Puerto Rico’s Act 60, officially known as the Puerto Rico Incentives Code, was introduced in 2019 to consolidate several previous tax incentive laws into one unified system. The law replaced earlier incentives such as Acts 20, 22, 73, and 74, creating a streamlined framework designed to attract global businesses, investors, and entrepreneurs. The primary goal of Act 60 is to stimulate economic development by offering competitive tax incentives to companies that establish operations on the island.
For manufacturing companies, Act 60 provides some of the most attractive tax benefits available in the United States and its territories. These incentives are particularly appealing for companies engaged in industrial production, research and development, and high-technology manufacturing. Businesses that qualify for the manufacturing incentive program can significantly reduce their operational costs while benefiting from Puerto Rico’s strategic location, bilingual workforce, and access to U.S. markets.
The government of Puerto Rico designed Act 60 to encourage both local and international companies to establish manufacturing facilities on the island. This strategy has already proven successful in industries such as pharmaceuticals, medical devices, biotechnology, and electronics manufacturing. By combining low corporate tax rates with investment incentives, Puerto Rico aims to position itself as a global hub for innovation and industrial development.
Companies approved under Act 60 receive a tax incentive decree, which guarantees specific tax benefits for a fixed period. This legal certainty allows businesses to plan long-term investments with confidence. The incentives provided under the manufacturing chapter of Act 60 are considered among the most powerful economic development tools in Puerto Rico’s tax system.
Why Act 60 Attracts Global Businesses
Global corporations constantly look for locations that offer favorable tax environments, skilled labor, and reliable infrastructure. Act 60 addresses these needs by providing a unique combination of financial incentives and operational advantages. Companies relocating to Puerto Rico can enjoy substantial tax savings while maintaining access to the U.S. legal and financial system.
One of the biggest reasons businesses move to Puerto Rico under Act 60 is the dramatically reduced corporate tax rate. While many jurisdictions impose corporate taxes exceeding 20%, companies operating under Act 60’s manufacturing incentives may qualify for a much lower tax rate. This difference allows businesses to retain more of their profits and reinvest them into growth, research, and job creation.
Another major attraction is Puerto Rico’s geographic location. Positioned between North and South America, the island serves as an ideal gateway for international trade. Companies can easily export products to the United States, Latin America, and Europe while benefiting from the island’s tax incentives.
Act 60 also promotes innovation by encouraging research and development activities. Businesses involved in technology, biotechnology, renewable energy, and advanced manufacturing can qualify for additional tax credits and financial incentives. This focus on innovation helps Puerto Rico compete with other global manufacturing centers.
For entrepreneurs and investors, Act 60 represents a strategic opportunity. The combination of tax savings, infrastructure support, and legal stability creates an environment where businesses can thrive while maintaining regulatory compliance.
Understanding Manufacturing Services Under Act 60
Eligible Manufacturing Activities
Manufacturing services under Act 60 cover a wide range of industrial activities. The law supports businesses involved in producing physical goods as well as companies engaged in technological and industrial research. To qualify for manufacturing incentives, a company must operate a permanent industrial facility dedicated to commercial-scale production.
Examples of eligible manufacturing activities include:
Pharmaceutical production
Medical device manufacturing
Electronics and semiconductor manufacturing
Biotechnology research and development
Food and beverage processing
Renewable energy equipment manufacturing
These industries play a crucial role in Puerto Rico’s economic growth. The island has already established itself as a major pharmaceutical manufacturing hub, producing significant portions of the world’s medical supplies.
Manufacturing companies that establish operations in Puerto Rico must demonstrate their ability to create economic value. This may include job creation, investment in infrastructure, or development of new technologies. The government reviews each application carefully to ensure the project aligns with the island’s economic development goals.
Industrial and Research-Based Manufacturing
Act 60 also supports companies engaged in industrial research and development (R&D). Businesses conducting scientific research or developing new technologies may qualify for manufacturing incentives even if they are not producing large quantities of physical products.
This approach reflects the growing importance of innovation in modern manufacturing. Many companies now combine production with research activities such as product development, prototype design, and advanced engineering. By encouraging these activities, Puerto Rico aims to become a center for technological innovation.
Companies conducting R&D can receive significant tax credits and incentives under Act 60. These benefits help offset the high costs associated with research projects and technological experimentation.
Key Tax Benefits of Act 60 for Manufacturing Companies
4% Corporate Income Tax Rate
One of the most significant advantages of Act 60 manufacturing incentives is the 4% corporate income tax rate. This rate applies to income generated from qualified manufacturing activities conducted in Puerto Rico.
Compared to standard corporate tax rates in many jurisdictions, this rate is extremely competitive. In some cases, newly established small businesses may even qualify for a 2% tax rate during their first five years of operations, depending on revenue levels and eligibility criteria.
The reduced tax rate allows companies to allocate more resources toward expansion, hiring employees, and developing new technologies. For multinational corporations, these savings can translate into millions of dollars annually.
Property Tax Exemptions
Act 60 also provides significant relief from property taxes for manufacturing businesses. Companies operating under the incentive program may receive up to 75% exemption on real and personal property taxes related to their industrial operations.
This exemption applies to:
Manufacturing facilities
Industrial equipment
Machinery used in production
Research laboratories
Manufacturing operations often require large investments in equipment and infrastructure. Property tax exemptions reduce the financial burden associated with these investments, making it easier for companies to build and expand industrial facilities.
Municipal Tax Reductions
Another major tax advantage under Act 60 is the 50% exemption from municipal taxes, commonly known as “patentes.”
Municipal taxes in Puerto Rico are typically based on a company’s gross revenue. By reducing this tax by half, Act 60 significantly lowers the operational costs for manufacturing companies.
Dividend Tax Exemption
Act 60 provides 100% tax exemption on dividends distributed from the manufacturing business to Puerto Rico residents.
This benefit is particularly attractive to investors and business owners because it allows profits to be distributed without additional taxation at the individual level. As a result, investors can maximize their returns while maintaining compliance with Puerto Rico’s tax regulations.
Additional Incentives for Manufacturing Businesses
Research and Development Tax Credits
Innovation is a key priority for Puerto Rico’s economic strategy. To encourage technological advancement, Act 60 offers tax credits of up to 50% for eligible research and development expenses.
These credits help companies reduce the financial risks associated with research projects. Businesses engaged in scientific experimentation, prototype development, and advanced engineering can significantly lower their tax liability.
Tax Credits for Local Purchases
Manufacturing companies that purchase goods produced in Puerto Rico may qualify for tax credits of up to 25% or even 30% for small businesses.
This incentive encourages companies to support local suppliers and strengthen Puerto Rico’s domestic economy.
Incentives for Equipment and Infrastructure Investment
Act 60 also allows companies to claim deductions or rebates related to investments in industrial infrastructure. Businesses that build manufacturing facilities or purchase new equipment may receive financial incentives that reduce the overall cost of these investments.
Duration of Act 60 Manufacturing Incentives
15-Year Decree
Companies approved under Act 60 typically receive a 15-year tax incentive decree. This decree guarantees that the business will continue receiving the agreed tax benefits during the incentive period.
Extension for Another 15 Years
In many cases, companies can request an additional 15-year extension, allowing them to enjoy the benefits of Act 60 for up to 30 years.
This long-term stability is one of the reasons global corporations choose Puerto Rico for manufacturing operations.
Requirements to Qualify for Act 60 Manufacturing Benefits
Business Eligibility Criteria
To qualify for Act 60 manufacturing incentives, businesses must meet several requirements. These may include establishing a physical manufacturing facility, creating jobs for Puerto Rican residents, and investing in equipment or infrastructure.
The government evaluates each project to ensure it contributes to economic development and industrial growth.
Job Creation and Investment Requirements
Companies applying for Act 60 incentives must demonstrate their commitment to the local economy. This often involves creating new employment opportunities, investing in research and development, and supporting local suppliers.
Advantages of Manufacturing in Puerto Rico Under Act 60
Manufacturing in Puerto Rico offers several advantages beyond tax incentives. Companies benefit from a skilled bilingual workforce, strong intellectual property protections, and access to the U.S. legal system.
The island also has well-developed infrastructure, including modern ports, airports, and industrial parks. These features make it easier for businesses to manufacture and export products globally.
Common Industries Using Act 60 Manufacturing Incentives
Several industries benefit from Act 60 manufacturing incentives, including:
Pharmaceutical and biotechnology companies
Medical device manufacturers
Electronics and semiconductor companies
Aerospace and engineering firms
Renewable energy technology developers
These industries contribute significantly to Puerto Rico’s economy and help position the island as a leading manufacturing hub.
Conclusion
The tax benefits of Act 60 manufacturing services provide a powerful incentive for businesses looking to expand or relocate their operations to Puerto Rico. With a 4% corporate tax rate, property tax exemptions, municipal tax reductions, and generous research incentives, companies can significantly lower operational costs while investing in innovation and growth.
By combining these financial advantages with a skilled workforce and strategic location, Puerto Rico has created an environment that attracts global manufacturers. Businesses that take advantage of Act 60 not only reduce their tax burden but also gain access to one of the most competitive manufacturing ecosystems in the Caribbean and the United States.
FAQs
1. What is Act 60 in Puerto Rico?
Act 60 is the Puerto Rico Incentives Code that provides tax incentives to businesses and investors to promote economic growth.
2. What is the corporate tax rate for Act 60 manufacturing companies?
Eligible manufacturing companies may qualify for a 4% corporate tax rate, significantly lower than standard corporate taxes.
3. How long do Act 60 tax benefits last?
Most tax incentives last 15 years, with the possibility of extending them for another 15 years.
4. What industries qualify for Act 60 manufacturing incentives?
Industries such as pharmaceuticals, biotechnology, electronics, and advanced manufacturing can qualify.
5. Can companies receive research and development tax credits under Act 60?
Yes. Businesses engaged in R&D activities may qualify for tax credits of up to 50% of eligible expenses.
