Transfer Pricing Webinar

Transfer Pricing Webinar

PR Advantage is pleased to offer a free webinar series on transfer pricing!

What is transfer pricing?

Some entrepreneurs who relocate to Puerto Rico have existing businesses that continue after their move, which gives them the opportunity to use a PR Export Services company to provide management and other services from PR. Once they have relocated to PR, formed a new business here, and applied for the Act 60 Export Services tax incentive, their new PR company becomes a service provider to the pre-existing business.

Such business owners may have controlling interest in both companies, which means the relationship of the two businesses is not “arm’s length”, from a tax perspective. If this describes your strategy, you may need to consider transfer pricing. It doesn’t affect everyone who moves to Puerto Rico, but for some business owners, it can be an important consideration. This page provides a bit more detail.

Free Webinar Schedule

Because many of our clients have had questions about transfer pricing, PR Advantage has partnered with an experienced firm to offer a free, educational webinar series about transfer pricing. Come and get your questions answered by an expert who has helped many other Act 60 applicants. We are offering the following timeslots:

Session dateRegistration link
Tuesday, February 14, 20234-4:30pm PR time (12-12:30pm Pacific time)
Wednesday, February 15, 20231-1:30am PR time (12-12:30pm Eastern time)

FAQ

Here are some common questions about this issue, as a preview for what we will discuss on the webinar. We encourage you to send additional questions in advance of the session, to ensure the best chance that we can accommodate them.

Q: What is transfer pricing?A: Fees paid by a company you own or control to another company you own or control.
Q: Why does it matter?A: This type of vendor relationship is not “arm’s length”, because you control both sides of the transaction.
Q: When would this affect you?A: In an audit, transactions that are not “arm’s length” could result in fees, penalties, and back taxes owed.
Q: What can you do about this?A: Obtain a Transfer Pricing Study from a qualified 3rd party vendor to set the prices one of your companies charges the other company.

We look forward seeing you on the webinar! Don’t forget to send us your questions in advance.

Frequently Asked Questions About Puerto Rico

Frequently Asked Questions About Puerto Rico

Below are some of the most common questions we hear from people considering Puerto Rico as a relocation destination. Contact us for more details, and for a free consultation about your unique situation.

 

Doesn’t Puerto Rico Have a High Crime Rate?

Puerto Rico’s issue has more to do with public relations than actual crime! This image is partly formed by cultural stereotypes and political history.

Like everywhere else, Puerto Rico’s crime rate varies depending upon what area you happen to be in. Its metropolitan areas tend to be higher, especially in less wealthy parts of town. However, it can be argued that the crime in the cities is comparable to US cities. For example, Puerto Rico’s murder rate is half that of Washington DC and Detroit. If Puerto Rico were ranked for safety as if it were a State, it would be 19th in the list.

For those who are relocating and want an extra degree of protection, there are a number of gated community options that are extremely safe.

 

What is the Food Like in Puerto Rico?

The local cuisine is Spanish with Caribbean accents. It is heavy in meat, particularly pork, and moderately spicy, though typically less spicy than what you might find in other parts of Latin America. As in many “island” cuisines, sweet and coconut flavors can be found in many dishes. Plantains are a major staple.

Dining out, we have found that while many fine options exist in Puerto Rico, good restaurants featuring Asian cuisines, in particular, are rare.

Grocery stores are plentiful, and the locally grown food is inexpensive. For organic food, and other items that are not produced on-island, you may have to go to specialty stores, where the prices are higher.

 

Is it Safe to Drink the Water?

The tap water is considered safe to drink in Puerto Rico, as the sanitation standards are the same here as in the States.

 

Is it Necessary to Learn Spanish to Live in Puerto Rico?

The great news is that it is not necessary to learn Spanish to relocate to Puerto Rico!

Both Spanish and English are official languages in Puerto Rico. Most government forms and official sites, as well as most menus and other things you might need to read, are available in English. Also, most service providers and customer service representatives are either fluent in both English and Spanish, or at least know enough English to get by.

However, you will almost definitely encounter some people who speak little to no English. For these encounters, it can be helpful to learn at least a little conversational Spanish, though we have never yet encountered a situation when it was absolutely necessary. Puerto Ricans are generally very friendly and accommodating of a limited Spanish vocabulary; rather than being judgmental or impatient, as some cultures can be in this type of situation, the folks in Puerto Rico usually appear to us to graciously appreciate whatever genuine effort you can make.

 

What is the Cost of Living in Puerto Rico?

The cost of living varies depending upon the area in which you live. Gated communities tend to be more expensive for real estate, and the dining and entertainment in those areas are also pricier. However, people who move to more expensive areas in Puerto Rico may well have lived incomparably expensive areas prior. There are many areas to live which are still desirable and safe, but affordable.

Gas tends to be just slightly more expensive in Puerto Rico than in the States. (Also note that it is sold in liters rather than gallons, which can be confusing at first.) Electricity is currently about twice the price; however, there is never a need to heat your living space here, and while you may choose to run your air conditioner more, fuel efficient inverter air conditioners are common in most modern homes.

Food can be more expensive, particularly if you prefer to buy organic products, as there is currently very little organic farming happening in Puerto Rico. Other items that must be imported may cost more as well.

Here is a cost of living comparison tool which may give you a good idea of what you might expect, based on an average price for living in Puerto Rico, compared to wherever you may be moving from.

 

What would happen if Puerto Rico Became a State?

If Puerto Rico became a US State, its residents would become subject to US federal tax. This almost completely eliminates the benefits of the tax incentive Acts, as the low Puerto Rico tax would then become a state tax, owed in addition to what must be paid to the IRS.

It should be noted, however, that the people of Puerto Rico have declined Statehood, by public referendum, on more than one occasion in the past. Many Puerto Ricans are proud of their independence; Puerto Rico competes as its own country in the Olympic Games. Also, with so many of the population living in poverty, few are eager to accept the additional tax burden for many that would come with Statehood. Finally, it appears to us that many Puerto Ricans are savvy about the prospects for economic recovery, growth, and prosperity made possible by the Commonwealth’s unique legal status. Though Statehood may be inevitable at some point in the farther future, we judge it to be unlikely in the near term.

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.

Traveling To And Around Puerto Rico

Traveling To And Around Puerto Rico

Air Travel

Puerto Rico air travel is fairly painless!  There are many non-stop flights every day between major eastern US hubs such as New York and Miami, and flights tend to be reliable and comparatively inexpensive.  If you are planning a trip to investigate relocating to Puerto Rico,contact us to help you!

Airports exist within an hour’s drive of almost any place on the island.  The following are the international airports, but there are 9 regional airports we aren’t including here:

  • San Juan – SJU (Luiz Munoz Marin International Aiport)
  • Ponce – PSE (Mercedita International Airport)
  • Aguadilla – BQN (Rafael Hernandez International Airport)

Renting a car in Puerto Rico

If you are planning a trip to Puerto Rico, you may find that it is difficult to rent a car during the Christmas season. Car rental companies may allow you to reserve a vehicle, but from mid-December to mid-January, some travelers find that no cars are available. Vacationers tend to extend their reservations without notice, and due to this and unexpected last minute cancellations, the agencies aren’t able to effectively manage their inventory.

For this reason, it may be best to schedule your vacation or exploratory trip during a different time period, or plan to be in a place where you can walk to most of what you want to see. Cabs are also very available and clean in the metropolitan areas, and relatively inexpensive.

Driving in Puerto Rico

Like the rest of the United States, the general infrastructure of Puerto Rico reflects “car culture”. It common for individuals or families to have at least one automobile, even if it is expensive, for commute and basic use. Private transportation is primary for many, accommodated by the extensive system of roads and traffic, complete with rush hour.

The size of the island is such that it would take a driver approximately 8 hours to travel around its perimeter at normal highway speeds. Those whose business interests would make frequent travel to different parts of the island advantageous, and those who want to visit the many natural wonders of the island with any considerable frequency, would find it advisable to simply own an automobile.

However, some who relocate to Puerto Rico elect to avoid the expense and extra hassle of owning a car. As elsewhere in the United States, public transportation and the proximity of goods and services can make this very feasible in some urban areas. In locales such as Condado, Isla Verde, and Old San Juan, a car really isn’t necessary. There are also several gated communities, many of them designed with expats in mind, in which it is typical for residents to use golf carts to get around.

For those who choose to, having a vehicle to use has its challenges:

  • Bringing your car with you when relocating to Puerto Rico isn’t cheap – shipping it will cost several thousand dollars, and you will also pay thousands more in taxes to import it (as much as 40% of the car’s value).
  • If you buy a car here, taxes are higher than in the States and in some other places. Taxes vary from 10-50% depending upon whether the car classifies as a luxury vehicle.
  • And leasing is, unfortunately, not really an option in Puerto Rico. While leases exist, they are rare, and such a different animal in Puerto Rico that they typically are not an attractive option.

Traffic can be a challenge as well. In some metro areas, congestion during rush hour is definitely to be avoided.

And finally, while the rules of the road in Puerto Rico are the same as in the States, people don’t tend to observe them in the same way. We find driving in Puerto Rico to be more chaotic and unpredictable than in other places we have lived. In some ways, it is more laid back – people tend to drive slower altogether, even in the fast lane. At the same time, you have to be very alert for unexpectedly creative interpretations of driving laws. To give a general impression, some of us find driving in Puerto Rico to be more difficult than in most of the States (with the possible exception of New York City), while far more sane and orderly than in some parts of Asia.

Puerto Rico’s Public Transportation

While there are some buses and trains in metro areas, many areas are not included. Bus schedules also have a reputation for being somewhat hit or miss. If you are considering public transit as part of your plan, it would be best to test out the options in your intended destination city.

Whether you are considering relocation or just wanting to check out Puerto Rico for the first time, contact us for advice and assistance!

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.

What You Need to Know About Puerto Rico’s Goverment

What You Need to Know About Puerto Rico’s Goverment

PROMESA Board

With the new PROMESA law, changes are in progress. PROMESA gives power for oversight of the Puerto Rico government to a 7-member, bi-partisan board appointed by the United States Congress. This page will be updated as new information is released.

Here is an article with details on the current PROMESA board appointees.

 

Puerto Rico’s Commonwealth Status

As a Commonwealth of the United States, Puerto Rico is part of the US but does not have the same status as a state. Citizens of Puerto Rico are citizens of the US and are entitled to a US passport. Any citizen of a country with travel rights to the US can travel freely to the US.

Puerto Rico is self-governing for internal matters and established its own constitution in 1952. Its chief of state is the President of the United States, and Puerto Rico itself is under the protection of the US military. Puerto Rico elects a Governor as its head of state, governing all internal affairs. US citizens who are residents of Puerto Rico may not vote in US presidential elections, and Puerto Rico does not have elected representation in either house of the US Congress, although a single resident commissioner from Puerto Rico has a voice, but cannot vote.

Puerto Rico corporate entities are considered foreign corporations according to US laws, a distinction that is important when considering your strategy if you are considering relocating. Contact us to discuss more how this may impact you.

Residents of Puerto Rico who earn their income by work done in Puerto Rico (or investments made while formally residing in Puerto Rico) are not subject to tax by the IRS; instead, US citizens in Puerto Rico pay tax to Hacienda, the Puerto Rico internal revenue organization.

 

Puerto Rico’s Legislative and Judicial Systems

With few exceptions, Puerto Rico is subject to all Federal laws and regulations put in place by the US government. Most relevant US agencies have representation within Puerto Rico.

The island is divided into 78 municipalities, each of which is governed by a mayor and municipal assembly. The senior legislative bodies consist of the 27-member Puerto Rico Senate and the 51-member Chamber of Representatives. All of these political positions are put in place by popular election and last for a term of 4 years.

Puerto Rico’s judicial system is directed by its Supreme Court, which consists of 7 judges appointed by the Governor. The system includes a Court of Appeals, a Superior Court, a District Court, and Municipal Court.

 

Puerto Rico’s Government Agencies

Here is a partial list of government agencies and offices you may find to be a helpful reference:

  • AT: Land Administration (Department of Economic Development)
  • DDEC: Department of Economic Development and Commerce
  • DH: Department of Finance
  • DTRH: Department of Labor and Human Resources
  • Hacienda: Treasury Department
  • JR: Review Board and Use Permits
  • La Fortaleza: Governor’s Office
  • PRIDCO: Puerto Rico Industrial Development Company (Department of Economic Development)
  • Promoexport: Trade and Export Company of Puerto Rico (Department of Economic Development)
  • OCIF: Office of the Commissioner of Financial Institutions
  • OGPe: Permit Management Office
  • OIGPe: Office of Inspector General Permit
  • OITE: Office of Industrial Tax Exemption

[Please note that the acronyms commonly used as names of agencies, by both English and Spanish speakers, reflect the original Spanish-language full names of the agencies. The acronyms listed above are what is commonly used by all; the full English-language names listed are the official translations of the full Spanish-language names of the agencies.]

References:
Official directory of government agencies (note that this site is in Spanish – if you are not fluent, the Google translate feature will be your friend here)
Hacienda official site (also in Spanish)

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.

What You Should Know About Puerto Rico’s Employment Laws

What You Should Know About Puerto Rico’s Employment Laws

Employee management can be more complex in Puerto Rico

Puerto Rico labor laws can be said to favor the employee. We have also heard from a number of sources that lower wage, non-exempt employees commonly know the employment laws well and hold employers accountable to them. If you will be managing employees of your own, you must become familiar with these laws, especially if you are required to maintain a certain number of employees to remain compliant with a tax exemption grant.

Because management of employees can be complex, our company offers business management services to oversee your human resources needs. We assist our clients in hiring and management of employees, as needed.

Below are some important notes (though this is not intended to be comprehensive).

 

Employment is not “at will:

It can be more difficult to release an employee in Puerto Rico.  If you wish to terminate an employee due to their performance, it must be for just cause, and you must be able to show documentation of disciplinary actions taken over time to remedy the situation.  It is also possible to lay off an employee because their position has truly been eliminated for demonstrable, valid business reasons.

In addition, it is possible for an employee to be hired for only a pre-defined length of time or to have an initial probation period of up to 90 days.  These types of arrangements would need to be explicitly stated in the employment contract and cannot continue indefinitely.

Firing someone without just cause can result in owing severance compensation based on years of service.

 

Paid Time Off

Puerto Rico requires employers to pay for time off in situations not required in the mainland US.

Mandatory paid maternity leave: Employees are entitled by law to 8 weeks paid maternity leave. Paid leave rights also apply to miscarriages, abortions, and adoptions of children 5 years or younger. The Working Mother’s Act also protects employees from pregnancy discrimination.

Vacation leave: All non-exempt employees are entitled to 1.25 days of paid vacation leave for each month in which they work at least 115 hours, though they aren’t entitled to take this leave until it has accrued for an entire year. Employers owe employees payment for vacation time not taken upon termination.

Sick leave: Non-exempt employees are also entitled to accrue one day of sick leave for each month in which they work at least 115 hours.

Paid Christmas Bonuses

Puerto Rico employees are legally entitled to a bonus in December of 6% of the first $10,000 of the employee’s annual wages.

PROMESA Changes

Exempt employees: The July 2016 FLSA rule change that doubled the minimum salary for employees defined as exempt from overtime does not apply in Puerto Rico.  The minimum annual salary for exempt employees in Puerto Rico currently remains at $23,660, but this matter is subject to a review underway by the Comptroller General of the United States.

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.

webinar

Free Webinars

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How to maximize Puerto Rico's tax incentives

Other upcoming webinars - email us to indicate your interest:

* What health insurance works in both Puerto Rico and in the mainland US? 

* The Basics of Transfer Pricing

* The Rules of Puerto Rico Residency

* Puerto Rico Charitable Donation Options

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