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E-Commerce (Exports)
Tax incentive for e-commerce businesses selling products to customers outside Puerto Rico, offering a 4% corporate tax rate on export e-commerce income.
11 min
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Section Code:
2031.01(A)-1 (a)-8
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Purpose:
Exports — 2031.01(A)-1 (a)-11
Overview
The E-Commerce export incentive under Section 2031.01(A)-1(a)-8 of Act 60-2019, as amended, provides preferential tax treatment for e-commerce businesses that sell products or services to customers located outside Puerto Rico through online channels. This designation supports digital commerce operations serving external markets.
Qualifying businesses pay a fixed four percent (4%) corporate income tax rate on income derived from e-commerce sales to customers outside Puerto Rico. The program attracts online retailers, digital product sellers, subscription commerce businesses, and e-commerce platforms that can operate from Puerto Rico while serving U.S. and international customers.
The key distinction of this designation is its focus on e-commerce - the sale of goods or services through digital channels - rather than traditional retail or other service models. E-commerce businesses leverage websites, mobile apps, marketplaces, and digital platforms to reach customers.
Puerto Rico's connectivity, logistics access, and business infrastructure support e-commerce operations. The incentive enhances competitiveness for Puerto Rico-based e-commerce businesses serving external markets.
Key Benefits
Corporate Income Tax Rate
E-commerce businesses approved under this designation pay a fixed four percent (4%) tax rate on income from qualifying e-commerce sales to customers 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
E-commerce businesses receive exemptions from property taxes on warehouse facilities, fulfillment equipment, technology infrastructure, and other assets.
Municipal Tax Exemptions
Decree holders are exempt from municipal license taxes on qualifying e-commerce revenues.
Digital Commerce Platform
E-commerce businesses benefit from Puerto Rico's connectivity and logistics supporting online sales and fulfillment to external customers.
Requirements & Obligations
Business Structure and Registration
Applicants must establish a Puerto Rico legal entity to conduct e-commerce operations 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 e-commerce sales to customers outside Puerto Rico. Sales to Puerto Rico customers do not qualify. Detailed customer and sales records are required.
E-Commerce Activities Definition
Activities must constitute genuine e-commerce including online sales of physical products, digital products, subscriptions, or services through websites, apps, or digital platforms. The e-commerce operations must be substantially managed from Puerto Rico.
Operations from Puerto Rico
E-commerce business management, including digital marketing, customer service, operations management, and fulfillment coordination, must be substantially based in Puerto Rico. Fulfillment may occur from Puerto Rico or through third-party logistics.
Employment Requirements
E-commerce businesses must hire at least one (1) full-time Puerto Rico resident employee within six (6) months of decree issuance. Operations staff, marketing, customer service, and management count toward requirements.
Physical Presence
The business must maintain offices or facilities in Puerto Rico where e-commerce operations are managed. Business records must be kept in Puerto Rico.
Compliance and Reporting
Annual compliance reports must document employment, revenue sources, customer locations, and sales volumes. Records must demonstrate e-commerce operations managed from Puerto Rico serving external customers.
How to Apply
The application process for the E-Commerce export incentive typically requires four (4) to six (6) months from planning to decree issuance.
The process begins with assessing whether the e-commerce business model qualifies. Companies should confirm that at least eighty percent (80%) of sales come from customers outside Puerto Rico and that operations can be effectively managed from Puerto Rico. Consultation with Puerto Rico advisors helps confirm eligibility.
During planning, companies establish a Puerto Rico legal entity and begin operations setup. This includes entity formation, banking, establishing facilities for operations management, and planning fulfillment. Some founders relocate while others hire local operations talent.
The formal application is submitted to PRIDCO and includes descriptions of e-commerce business model, products or services sold, customer base analysis, operations structure, financial projections, and employment plans. Evidence of existing e-commerce operations or credible launch plans strengthens applications.
PRIDCO reviews the application over approximately sixty (60) to ninety (90) days. Staff may request additional information about e-commerce model, customer locations, or operational plans. Applications demonstrating genuine e-commerce capabilities and Puerto Rico commitment receive favorable consideration.
Upon approval, the decree is issued specifying terms and obligations. After issuance, the company must establish operations and meet employment milestones.
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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