunity Zones for Additional Benefits
Puerto Rico has designated numerous Opportunity Zones, offering federal tax incentives for investments in economically distressed areas.
Commercial builders can benefit from:
- Deferral of capital gains taxes on prior investments.
- Reduction of capital gains taxes on new investments held for at least five years.
- Potential exclusion of capital gains taxes on Opportunity Zone investments held for at least ten years.
Combining Opportunity Zone benefits with Act 60 incentives can significantly enhance the financial viability of commercial projects.
How DEV Builders Group Can Maximize Your Tax Incentive Benefits
Navigating the complexities of tax incentives and construction regulations in Puerto Rico requires local expertise and experience.
DEV Builder Group, a family-owned company with over 20 years in the industry, specializes in delivering high-quality commercial projects on time and within budget.
Our Services Include:
- Pre-Construction Services: From initial planning to permitting and land acquisition.
- Construction Project Management: Ensuring compliance, cost control, and quality finishes.
- Refurbishment and Maintenance: Minimizing disruption and maintaining safety standards.
With a proven track record of successful projects, including car dealerships and service centers, aviation, hospitality, commercial, and sports complexes across Puerto Rico, DEV Builders Group is equipped to help you capitalize on the island's tax incentives while delivering exceptional results.
Unlocking Puerto Rico’s Tax Incentives
Puerto Rico's Act 60 offers a compelling suite of tax incentives for commercial builders ready to expand or relocate to the island.
With reduced corporate tax rates, exemptions on property and municipal taxes, and opportunities to benefit from federal initiatives like Opportunity Zones, the island provides a powerful financial edge.
When paired with the growing demand for new commercial infrastructure, especially in sectors like retail, hospitality, and real estate development, it creates a prime investment environment.
However, navigating these incentives requires a local partner that understands both the regulatory landscape and the practical realities of building in Puerto Rico.
That’s where DEV Builders Group comes in.
With over 20 years of experience in delivering high-quality commercial builds and refurbishments across Puerto Rico, DEV Builders is uniquely positioned to assist clients not just in construction execution, but in unlocking every financial advantage available under Act 60.
Our pre-construction services include permitting, land acquisition, and liaison with the Department of Economic Development and Commerce (DDEC), helping you move from planning to execution smoothly.
Whether you're planning a ground-up commercial development or upgrading an existing facility, we help ensure your project is compliant, efficient, and financially optimized.
Sources:
- Puerto Rico DDEC - Single Business Portal– Official portal for applying and managing business incentives.
- Act 60 Overview - McConnell Valdés LLC – Legal insights on eligibility, structure, and scope of Act 60.
- Piloto151 Puerto Rico Incentives Guide – Simple breakdown of tax benefits for businesses and investors.
- PwC Puerto Rico Tax Summary – Professional guide to corporate tax credits and exemptions.
- BLS Strategies Guide on Incentives – Overview of business incentive strategies and implementation.
- Dorado Beach Act 60 Real Estate Summary – Real estate-focused analysis of Act 60 applications.
Frequently Asked Questions
What tax incentives are available for commercial builders in Puerto Rico?
Builders can access tax benefits including 4% corporate tax, 75%-100% property tax exemptions, municipal tax breaks, and tax credits under Act 60.
What is Act 60 and how does it benefit commercial builders?
Act 60 is Puerto Rico’s Incentives Code. It simplifies and unifies tax exemptions and benefits for eligible sectors including construction.
How long do the tax exemptions and incentives last for commercial projects?
Typically, decrees last for 15 years, with possible extensions depending on compliance and reinvestment levels.
What are the eligibility requirements?
To qualify, a business must register as an eligible entity, meet minimum employment criteria, and apply for an Exempt Business Decree from DDEC.
What is the process for applying for Act 60 incentives?
Submit an application via Puerto Rico’s Single Business Portal, pay required fees, and await review by DDEC.
Which taxes can be reduced or exempt?
Corporate income tax, real and personal property tax, municipal license tax, and construction excise taxes.
Are materials, machinery, or equipment included in the incentives?
Yes. Construction materials and equipment may qualify for partial excise tax exemptions or local tax credits.
Can decrees be extended or renegotiated?
Yes, depending on investment continuation and compliance, decree extensions or amendments are possible.
How does Puerto Rico compare to other U.S. jurisdictions?
Puerto Rico offers more aggressive and longer-lasting incentives compared to many mainland states.
Are there job creation or investment requirements?
Yes. Requirements vary based on sector and business size, but generally require full-time hires and minimum investment.
Do tax incentives apply to new and renovation projects?
Yes, as long as the projects meet Act 60 eligibility requirements.
Are there additional local incentives beyond Act 60?
Yes, municipal governments may offer added incentives or fee reductions to attract commercial development.
What are the compliance obligations?
Annual financial reporting, tax filing, and maintaining business operations as described in the exempt decree.
Can foreign or mainland U.S. companies qualify?
Yes. Non-Puerto Rican companies can apply and qualify if they establish operations and meet criteria.
