In today’s cutthroat market, entrepreneurs and startups struggle to stay competitive and maximize revenues, while maintaining valuable working capital during initial business operations. Variables like scaling, overhead and taxes eat up profits, leaving entrepreneurs desperately searching for innovative ways to broaden their horizons and mitigate risk. Stuck in a period of uncertainty and change, Puerto Rico rose to the occasion and offered U.S. businesses a place to seamlessly operate by way of unprecedented tax incentives, without a U.S. passport and without having to give up their citizenship.Today, local and foreign entrepreneurs are seeking opportunity in Puerto Rico that they can’t find elsewhere.
“A Balancing Act” 20/22
There is no tax treatment quite like the one offered in Puerto Rico. Since the island is treated as a “foreign country” for U.S. federal income tax purposes, residents experience a special tax treatment, allowing the island to enact tax incentives that encourage entrepreneurs, startups and the economy to thrive.
Through Act 20 (the Export Services Act), businesses in Puerto Rico pay a flat rate of 4% on corporate profits, compared to a hefty 50-60% for successful entrepreneurs residing in cities like New York or California. Businesses who have taken the leap and moved to Puerto Rico have been able to cut their income tax down to almost nothing. Act 20 also allows as much as 100% tax exemption on distributions from earnings and profits, and a 90% tax exemption for personal property taxes for businesses. Act 22, also known as Individual Investors Act, was enacted to offer incentives to attract high net worth investors to Puerto Rico. Under the Act, investors are provided with 100% tax exemptions on all interest, dividends and long-term capital gains. When compared to those paying 15-20% on dividends in the mainland, these tax breaks add up quickly to impressive savings.
Investing in Paradise
Captivated by these recent tax incentives, some of the most distinguished high net worth individuals, including billionaire hedge fund manager, John Paulson, have moved to the island. An owner of a tech startup on the island was recently able to expand her business and export service to Connecticut, stating that “Act 20 helps local companies like hers’ get into the global economy.” This has been a huge improvement for Puerto Rico in the international marketplace. Entrepreneurs and startups that have moved their investments to the island have seen a drastic cut in their U.S. tax bills. According to Puerto Rico’s Department of Economic Development and Commerce, “about 200 traders, private equity moguls, and entrepreneurs have already moved or are committed to moving to the island.” This has left many to wonder, “Where to?”
Going the “Golden Mile”
With the continued influx of new business cropping up across Puerto Rico, so have new office buildings. In the heart of Hato Rey, the flourishing financial district known as the “Golden Mile” has quickly become a highly sought after real estate mecca for investors. Here, American International Plaza (a sixteen story, 326,275 rentable sq. ft. office tower) and its sister property, 270 Plaza (a twenty story, 213,543 rentable sq. ft. office tower) are currently offering some of the most attractive leasing options for big corporations and small companies alike. Both state-of-the-art towers boast turn-key office space, concierge oriented service, fiber-optic communication infrastructure, 24 hour security with controlled access, Energy Star certification and flexible floor planning. What’s more, American International Plaza and 270 Plaza have been deemed the “best U.S. Standard Class A buildings in Puerto Rico” for Act 20/22 investors and businesses.
We love to meet people and talk about possibilities