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Architectural & Engineering (Exports)
Tax incentive for architectural and engineering firms providing services to clients outside Puerto Rico, offering a 4% corporate tax rate.
11 min
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Section Code:
2031.01(A)-1 (a)-5
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Purpose:
Exports — 2031.01(A)-1 (a)-6
Overview
The Architectural and Engineering export incentive under Section 2031.01(A)-1(a)-5 of Act 60-2019, as amended, provides preferential tax treatment for architectural and engineering firms that serve clients located outside Puerto Rico. This designation supports professional design and engineering practices serving export markets.
Qualifying businesses pay a fixed four percent (4%) corporate income tax rate on income derived from architectural and engineering services provided to clients outside Puerto Rico. The program attracts architecture firms, engineering consultancies, design-build firms, and integrated professional services firms that can operate from Puerto Rico while serving external clients.
The key distinction of this designation is its specific focus on architecture and engineering as licensed professional disciplines. These services require professional credentials and involve design, planning, and engineering for construction, infrastructure, industrial, and other projects.
Puerto Rico's architectural and engineering professionals support these practices. The incentive enhances competitiveness for Puerto Rico-based firms serving U.S. and international clients.
Key Benefits
Corporate Income Tax Rate
Architectural and engineering firms approved under this designation pay a fixed four percent (4%) tax rate on income from qualifying services to clients outside Puerto Rico. This rate applies for the decree term of fifteen (15) to twenty (20) years.
Compared to standard Puerto Rico rates of thirty-seven and a half percent (37.5%), savings exceed ninety percent (90%).
Dividend Tax Treatment
Dividends distributed from decree income to shareholders outside Puerto Rico face zero percent (0%) withholding.
Property Tax Exemptions
Firms receive exemptions from property taxes on office equipment, design technology, and other business assets.
Municipal Tax Exemptions
Decree holders are exempt from municipal license taxes on qualifying architectural and engineering revenues.
Professional Practice Structure
The incentive allows licensed professionals to structure practices serving export clients while maintaining professional licensing and standards.
Requirements & Obligations
Business Structure and Registration
Applicants must establish a Puerto Rico legal entity to conduct architectural and engineering services and hold the decree. The entity must register with Puerto Rico authorities and obtain necessary licenses.
Export Revenue Threshold
At least eighty percent (80%) of gross income must derive from architectural and engineering services provided to clients outside Puerto Rico. Services to Puerto Rico clients do not qualify. Detailed client and revenue records are required.
Architectural and Engineering Services Definition
Services must constitute genuine architectural or engineering services including building design, structural engineering, MEP engineering, civil engineering, industrial engineering, or related professional services. The work must be substantially performed from Puerto Rico.
Professional Licensing
Architectural and engineering services require appropriate professional licenses. Architects must hold valid architecture licenses, engineers must hold engineering licenses in relevant disciplines. Professional licensing in Puerto Rico or client jurisdictions may be required depending on regulatory requirements.
Service Delivery from Puerto Rico
Design, engineering, and professional work must be substantially performed in Puerto Rico by Puerto Rico-based professionals. Site visits and client meetings may occur at project locations, but core professional services must be from Puerto Rico.
Employment Requirements
Firms must hire at least one (1) full-time Puerto Rico resident employee within six (6) months of decree issuance. Licensed architects, engineers, designers, and support staff count toward requirements.
Physical Presence
The firm must maintain professional offices in Puerto Rico where architectural and engineering work is performed. Business records must be kept in Puerto Rico.
Compliance and Reporting
Annual compliance reports must document employment, revenue sources, client locations, and professional licensing status. Records must demonstrate that qualifying services are performed from Puerto Rico for non-Puerto Rico clients.
How to Apply
The application process for the Architectural and Engineering export incentive typically requires four (4) to six (6) months from planning to decree issuance, plus time for any professional licensing procedures.
The process begins with assessing whether the professional practice qualifies. Firms should confirm that services constitute architectural or engineering services, that at least eighty percent (80%) of revenue comes from non-Puerto Rico clients, and that professional licensing can be maintained or obtained. Consultation with Puerto Rico advisors clarifies eligibility.
During planning, firms establish a Puerto Rico legal entity and address professional licensing. Professional licenses may require specific procedures in Puerto Rico. Firms should also secure appropriate professional office space.
The formal application is submitted to PRIDCO and includes descriptions of architectural and engineering services, credentials of key professionals, client base analysis, financial projections, and employment plans. Documentation of professional licenses should be included.
PRIDCO reviews the application over approximately sixty (60) to ninety (90) days. Staff may request additional information about professional qualifications, client relationships, or licensing. Applications demonstrating genuine professional capabilities and Puerto Rico commitment receive favorable consideration.
Upon approval, the decree is issued specifying terms and obligations. After issuance, the firm must meet operational milestones and maintain professional licensing throughout the decree term.
This information is educational and should not be considered legal or tax advice. Applicants should consult with qualified legal and tax professionals familiar with Puerto Rico incentive programs before making any business decisions or submitting applications.
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