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Investment Banking & Fund Managers (Exports)
Tax incentive for investment banking and fund management services provided to clients outside Puerto Rico, offering a 4% corporate tax rate.
11 min
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Section Code:
2031.01(A)-1 (a)-17
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Purpose:
Exports — 2031.01(A)-1 (a)-17
Overview
The Investment Banking and Fund Managers export incentive under Section 2031.01(A)-1(a)-17 of Act 60-2019, as amended, provides preferential tax treatment for investment banking and fund management firms that serve clients located outside Puerto Rico. This designation supports financial services professionals serving external markets.
Qualifying businesses pay a fixed four percent (4%) corporate income tax rate on income derived from investment banking and fund management services provided to clients outside Puerto Rico. The program attracts investment banking advisors, asset managers, fund managers, and financial advisory firms that can operate from Puerto Rico while serving external clients.
The key distinction of this designation is its focus on investment banking and investment management as specialized financial services. These services involve advising on transactions, managing investment portfolios, operating investment funds, or providing sophisticated financial advisory services.
Puerto Rico's financial services capabilities and regulatory framework support certain investment banking and fund management operations. The incentive enhances competitiveness for Puerto Rico-based financial services firms serving external clients.
Key Benefits
Corporate Income Tax Rate
Investment banking and fund management 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 facilities, technology infrastructure, and business assets.
Municipal Tax Exemptions
Decree holders are exempt from municipal license taxes on qualifying financial services revenues.
Financial Services Infrastructure
Firms benefit from Puerto Rico's financial services infrastructure and proximity to U.S. financial markets.
Requirements & Obligations
Business Structure and Registration
Applicants must establish a Puerto Rico legal entity to conduct investment banking or fund management services and hold the decree. The entity must register with Puerto Rico authorities and obtain necessary financial services licenses.
Export Revenue Threshold
At least eighty percent (80%) of gross income must derive from investment banking or fund management services provided to clients outside Puerto Rico. Services to Puerto Rico clients do not qualify. Detailed client and service records are required.
Financial Services Definition
Services must constitute qualifying investment banking or fund management including merger and acquisition advisory, capital markets advisory, fund management, portfolio management, or related financial advisory services. The work must be substantially performed from Puerto Rico.
Financial Services Licensing
Investment banking and fund management activities may require appropriate financial services licenses and regulatory compliance. Broker-dealer, investment advisor, or other registrations may be required depending on specific services.
Service Delivery from Puerto Rico
Investment banking advisory, portfolio management, and fund operations must be substantially conducted from Puerto Rico by Puerto Rico-based professionals. Client meetings may occur elsewhere, but core 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. Investment professionals, analysts, and support staff count toward requirements.
Physical Presence
The firm must maintain offices in Puerto Rico where investment banking or fund management 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 financial services licensing status. Records must demonstrate services performed from Puerto Rico for non-Puerto Rico clients.
How to Apply
The application process for Investment Banking and Fund Managers export incentives typically requires four (4) to eight (8) months from planning to decree issuance, depending on financial services licensing requirements.
The process begins with assessing whether the financial services model qualifies. Firms should confirm that services constitute investment banking or fund management, that at least eighty percent (80%) of revenue comes from non-Puerto Rico clients, and that licensing can be obtained. Consultation with financial regulatory and tax advisors is essential.
During planning, firms establish Puerto Rico legal entities, address financial services licensing, and plan operations. Licensing requirements depend on specific services offered.
The formal application is submitted to PRIDCO and includes financial services descriptions, service model, client base analysis, licensing plans, financial projections, and employment plans. Documentation of financial services credentials strengthens applications.
PRIDCO reviews the application over approximately sixty (60) to ninety (90) days. Staff may request additional information about services, licensing, or operational plans.
Upon approval, the decree is issued specifying terms and obligations. After issuance, the firm must establish operations, obtain financial services licensing, and begin serving clients.
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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