Tax Incentives
Two of Puerto Rico Real Estate Fund LLC’s upcoming real estate projects will be developed within designated Opportunity Zones in Puerto Rico, pursuant to Act 60-2019.
These tax incentives provide significant benefits for both investors and the projects themselves, enhancing the financial viability of the investments while reducing the tax burden associated with real estate development.
Additionally, the tax advantages obtained through projects developed under the Opportunity Zones Program may help strengthen the financial position of the development companies, supporting future projects, including developments that may not necessarily be located within eligible zones.
Tax Benefits for Investors
Además de los beneficios aplicables a inversiones directas en proyectos elegibles, los inversionistas que deseen invertir en PRRE por medio de uno de los fondos de capital privado de Puerto Rico con los que tenemos convenio podrían acceder a beneficios contributivos adicionales, sujeto a elegibilidad, disponibilidad y cumplimiento con los requisitos aplicables.
Tax-Free Gains in Puerto Rico (0%)
Distributions generated from projects developed under the Opportunity Zones Program may qualify for exemption from Puerto Rico income taxes for investors.
“Shareholders or partners of a corporation or partnership that qualifies as an exempt business shall not be subject to Puerto Rico income tax on dividends or profit distributions generated from Opportunity Zone net income.”
Visual Summary
- 0% Puerto Rico income tax on eligible distributions
- Applies to distributions generated from Opportunity Zones projects
- Tax benefit granted under Puerto Rico Act 60
Deducción Especial por Inversión de Capital Privado (hasta 60%)
Los inversionistas acreditados residentes de Puerto Rico que deseen invertir en PRRE por medio de uno de los fondos de capital privado de Puerto Rico con los que tenemos convenio podrían beneficiarse de una deducción contributiva adicional sobre la inversión realizada por dicho fondo, sujeto a los requisitos, límites y condiciones establecidos en la Ley 60.
Este beneficio puede permitir que el inversionista utilice la deducción en el Año Contributivo en que el fondo invierta en todo o en parte la inversión, y durante los quince (15) años siguientes, sujeto al límite anual aplicable.
“Un Fondo de Capital Privado de Puerto Rico podrá tomar una deducción hasta un máximo del sesenta por ciento (60%) de la base ajustada de su Inversión de Capital Privado, según se determine tal base bajo el Código de Rentas Internas de Puerto Rico. La deducción estará disponible para uso del Inversionista Acreditado Residente en el Año Contributivo en que el Fondo haya invertido en todo o en parte la inversión y por los quince (15) años siguientes. (…) El máximo que un Inversionista Acreditado Residente podrá deducir en un Año Contributivo no excederá del treinta por ciento (30%) de su ingreso neto antes de la deducción.”
Visual Summary
- Deducción potencial de hasta 60% sobre la base ajustada de la inversión elegible
- Disponible para inversionistas acreditados residentes, según los requisitos de Ley 60
- Uso potencial durante el año en que el fondo invierte y los 15 años siguientes
- Límite anual: hasta 30% del ingreso neto antes de la deducción
La calculadora permite estimar, de forma preliminar, el posible impacto contributivo de esta deducción bajo distintos escenarios de inversión e ingreso neto.
Tax Benefits for PRRE Projects
Applicable tax incentives for real estate developments help reduce operational and tax-related costs, strengthening the profitability and financial stability of the projects.
Transferable Investment Tax Credit (Up to 25%)
Projects eligible under the Opportunity Zones Program may also benefit from transferable tax credits of up to 25% on certain investments made into the developments.
Because these tax credits are transferable, they may be monetized through sale or assignment, potentially representing between USD 7 million and USD 14 million in additional value. This significantly strengthens project liquidity, profitability, and overall financial viability.
The provisions of Act 60 include transferable tax credits related to eligible investments made in projects developed under the Opportunity Zones Program.
Visual Summary
- Transferable tax credit of up to 25%
- Potential monetization through sale or assignment
- Increased liquidity and financial strength for the project
- Tax incentive granted under Puerto Rico Act 60
Reduced Tax Rate (18.5%)
“An exempt business shall be subject to a fixed income tax rate of eighteen point five percent (18.5%) on its Opportunity Zone net income…”
“An exempt business shall be subject to a fixed income tax rate on its opportunity zone net income of eighteen point five (18.5%) percent…”
Visual Summary
- Reduced fixed income tax rate of 18.5%
- Lower tax burden for the project
- Enhanced financial stability and long-term viability
Partial Exemption on Municipal and Excise Taxes (25%)
Projects eligible under the Opportunity Zones Program may benefit from partial exemptions on certain municipal and excise taxes.
“Exempt businesses shall receive a twenty-five (25) percent exemption on municipal license taxes, municipal excise taxes, and other municipal taxes…”
Visual Summary
- 25% reduction on municipal taxes and excise taxes
- Reduced operational costs
- Greater financial efficiency for the project
Partial Property Tax Exemption (25%)
Eligible projects may also receive tax benefits related to certain property taxes associated with property used in the development and operation of the project.
“The personal property of an exempt business… shall receive a twenty-five (25) percent exemption from municipal and state property taxes.”
Visual Summary
- 25% exemption on applicable taxes for eligible property
- Lower development and operational costs
- Greater potential project profitability
The information presented is for general informational purposes only and is based on provisions of Puerto Rico Act 60. It does not constitute individualized legal, tax, or financial advice. Tax treatment may vary depending on each investor’s jurisdiction and individual circumstances. Investors are encouraged to consult qualified legal and tax advisors before making any investment decisions.