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Puerto Rico IFE

Act 60 Tax Incentives | International Financial Entity

What is an IFE

The Act 60 International Financial Entity incentive (formerly referred to as Act 273) was put in place with the intention to expand Puerto Rico into an international financial center and promote economic growth by broadening the scope of banking activities for International Financial Entities (IFEs) organized in Puerto Rico.

Entities that have been issued this tax incentive grant (which is a type of contact, also sometimes referred to as a decree) enjoy world-class tax benefits, such as low corporate and shareholder taxes, comparatively low capital requirements, and fewer regulations than for offshore banks.  

Puerto Rico IFEs can:

  • Accept deposits
  • Borrow money
  • Lend money (including refinancing and underwriting)
  • Provide letters of credit
  • Exchange foreign currency
  • Finance trades
  • Provide other financial services, including:
    • Securities brokerage
    • Clearinghouse services
    • Asset management 

Puerto Rico IFEs are exempted from the US International Banking Act, and the US Bank Holding Company Act.  They are subject to the Bank Secrecy Act, the US Patriot Act, and the Office of Foreign Asset Control (OFAC).

What changed with Act 60?

Act 60 is a new law that took effect on January 1, 2020 and consolidated most of the Puerto Rico’s tax incentive programs under a single program.  Many of the incentives changed a bit under Act 60, though the basics remain.

Summary of Puerto Rico IFE changes under Act 60:

  • Municipal Tax – was 100% exempt, now 50%
  • Real & Personal Property Tax – was 100% exempt, now 75%
  • Term of Tax Exemption contract – 15 years, was renewable for up to two additional 15 year terms, now only one additional term for a total of 30 years 

Benefits

Benefits of acquiring an Act 60 IFE decree include:

  • 4% fixed income tax rate
  • 100% exclusion of interest, finance charges, or participation in partnership benefits
  • 6% fixed income tax rate on dividends and pro-rate share of benefits for Puerto Rico residents that are shareholders or partners of the qualifying financial institution
  • 75% exemption from corporate property tax
  • 50% exemption from municipal tax

How long is this decree valid?

The Act 60 IFE decree is in effect for 15 years, with 1 possible renewal of 15 years.  
Like all Puerto Rico tax incentives, it’s important to maintain compliance or it can be revoked. 

 

How to Qualify

In International Financial Entity or IFE is any legal entity organized or incorporated under the laws of Puerto Rico, or any country in the world.

In order to qualify for the Act 60 IFE decree, the IFE must:

  • Provide a certified copy of the Articles of Incorporation and other corporate documents.
  • Pay a non-refundable permit application fee of $5,000 (an additional deposit may be requested if it appears that the cost of investigations for the application may exceed $5,000).
  • Submit a personal, business and credit history, and balance sheet for any owner with 10% or more controlling interest in the IFE.  Note that that all owners will be investigated for financial solvency, credit integrity, banking experience, and business integrity.
  • The planned IFE must authorize capital stock of at least $5,000,000, and at least $250,000 should be fully paid at the time the license is issued.

To retain the IFE license once given, it must:

  • Comply with any applicable requirements established in the Bank Secrecy Act.
  • Maintain a minimum of four employees. (It is possible to request a waiver to lower this employee requirement, but this will be granted only at the discretion of the Puerto Rican government agency.)
  • Obtain office space where business is conducted and all records and documents are stored.
  • Comply with the restrictions on types of transactions in which the IFE may and may not engage.  (The permitted transactions will be listed on the license.)
  • Renew the license annually, with a fee of $5,000.

Application Process

We have the ability to streamline the process of obtaining your Act 60 IFE grant by assisting you with developing all of the necessary documents to apply.

Contact us for a free consultation!

We Can Help

Our company helps people like you take advantage of Puerto Rico’s excellent tax incentives!  We can help you determine which tax incentives are right for you, help you plan your residency and relocation strategy, and simplify the entire process for you.

Contact us for a free initial consultation.

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