flag Puerto Rico Puerto Rico: Investing

FDI in Figures

For more than half a century, the Puerto Rican government has pursued its principal objective of creating new jobs by attracting foreign investment through financial and fiscal incentives. Among the financial incentives offered are rental of public buildings at attractive rates, wage incentives and access to financing through tax-free industrial bonds and direct loans. However, in the name of national security the federal government limits foreign investment in transportation, utilities, banking, communication, finance, nuclear power and defence. In 2020, FDI in Latin America and the Caribbean decreased by 38% to an estimated USD 88 billion, amidst one of the deepest recessions across the developing world caused in part by the COVID-19 pandemic (UNCTAD, 2021). Nevertheless, there have been some significant investments made in the country during that period. In September 2020, the German health-care company Fresenius Kabi announced it would invest USD 30 million to expand its manufacturing complex in San Germán, modernising and automating the plant to increase its capacity and competitiveness. Another German corporation, the pharmaceutical giant Boehringer Ingelheim, also made an investment to expand its manufacturing site in Puerto Rico, at a total cost of USD 50 million.

The country ranked 65th out of 190 countries in the last Doing Business report, published by the World Bank in 2020, which indicates a slight decrease from the previous year, when it ranked 64th. The United States has created a variety of incentives for foreign investment in Puerto Rico, including tax incentives and exemptions, the use of U.S. currency, and government-backed start up costs. The Puerto Rican government actively seeks FDI, mainly through financial and tax incentives, which include renting out public buildings at attractive rates, wage incentives and access to financing through tax-exempted industrial bonds and direct loans, full or partial tax exemptions on income, property ownership, gross income of municipalities and construction, and excise taxes for certain agricultural activities. Additionally, the national investment promotion agency provides aid for foreign investors who seek to invest in the country. Puerto Rico's attractiveness include a skilled and relatively cheap labour force, excellent infrastructure, political stability, and a diversified economy. Also, as Puerto Rico is a U.S. territory, treaties signed by the U.S. government apply to the island as well. However, Puerto Rico is vulnerable to climatic factors, it has a high rate of poverty and unemployment and high level of bureaucracy.

 

Country Comparison For the Protection of Investors

  Puerto Rico Latin America & Caribbean United States Germany
Index of Transaction Transparency* 7.0 4.1 7.0 5.0
Index of Manager’s Responsibility** 6.0 5.2 9.0 5.0
Index of Shareholders’ Power*** 8.0 6.7 9.0 5.0

Source: Doing Business - Latest available data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

 

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Tax Rates

Sales and Use Tax (SUT)
11.5% (10.5% plus 1% municipal tax)
Company Tax
Withholding Taxes
Dividends: 0 (resident companies)/10% (non-resident companies)/15% (individuals); Interest: 0/29% (interest paid to non-resident related entities not engaged in a trade or business in Puerto Rico); Royalties: 0 (residents)/29% (non-residents)
Social Security Contributions Paid By Employers
Federal: FICA: 7.65% compensation of employees; FUTA 0.8% of the first tranche of $7,000 of employee compensation. In Puerto Rico: Unemployment Insurance: maximum 5.4% of the first tranche of $7,000 of employee compensation; disability insurance: 0.3% of the first tranche of $9,000 of employee compensation; work accident insurance: rates vary according to the degree of risk associated with the employee's occupation.
Other Domestic Resources
Puerto Rico Treasury Department (PRTD)
Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.
 
 

Individual Taxes

Individual Income Tax Progressive rate from 7% to 33%
Not over USD 9,000 0%
Over USD 9,000, but not over 25,000 7% of the excess over USD 9,000
Over USD 25,000, but not over 41,500 USD 1,120 plus 14% of the excess over USD 25,000
Over USD 41,500, but not over 61,500 USD 3,430 plus 25% of the excess over USD 41,500
Over USD 61,500 USD 8,430 plus 33% of the excess over USD 61,500
Gradual adjustment tax (for income over USD 500,000) 5% of the excess of the total net taxable income over USD 500,000 (limited to 33% of their personal and dependents' exemption plus USD 8,895)
Alternate basic tax (ABT) In addition to the regular income tax, individuals are required to compute an ABT. The ABT taxable income is computed by adding back certain income items exempt from regular income tax.
Over USD 25,000 but not over 50,000 1%
Over USD 50,000 but not over 75,000 3%
Over USD 75,000 but not over 150,000 5%
Over USD 150,000 but not over 250,000 10%
Over USD 250,000 24%
Optional tax regime for self-employed individuals rendering services Progressive rate from 6% to 20%
Up to USD 100,000 6%
USD 100,000 - 200,000 10%
USD 200,000 - 300,000 13%
USD 300,000 - 400,000 15%
USD 400,000 - 500,000 17%
Over USD 500,000 20%
 
 

Country Comparison For Corporate Taxation

  Puerto Rico Latin America & Caribbean United States Germany
Number of Payments of Taxes per Year 16.0 28.2 10.6 9.0
Time Taken For Administrative Formalities (Hours) 218.0 327.5 175.0 218.0
Total Share of Taxes (% of Profit) 64.4 46.8 36.6 48.8

Source: Doing Business - Latest available data.

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Investment Opportunities

Tenders, Projects and Public Procurement
Government Bids - Puerto Rico, Bids in Puerto Rico
Puerto Rico bids network, Bids in Puerto Rico
Tenders worldwide, Tenders worldwide
Setting Up a Company
Consult Doing Business Website, to know about procedures to start a Business in Puerto Rico.
Useful Resources
Grand Thornton Guide on Doing Business in Porto Rico
 

Business Setup Procedures

Setting Up a Company Puerto Rico Latin America & Caribbean
Procedures (number) 6.00 8.00
Time (days) 5.50 25.22

Source: Doing Business.

 
 
 

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Latest Update: July 2022

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