You are a major distributor of electronics servicing the Caribbean and Latin America and you are seeking ways to reduce costs and be closer to clients. As you examine all possibilities, including the relocation of regional headquarters, you find that Puerto Rico promotes the establishment of regional headquarters with tax incentives.
You find there is ample commercial space available at great prices and a good ports infrastructure. And more importantly, you qualify for generous benefits under the Economic Incentives Act, although you are a distributing company. Your company would benefit from:
• A 4% fixed income tax rate.
• Distributions would be 100% tax exempt while gain on a sale of the partnership interest would be 4% during the term of the grant.
Additionally, you can examine the possibility of adding value to your operation by taking advantage of the benefits offered by the Foreign Trade Zones on the island. Under the Economic Incentives Act, if you establish an operation in Puerto Rico for export and establish it in a foreign trade zone, you can take advantage of the Economic Incentives Act and the benefits provided by the Foreign Trade Zones.
Puerto Rico has three operators of Foreign Trade Zones who sublease the space and service to companies interested in operating under the benefits provided by the zones. These are Zone #61 in San Juan managed by Compañía de Comercio y Exportación (CCE); Zone #163 in Ponce managed by CODEZOL, and Zone #7 managed by the Puerto Rico Industrial Corporation (PRIDCO), a government development company. PRIDCO manages the largest contiguous foreign trade zone under the U.S. flag. Puerto Rico’s Free Trade Zones ranked among the first 15 in the U.S., according to a report by the National Association of Foreign Trade Zones.
Adding certain amount of value to the product in the Foreign Trade Zone allows the product to be labeled Made in USA and enters the U.S. market duty free.
