Chapter 10 of the recently enacted Act 60 of 2019, known as "Puerto Rico Incentives Code," provides incentives for young entrepreneurs who are committed to establish successful business operations that would create jobs in Puerto Rico

Startups businesses and the young  population play a vital role in a country's economic growth and social prosperity.  This is why Act 60 significantly improves the incentives and benefits of former Act 135 of 2014, known as the "Young Entrepreneurs Incentive and Financing Act", devoting an entire chapter on tax incentives and economic benefits aimed at encourageing young entrepreneurship in Puerto Rico.

A young entrepreneur is an individual who is:

  • a resident of Puerto Rico
  • between the ages of 16 and 35
  • a high school graduate, and
  • creates and operates a new business in Puerto Rico.

A new business is not a business that has been operating through affiliates or that is created after  a business reorganization, as defined in the Puerto Rico Internal Revenue Code of 2011, as amended ("the Code"). The tax incentives available in Act 60 can only be applied towards one (1) new business per young individual, and the new business must be operated solely by the young entrepreneurs.   

Tax Incentives for Young Entrepreneurs and New Business

The tax benefits available for young entrepreneurs and their new businesses under Act 60 include:

  • A 100% income tax exemption for the first $40,000 earned by the young entrepreneur between the ages of sixteen (16) and twenty-six (26) years old, from wages and other compensation for personal services rendered.
  • A 100% income tax exemption on the first $500,000 of net income generated by the young entrepreneur's new business during the first three (3) years of operations.
  • A 100% exemption on the young entrepreneur's new business's personal property taxes during the first three (3) years of operations.
  • A 100% exemption on municipal taxes during the first three (3) years of operations of the young entrepreneur's new business.

The net income over $500,000 and any dividend distributions from the new business to its owners will be subject to the regular tax rates applicable under the Code.

Young entrepreneurs who wish to benefit from the incentives provided by Act 60 must file an application for the tax benefits and  must enter into a special agreement with the Secretary of the Department of Economic Development and Commerce (DDEC) before commencing the new business operations in Puerto Rico.    

For more information or to receive an orientation by one of our tax advisors, please call (787) 751-6164, or email us at [email protected].