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Telecommunications (Exports)
Tax incentive for telecommunications services provided to clients outside Puerto Rico, offering a 4% corporate tax rate on export telecom services.
11 min
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Section Code:
2031.01(A)-1 (a)-14
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Purpose:
Exports — 2031.01(A)-1 (a)-12
Overview
The Telecommunications export incentive under Section 2031.01(A)-1(a)-14 of Act 60-2019, as amended, provides preferential tax treatment for telecommunications services provided to clients located outside Puerto Rico. This designation supports telecommunications service providers serving external markets.
Qualifying businesses pay a fixed four percent (4%) corporate income tax rate on income derived from telecommunications services provided to clients outside Puerto Rico. The program attracts telecom service providers, voice and data service companies, and telecommunications operators that can serve external clients from Puerto Rico infrastructure.
The key distinction of this designation compared to domestic telecom infrastructure incentives is its focus on providing telecommunications services to external clients rather than serving the Puerto Rico market. Export telecom services may include voice services, data services, connectivity services, or other telecommunications offerings to non-Puerto Rico customers.
Puerto Rico's telecommunications infrastructure and connectivity position support telecommunications service export. The incentive enhances competitiveness for telecom operations serving external markets from Puerto Rico.
Key Benefits
Corporate Income Tax Rate
Telecommunications service providers approved under this designation pay a fixed four percent (4%) tax rate on income from qualifying 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
Telecom operations receive exemptions from property taxes on telecommunications facilities, network equipment, switching equipment, and infrastructure used in service delivery.
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 telecommunications revenues.
Infrastructure Leverage
Telecom service providers benefit from Puerto Rico's connectivity and telecommunications infrastructure for serving external markets.
Requirements & Obligations
Business Structure and Registration
Applicants must establish a Puerto Rico legal entity to conduct telecommunications operations and hold the decree. The entity must register with Puerto Rico authorities and obtain necessary telecommunications licenses.
Export Revenue Threshold
At least eighty percent (80%) of gross income must derive from telecommunications services provided to clients outside Puerto Rico. Services to Puerto Rico clients do not qualify. Detailed client and service records are required.
Telecommunications Services Definition
Services must constitute qualifying telecommunications services including voice services, data transmission, connectivity services, or other telecommunications offerings. Services must be provided from Puerto Rico infrastructure to external clients.
Telecommunications Licensing
Telecommunications services may require appropriate licenses from telecommunications regulatory authorities depending on services offered. Operators must maintain regulatory compliance.
Service from Puerto Rico
Telecommunications services must be provided from Puerto Rico-based infrastructure and operations. Technical operations and service delivery must occur from Puerto Rico.
Employment Requirements
Telecommunications operations must hire at least one (1) full-time Puerto Rico resident employee within six (6) months of decree issuance. Technical operations, network management, and support staff count toward requirements.
Physical Presence
The business must maintain telecommunications facilities and operations in Puerto Rico. Business records must be kept in Puerto Rico.
Compliance and Reporting
Annual compliance reports must document employment, revenue sources, client locations, and service volumes. Records must demonstrate telecommunications services to external clients from Puerto Rico operations.
How to Apply
The application process for Telecommunications export incentives typically requires six (6) to twelve (12) months depending on infrastructure and licensing requirements.
The process begins with telecommunications service planning. Operators should define service offerings, assess target markets, plan infrastructure requirements, and evaluate licensing needs. Consultation with telecommunications regulatory and tax advisors is recommended.
During planning, operators establish Puerto Rico legal entities, address telecommunications licensing, and advance infrastructure development. Infrastructure requirements depend on services offered.
The formal application is submitted to PRIDCO and includes telecommunications service descriptions, infrastructure plans, client market analysis, financial projections, and employment plans. Documentation of telecommunications licensing should be included.
PRIDCO reviews the application over approximately sixty (60) to ninety (90) days. Staff may request additional information about services, licensing, or infrastructure plans.
Upon approval, the decree is issued specifying terms and obligations. After issuance, the operator must establish operations, obtain final licensing, and begin service delivery.
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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