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Consulting (Exports)
Tax incentive for consulting firms providing advisory services to clients outside Puerto Rico, offering a 4% corporate tax rate on qualifying export income.
11 min
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Section Code:
2031.01(A)-1 (a)-3
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Purpose:
Exports — 2031.01(A)-1 (a)-3
Overview
The Consulting export incentive under Section 2031.01(A)-1(a)-3 of Act 60-2019, as amended, provides preferential tax treatment for consulting firms that serve clients located outside Puerto Rico. This designation supports the establishment of professional consulting practices that can leverage Puerto Rico's talent and business environment to serve mainland U.S. and international markets.
Qualifying businesses pay a fixed four percent (4%) corporate income tax rate on income derived from consulting services provided to clients outside Puerto Rico. The program attracts management consultants, strategy advisors, business process consultants, technology consultants, and specialized advisory firms that can operate effectively from Puerto Rico while serving geographically dispersed clients.
The key distinction of this designation is its broad applicability to various consulting disciplines, from strategy and operations to technology implementation and organizational development. While other export designations address specific service categories like software development or professional services, consulting covers the general advisory and problem-solving services that businesses purchase to improve performance, navigate challenges, or implement changes.
Puerto Rico's bilingual professional workforce, business infrastructure, and connectivity support modern consulting practices that increasingly leverage virtual collaboration and can serve clients without requiring constant physical presence. The incentive enhances these capabilities with substantial tax advantages that improve the competitiveness of Puerto Rico-based consulting practices.
Key Benefits
Corporate Income Tax Rate
Consulting firms approved under this designation pay a fixed four percent (4%) tax rate on income from qualifying consulting 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 corporate rates of thirty-seven and a half percent (37.5%), the savings exceed ninety percent (90%). A consulting firm generating one million dollars ($1,000,000) annually in taxable income pays approximately forty thousand dollars ($40,000) rather than three hundred seventy-five thousand dollars ($375,000).
Dividend Tax Treatment
Dividends distributed from decree income to shareholders outside Puerto Rico face zero percent (0%) withholding. This allows consulting firm owners and partners to extract profits efficiently after corporate tax.
Property Tax Exemptions
Consulting firms receive exemptions from property taxes on office equipment, technology systems, and other business assets used in consulting operations.
Municipal Tax Exemptions
Decree holders are exempt from municipal license taxes on qualifying consulting revenues.
Professional Services Structure
The incentive allows consultants to structure practices serving export clients while maintaining flexibility in service delivery models, from virtual consulting to on-site engagements at client locations.
Requirements & Obligations
Business Structure and Registration
Applicants must establish a Puerto Rico legal entity to conduct consulting operations and hold the decree. The entity must register with Puerto Rico authorities and obtain necessary business licenses.
Export Revenue Threshold
At least eighty percent (80%) of gross income must derive from consulting services provided to clients located outside Puerto Rico. Services to Puerto Rico clients do not qualify for preferential treatment. Detailed client records and revenue attribution documentation are required.
Consulting Services Definition
Services must constitute genuine consulting and advisory activities including strategy consulting, management consulting, operations consulting, technology consulting, organizational development, and related professional advisory services. The work must be substantially performed from Puerto Rico.
Service Delivery from Puerto Rico
Consulting work, including analysis, research, strategy development, and recommendations, must be substantially performed in Puerto Rico by Puerto Rico-based consultants. Client meetings and presentations may occur at client locations, but the core consulting work must be done from Puerto Rico.
Employment Requirements
Consulting firms must hire at least one (1) full-time Puerto Rico resident employee within six (6) months of decree issuance. Consultants, analysts, researchers, and support staff count toward requirements. Larger firms will have higher thresholds based on scale.
Physical Presence
The consulting firm must maintain a physical office in Puerto Rico where consulting work is performed. The presence must be genuine, not nominal. Business records must be kept in Puerto Rico.
Compliance and Reporting
Annual compliance reports must document employment, revenue sources, client locations, and project activity. Records must demonstrate that qualifying consulting services are performed from Puerto Rico for non-Puerto Rico clients.
How to Apply
The application process for the Consulting export incentive typically requires four (4) to six (6) months from planning to decree issuance.
The process begins with assessing whether the consulting practice qualifies. Firms should confirm that services constitute consulting activities, that at least eighty percent (80%) of revenue comes from non-Puerto Rico clients, and that work can be effectively performed from Puerto Rico. Consultation with Puerto Rico advisors helps clarify eligibility.
During planning, firms establish a Puerto Rico legal entity and begin operations setup. This includes entity formation, banking, securing professional office space, and establishing presence. Some principals and consultants relocate to Puerto Rico while others hire local consulting talent.
The formal application is submitted to PRIDCO and includes descriptions of consulting services, practice areas and specializations, client base analysis, service delivery model, financial projections, and employment plans. Documentation of consulting credentials and track record strengthens applications.
PRIDCO reviews the application over approximately sixty (60) to ninety (90) days. Staff may request additional information about consulting services, client relationships, or operational plans. Applications demonstrating genuine consulting capabilities and Puerto Rico commitment receive favorable consideration.
Upon approval, the decree is issued specifying terms and obligations. After issuance, the firm must meet employment and operational milestones within specified timeframes.
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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