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Centralized Services (Exports)
Tax incentive for shared service centers and centralized business service operations serving external entities, offering a 4% corporate tax rate.
11 min
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Section Code:
2031.01(A)-1 (a)-12
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Purpose:
Exports — 2031.01(A)-1 (a)-14
Overview
The Centralized Services export incentive under Section 2031.01(A)-1(a)-12 of Act 60-2019, as amended, provides preferential tax treatment for shared service centers and centralized business operations that provide services to entities located outside Puerto Rico. This designation supports back-office, administrative, and business process operations.
Qualifying businesses pay a fixed four percent (4%) corporate income tax rate on income derived from centralized services provided to external entities. The program attracts shared service centers, business process outsourcing operations, corporate service centers, and centralized administrative functions serving parent companies or external clients.
The key distinction of this designation is its focus on centralized business services and back-office functions rather than customer-facing services. This includes finance and accounting services, human resources administration, IT support, procurement services, and other administrative functions consolidated in Puerto Rico to serve external organizations.
Puerto Rico's bilingual workforce, business infrastructure, and cost competitiveness support shared service center operations. The incentive enhances attractiveness for companies consolidating administrative functions in Puerto Rico.
Key Benefits
Corporate Income Tax Rate
Centralized service operations approved under this designation pay a fixed four percent (4%) tax rate on income from qualifying services to external entities. 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
Centralized service operations receive exemptions from property taxes on facilities, office equipment, and technology infrastructure.
Municipal Tax Exemptions
Decree holders are exempt from municipal license taxes on qualifying centralized services revenue.
Operational Efficiency
Centralizing administrative and business services in Puerto Rico with preferential tax treatment creates cost efficiencies for multinational operations and service providers.
Requirements & Obligations
Business Structure and Registration
Applicants must establish a Puerto Rico legal entity to conduct centralized 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 centralized services provided to entities outside Puerto Rico. This may include services to parent companies, affiliates, or external clients located outside Puerto Rico. Detailed service recipient and revenue records are required.
Centralized Services Definition
Services must constitute qualifying centralized business services including finance and accounting, human resources administration, IT support, procurement, data processing, customer support, or other administrative and business process services. The services must be substantially performed from Puerto Rico.
Service Delivery from Puerto Rico
Centralized services must be substantially performed in Puerto Rico by Puerto Rico-based staff. Service centers must maintain operational presence in Puerto Rico, not merely nominal registration.
Employment Requirements
Centralized service operations must hire at least one (1) full-time Puerto Rico resident employee within six (6) months of decree issuance. Service center staff across various functions count toward requirements. Larger operations will have higher employment thresholds.
Physical Presence
The business must maintain service center facilities in Puerto Rico where centralized services are performed. Business records must be kept in Puerto Rico.
Compliance and Reporting
Annual compliance reports must document employment, revenue sources, service recipients, and service volumes. Records must demonstrate that qualifying centralized services are performed from Puerto Rico for external entities.
How to Apply
The application process for the Centralized Services export incentive typically requires four (4) to six (6) months from planning to decree issuance.
The process begins with assessing whether the centralized services model qualifies. Companies should confirm that services constitute centralized business services, that at least eighty percent (80%) of revenue comes from external entities, and that operations can be effectively conducted from Puerto Rico. Consultation with Puerto Rico advisors helps confirm eligibility.
During planning, companies establish a Puerto Rico legal entity and advance service center setup. This includes entity formation, banking, securing office space, establishing technology infrastructure, and planning service delivery. Some companies relocate existing shared service functions while others establish new centers.
The formal application is submitted to PRIDCO and includes descriptions of centralized services, service delivery model, client or service recipient base, financial projections, and employment plans. Documentation of service commitments or contracts strengthens applications.
PRIDCO reviews the application over approximately sixty (60) to ninety (90) days. Staff may request additional information about services, recipients, or operational plans. Applications demonstrating genuine centralized service operations 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 and service delivery 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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