
Puerto Rico Tax Incentives for Startups and Freelancers - jchernan
https://medium.com/@peignoir/puerto-rico-just-became-a-new-startup-and-freelancer-eldorado-8e579909581d
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ChrisBland
Do they really believe that our memories are that short? One of the main
reasons for the most recent financial crisis in PR was due to section 936 of
the US Tax code.

Take a read of the most recent crisis: [https://taxfoundation.org/tax-policy-
helped-create-puerto-ri...](https://taxfoundation.org/tax-policy-helped-
create-puerto-rico-s-fiscal-crisis/)

United States General Accounting Office Report to the Chairman, Committee on
Finance, TAX POLICY Puerto Rico and the Section 936 Tax Credit
[http://www.gao.gov/assets/220/218131.pdf](http://www.gao.gov/assets/220/218131.pdf)

~~~
annerajb
I think the reason wasn't section 936. The reason was more the local
government not putting to good use any of the benefits from either the bonds
or local companies setting up.

Instead of using those funds to improve education, technical training, create
buildings/projects that made sense in the distant future where funds/companies
would not be so incentivized to stay here. They went and started building
pointless infrastructure projects with arguably benefits or ROI almost always
with some sort of controversy on the project builder/developer intentions.

Building statues, pointless sports venues, really expensive projects with zero
to marginal benefits to society/Puerto Rico's economy long term.

~~~
ChrisBland
Agree that they were not the most prudent financial managers, my point was as
soon as they changed the tax code; there was a 10 year window to sunset it and
almost all of the companies left which really decimated the economy where jobs
just vanished as they were moved back onshore and satellite offices closed.

~~~
MarieAACC
You're right, many companies left after they 936 decrees expired, but they
weren't cancelled right away when the Congress changed the tax code and got
rid of section 936. Same with Act 20 and 22, once they are signed, you're good
to go for 20 years, even if the laws change in the future.

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qdpb
Wonderful to see people reinventing taxation from the first principles:
"awesome country to live in, with great education and social security, but
these are expensive countries, from a Tax perspective"

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flanbiscuit
Do tax incentives really work over the long term? Some quick searching via
Google seem to bring up some negative answers but my search term could be
biased ("do tax incentives really work?") and only lead me to answers that
backup my question. I'm just curious to know if Tax Incentives actually do
work for any city or state. Weren't tax breaks (or the removal of) part of the
problem that got P.R. into their current situation?

~~~
yincrash
What is your definition of "really work"? Georgia started its tax incentives
for Film/Television in 2005 and now it's the third largest film/tv industry in
the nation behind California and NY. It's also propped up tourist economies as
a secondary effect where people want to go to places where things were filmed.
Georgia legislators would probably argue that the incentives there work.

[] [http://www.adweek.com/tv-video/how-atlanta-became-the-
worlds...](http://www.adweek.com/tv-video/how-atlanta-became-the-worlds-
fastest-growing-film-and-tv-destination/)

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MarieAACC
Act 20 applies to any company/freelancer that exports services from PR,the
condition to have lived outside of the island doesn't apply here. And the
government just changed the job requirement, so you don't have to hire 5
people anymore, making it available to companies with fewer employees and
freelancers.

~~~
annerajb
This would mean that as a founder living in Puerto Rico for the past 7-8
years. Could I apply for Act 20 and have my tax rate reduced to just 4% corp
income tax as long as we export our services/products?

Hmm interesting.

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annerajb
My only gripe when they originally enacted act 20 and 22. Was that it required
the founder not to have lived in Puerto Rico in the past 15 years or long
period of time before arriving here.

Unless they changed it this would forbid founders that are trying to make a
company in Puerto Rico able to qualify.

~~~
jchernan
It seems the requirement has been relaxed a bit:

"Puerto Rico Senate Bill 864 increases the potential impact of Act 22 by
expanding who qualifies for the tax break. Prior to this legislation, Act 22
was only applicable to new migrants to Puerto Rico who had not been residents
for the 15 year period before the Act went into effect in January 2012. That
period has now been reduced from 15 to 6 years."

[https://www.forbes.com/sites/janetnovack/2015/01/27/puerto-r...](https://www.forbes.com/sites/janetnovack/2015/01/27/puerto-
rico-expands-tax-haven-deal-for-americans-to-its-own-emigrants/#6e6883092735)

~~~
annerajb
I only spent two year outside PR for my bachelors. Been back here for 8 years
now. :(

Still feels odd trying to help create startups but excluding people that live
here. I mean the original purpose was to bring new companies, "expats" to
puerto rico which IMO is good at accomplishing.

~~~
MarieAACC
Act 20 applies to any company or freelancer exporting services from Puerto
Rico. Act 22 only applies to passive income, so it targets investors moving to
the island.

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spraak
When I see such a poorly formatted/edited article, it makes me question the
integrity and quality of the thinker behind it. I know it's vain and maybe
superficial, but if they can't be bothered to consistently format or proofread
their work, then I wonder what else they couldn't be bothered to do.

