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Opening a Business in Puerto Rico

opening a business in puerto rico

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Many companies from around the globe already call Puerto Rico home. These companies came to boost their opportunities for advancement and growth through the variety of industries thriving in Puerto Rico. Not to mention having a skilled labor pool and low costs.

Puerto Rico as a Business Destination

For companies expanding from the United States, Puerto Rico offers a familiarity while still providing the uniqueness and excitement of a different culture you might find further from home.

While Puerto Rico is part of the US, it is not technically a state, and there are some slight differences between starting a business in the US and starting one in the unincorporated US territory. Some people might say that Puerto Rico has a slow permitting process, and it might seem so if you compare the process to the fastest methods like those in New Zealand, which World Bank data has given the title of the #1 country on their ease of doing business list. Although it may not have the same fastest permitting process, the territory has a more straightforward process than places such as India and China.

An Excellent Location for Entrepreneurs

After being hit by both Hurricane Maria and Hurricane Irma in 2017, Puerto Rico has been struggling to get back on its feet. That may not sound like the ideal place to start your business, but the Puerto Rican government has created several incentives for entrepreneurs to open their stores. They hope that providing entrepreneurs with these incentives will bring revenue back to the country and this will help them to get back on their feet. It is a similar approach to what Singapore has done over the last ten years, while achieving outstanding results.

The Advantages of Opening a Business in Puerto Rico

1. Personal Taxes

The two biggest reasons to start a business in Puerto Rico are the taxes. Puerto Rico is exempt from US federal taxes because they are a commonwealth nation. However, they are technically part of the US which means that they retain US citizenship. For entrepreneurs wanting to be free of the US tax, all they need to do is live in Puerto Rico 183 days out of the year. Puerto Rico is the only place that US citizens can move to and not have to renounce their US citizenship to be exempt from federal taxes. Entrepreneurs in the US can have more than half of their income taxed in individual states, while Puerto Rico has a fixed income tax rate of 4%. Capital gains are also taxed in the US anywhere from 15-20% while in Puerto Rico the rate is 0.

2. Corporate Taxes

Companies in either the manufacturing services or export divisions can qualify for a 4% fixed income tax rate as well as a full tax exemption on total earnings, including profits. In a few cases, some businesses can qualify for a property tax exemption as well. And most startups get a full property tax exemption for the first five years they are in business. The savings in Puerto Rico compared to the US are nearly unbelievable.

3. Skilled Workforce

Puerto Rico suffers from a “brain drain” of sorts. While the island graduates thousands of STEM students every year, a majority of the grads decide to leave the country. In spite of those numbers, Puerto Rico believes that the opening of new businesses will help to keep these graduates in the country and even offers a 50% tax credit for companies who are working towards research and development.

4. US Perks

Businesses in Puerto Rico still get to enjoy many perks of other businesses in America despite not having to pay the tax rates. All products that a business creates in Puerto Rico get stamped with “Made in the USA.” There won’t be any shady business with your intellectual property either because it will be protected by US law. Puerto Rico is due to receive $17 billion in funds from the US, which is expected to create an increase in budget.

Opening a business in Puerto Rico does come with its fair share of obstacles, but if it is done correctly, the savings will be staggering.

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