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Professional Services (Exports)
Tax incentive for professional service firms providing 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)-4
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Purpose:
Exports — 2031.01(A)-1 (a)-7
Overview
The Professional Services export incentive under Section 2031.01(A)-1(a)-4 of Act 60-2019, as amended, provides preferential tax treatment for professional service firms that serve clients located outside Puerto Rico. This designation supports the establishment of professional practices that can leverage Puerto Rico's professional talent to serve export markets.
Qualifying businesses pay a fixed four percent (4%) corporate income tax rate on income derived from professional services provided to clients outside Puerto Rico. The program attracts law firms, accounting firms, financial advisory practices, and other professional service businesses that can operate from Puerto Rico while serving geographically dispersed clients.
The key distinction of this designation is its broad coverage of professional services as a category. While other export designations address specific services like consulting, software development, or marketing, professional services covers the range of licensed professional practices and advisory services provided by credentialed professionals.
Puerto Rico's bilingual professional workforce and business infrastructure support professional service practices. The incentive enhances competitiveness for Puerto Rico-based professional firms serving mainland U.S. and international clients.
Key Benefits
Corporate Income Tax Rate
Professional service firms approved under this designation pay a fixed four percent (4%) tax rate on income from qualifying professional 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 professional firm generating two million dollars ($2,000,000) annually pays approximately eighty thousand dollars ($80,000) rather than seven hundred fifty thousand dollars ($750,000).
Dividend Tax Treatment
Dividends distributed from decree income to shareholders outside Puerto Rico face zero percent (0%) withholding. Professional firm owners and partners can extract profits efficiently after corporate tax.
Property Tax Exemptions
Professional firms receive exemptions from property taxes on office equipment, technology systems, and other business assets used in professional practice.
Municipal Tax Exemptions
Decree holders are exempt from municipal license taxes on qualifying professional services revenue.
Professional Practice Structure
The incentive allows professionals to structure practices serving export clients while maintaining professional standards and licensing requirements.
Requirements & Obligations
Business Structure and Registration
Applicants must establish a Puerto Rico legal entity to conduct professional services 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 professional services provided to clients located outside Puerto Rico. Services to Puerto Rico clients do not qualify. Detailed client records and revenue attribution are required.
Professional Services Definition
Services must constitute genuine professional services including legal services, accounting services, financial advisory, tax advisory, actuarial services, and other licensed professional services. The work must be substantially performed from Puerto Rico.
Professional Licensing
Where applicable, professional services must be provided by appropriately licensed professionals. Legal services require attorney licenses, accounting services require CPA licenses, and other professions require relevant credentials. Professional licensing in Puerto Rico or client jurisdictions may be required depending on services and regulatory requirements.
Service Delivery from Puerto Rico
Professional work must be substantially performed in Puerto Rico by Puerto Rico-based professionals. Client meetings may occur at client locations, but core professional services must be delivered from Puerto Rico.
Employment Requirements
Professional firms must hire at least one (1) full-time Puerto Rico resident employee within six (6) months of decree issuance. Licensed professionals and support staff count toward requirements.
Physical Presence
The firm must maintain professional offices in Puerto Rico where professional services are performed. Business records must be kept in Puerto Rico.
Compliance and Reporting
Annual compliance reports must document employment, revenue sources, client locations, and professional licensing status. Records must demonstrate that qualifying services are performed from Puerto Rico for non-Puerto Rico clients.
How to Apply
The application process for the Professional Services export incentive typically requires four (4) to six (6) months from planning to decree issuance, plus time for any professional licensing procedures.
The process begins with assessing whether the professional practice qualifies. Firms should confirm that services constitute professional services, that at least eighty percent (80%) of revenue comes from non-Puerto Rico clients, and that professional licensing can be maintained or obtained. Consultation with Puerto Rico advisors clarifies eligibility.
During planning, firms establish a Puerto Rico legal entity and address professional licensing. Some professions require specific procedures to practice in Puerto Rico. Firms should also secure appropriate professional office space and begin establishing presence.
The formal application is submitted to PRIDCO and includes descriptions of professional services, credentials of key professionals, client base analysis, financial projections, and employment plans. Documentation of professional licenses and qualifications should be included.
PRIDCO reviews the application over approximately sixty (60) to ninety (90) days. Staff may request additional information about professional qualifications, client relationships, or licensing. Applications demonstrating genuine professional capabilities and Puerto Rico commitment receive favorable consideration.
Upon approval, the decree is issued specifying terms and obligations. After issuance, the firm must meet operational milestones and maintain professional licensing throughout the decree term.
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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