Puerto Rico: Investing
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 defense. Puerto Rico is not included in UNCTAD's World Investment Report 2023. According to data from Invest Puerto Rico, in the fiscal year 2022/23, the island attracted new investments worth USD 416 million, up from USD 350 million one year earlier. Among the most significant investments made in Puerto Rico over the past few years are the investment of USD 30 million made by the German health-care company Fresenius Kabi, to expand its manufacturing complex in San Germán, modernizing and automating the plant to increase its capacity and competitiveness; and a USD 50 million investment made by another German corporation, the pharmaceutical giant Boehringer Ingelheim, also made to expand its manufacturing site in Puerto Rico. Furthermore, the burgeoning technology sector is further strengthened by the presence of prominent tech companies with established operations, including Honeywell and AWS.
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 (Invest PR) provides aid for foreign investors who seek to invest in the country. Puerto Rico's attractiveness includes a skilled and relatively cheap labor 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 a high level of bureaucracy.
| 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.
| 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% |
| 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.
| 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: April 2024
