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Act 20 | Export Services Act

Tax Grants / Act 20

What is Act 20?

The purpose of Act 20, the Export Services Act, is to promote the development of new service businesses in by incentivizing the inbound transfer of US and other foreign service providers to Puerto Rico and to establish and develop an international export services center in Puerto Rico.

Act 20 is one of several economic development tax incentive programs implemented by the US Commonwealth of Puerto Rico to create jobs, stimulate the local economy, bringing external businesses and income into the Commonwealth to be earned by Puerto Rican residents, and to improve the quality of life for Puerto Ricans.

Act 20 is specifically designed for service businesses that can perform their service from within Puerto Rico for clients outside of Puerto Rico. Inbound service businesses can apply for a tax exemption decree (grant) under the Act 20 program. Once accepted, the grant is for a term of 20 years, and is renewable for an additional 10 years, as long as it maintains compliant with the law and the rules of the program.

We have the ability to streamline the process of obtaining your Act 20 grant by assisting you with developing all of the necessary documents to apply.

Benefits of Act

Under Act 20, all eligible export services business income:

Eligible Business Types

There are many eligible export services that can be performed under Act 20, including, but not limited to:

  • Research and development
  • Advertising and public relations
  • Economic, environmental, technological, scientific, management, marketing, human resources, information and audit consulting
  • Advisory services on matters relating to any trade or business
  • Commercial arts and graphic services
  • Production of construction drawings, architectural and engineering services and project management
  • Professional services such as legal, tax and accounting
  • Corporate headquarters
  • Electronic data processing centers
  • Development of computer programs
  • Voice and data telecommunications between persons located outside of Puerto Rico
  • Call centers
  • Shared services centers (“shared services”) including but not limited to accounting, finance, taxes, auditing, marketing, engineering, quality control, human resources, communications, electronic data processing and other centralized management services
  • Storage and distributions centers (“hubs”)
  • Educational and training services
  • Hospital and laboratory services
  • Investment banking and other financial services
  • Any other service that the Government of Puerto Rico later determines that must be treated as an eligible service

Application Process for Act 20

We have the ability to streamline the process of obtaining your Act 20 grant by assisting you with developing all of the necessary documents to apply.

Contact us for a free initial consultation!

How long is an Act 20 grant valid?

The initial grant is for a period of 20 years, with one possible 10 year extension.

How to Qualify for Act 20

In short, to take advantage of Act 20, you must meet the following conditions:

  • You must be an owner (or part-owner or member) of a Puerto Rico company that has been granted a tax exemption decree and is in compliance with all of its legal obligations, including employment of employees that are Puerto Rico residents (the number of employees is determined by the PR government on a case-by-case basis – some companies are approved to only have 1).
  • The income for which you desire to receive the tax exemptions must be Puerto Rico sourced and effectively connected to Puerto Rico as “Non-U.S. Source Income”.
  • You must be a “bona fide resident” of Puerto Rico if and when you wish to receive the tax benefits personally.
  • Pay a non-refundable application fee of $750.

Act 20 Eligible Income

Export Services Income is eligible under the Act 20 program if it is income from eligible services performed within Puerto Rico or income effectively connected with the conduct of a trade or business within Puerto Rico. The work must be done for non-resident individuals and clients external to Puerto Rico, including clients in the US.

Some businesses may require travel external to Puerto Rico for marketing purposes or to maintain current client relationships. Such time performing these non-income producing activities may not need to be counted against the services income. However, if you perform significant billable activities while traveling outside of Puerto Rico, that income must be counted as US-sourced income and is not Act 20 eligible income.

We Can Help

We have the ability to streamline the process of obtaining your Act 20 grant by assisting you with developing all of the necessary documents to apply and answer any questions you might have.

Contact us for a free consultation!

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