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Data Centers (Exports)
Tax incentive for data center operations serving external clients, offering a 4% corporate tax rate on data hosting and colocation services.
11 min
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Section Code:
2031.01(A)-1 (a)-13
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Purpose:
Exports — 2031.01(A)-1 (a)-9
Overview
The Data Centers export incentive under Section 2031.01(A)-1(a)-13 of Act 60-2019, as amended, provides preferential tax treatment for data center operations that provide hosting, colocation, and data services to clients located outside Puerto Rico. This designation supports Puerto Rico's development as a data center location.
Qualifying businesses pay a fixed four percent (4%) corporate income tax rate on income derived from data center services provided to external clients. The program attracts data center operators, colocation providers, cloud infrastructure companies, and hosting services that can serve external markets from Puerto Rico facilities.
The key distinction of this designation compared to domestic telecom and data storage incentives is its focus on serving external clients rather than the Puerto Rico market. Export data centers provide hosting, colocation, and computing infrastructure for clients and workloads outside Puerto Rico.
Puerto Rico's connectivity, climate control requirements, and infrastructure support data center operations. The incentive enhances competitiveness for attracting data center investment serving U.S. and international clients.
Key Benefits
Corporate Income Tax Rate
Data center operations approved under this designation pay a fixed four percent (4%) tax rate on income from qualifying data services to external clients. 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%).
Property Tax Exemptions
Data centers receive substantial exemptions from property taxes on facilities, servers, networking equipment, power infrastructure, cooling systems, and related capital-intensive assets. For data centers requiring tens of millions in infrastructure investment, these exemptions provide significant value.
Dividend Tax Treatment
Dividends distributed from decree income to shareholders outside Puerto Rico face zero percent (0%) withholding.
Municipal Tax Exemptions
Decree holders are exempt from municipal license taxes on qualifying data center revenues.
Infrastructure Position
Puerto Rico's position and connectivity support data center operations serving U.S. and Caribbean markets.
Requirements & Obligations
Business Structure and Registration
Applicants must establish a Puerto Rico legal entity to conduct data center 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 data center services provided to clients or workloads outside Puerto Rico. Services to Puerto Rico clients do not qualify. Detailed client and service records are required.
Data Center Services Definition
Services must constitute qualifying data center operations including server hosting, colocation services, cloud infrastructure, managed hosting, or data storage services provided to external clients. Operations must occur at data center facilities in Puerto Rico.
Data Center Facilities
Operations must be conducted at appropriate data center facilities in Puerto Rico with power, cooling, connectivity, security, and infrastructure meeting data center standards. Facility investment and capabilities must support professional data center operations.
Service to External Clients
Data center capacity must serve external clients or workloads, not internal use. Hosting, colocation, or infrastructure services must be provided to identifiable external customers.
Employment Requirements
Data center operations must hire at least one (1) full-time Puerto Rico resident employee within six (6) months of decree issuance. Technical operations, facility management, and support staff count toward requirements.
Physical Presence
The business must maintain data center facilities in Puerto Rico. Business records must be kept in Puerto Rico.
Compliance and Reporting
Annual compliance reports must document employment, revenue sources, client locations, facility operations, and capacity utilization. Records must demonstrate data center services to external clients.
How to Apply
The application process for Data Centers export incentives typically requires six (6) to eighteen (18) months depending on facility development requirements.
The process begins with data center planning and feasibility analysis. Operators should assess Puerto Rico's suitability for data center operations, evaluate sites, plan facility specifications, and model economics. Data center projects require substantial capital and technical planning. Consultation with infrastructure and tax advisors is recommended.
During planning, operators establish Puerto Rico legal entities and advance facility development. This includes site acquisition, facility design and construction, equipment procurement, connectivity arrangements, and power infrastructure. Evidence of data center expertise and financing strengthens applications.
The formal application is submitted to PRIDCO and includes detailed data center descriptions, facility specifications, client market analysis, financial projections, and employment plans. Technical documentation of data center capabilities should be included.
PRIDCO reviews the application over approximately sixty (60) to one hundred twenty (120) days. Staff evaluate data center viability, technical capabilities, and economic impact.
Upon approval, the decree is issued specifying terms and obligations. For development projects, construction milestones and operational requirements are specified.
After decree issuance, the operator must complete facility development, achieve operational status, and establish compliance reporting.
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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