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Trading Companies
Tax incentive for trading companies engaged in international trade activities through Puerto Rico, offering preferential treatment on trading income.
11 min
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Section Code:
2031.01(A)-1 (b)
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Purpose:
Exports — 2031.01(A)-1 (a)-16
Overview
The Trading Companies designation under Section 2031.01(A)-1(b) of Act 60-2019, as amended, provides preferential tax treatment for trading companies that engage in international trade activities through Puerto Rico. This designation supports Puerto Rico's role as a trading and distribution hub.
Qualifying trading companies may receive preferential corporate income tax treatment on income from international trading activities. The program attracts import-export companies, international trading firms, and businesses that facilitate trade between markets using Puerto Rico as a base.
The key distinction of this designation is its focus on trading activities involving goods moving through international commerce rather than services. Trading companies buy and sell goods, facilitate international transactions, or serve as intermediaries in global trade.
Puerto Rico's position, port infrastructure, and access to shipping create opportunities for trading operations. The incentive supports businesses that can use Puerto Rico as a strategic location for international trade activities.
Key Benefits
Preferential Corporate Income Tax Rate
Trading companies may receive a preferential corporate income tax rate on income from international trading activities. The specific rate depends on trading structure and decree terms, with rates significantly below standard Puerto Rico rates.
Property Tax Exemptions
Trading companies may receive exemptions from property taxes on warehouse facilities, inventory, equipment, and infrastructure used in trading operations.
Municipal Tax Exemptions
Trading operations may receive exemptions from municipal license taxes on trading revenues.
Trade Facilitation
Puerto Rico's position and infrastructure support international trade operations including port access, logistics capabilities, and trade connections.
Strategic Location
Trading companies benefit from Puerto Rico's strategic position for trade between U.S., Caribbean, and Latin American markets.
Requirements & Obligations
Business Structure and Registration
Trading companies must establish Puerto Rico legal entities, register with Puerto Rico authorities, and obtain necessary business licenses and import-export registrations.
International Trading Activities
Businesses must conduct genuine international trading activities involving buying, selling, or facilitating trade in goods across international borders. Activities must involve Puerto Rico in the trading chain.
Puerto Rico Operations
Trading companies must maintain operational presence in Puerto Rico including offices, potentially warehousing or distribution facilities, and management of trading activities from Puerto Rico.
Trade Documentation
Trading companies must maintain detailed documentation of trading transactions, goods movements, international partners, and Puerto Rico's role in trading activities.
Employment Requirements
Trading companies must employ Puerto Rico residents in trading operations, logistics coordination, and business management.
Compliance and Reporting
Annual compliance reports must document trading activities, transaction volumes, employment, and revenues. Records must demonstrate genuine international trading operations through Puerto Rico.
How to Apply
The application process for Trading Companies incentives typically requires four (4) to eight (8) months depending on trading structure complexity.
The process begins with trading business planning. Companies should define trading strategies, identify traded goods and markets, plan Puerto Rico's role in trading operations, and assess logistics requirements. Consultation with international trade and tax advisors helps structure operations.
During planning, companies establish Puerto Rico legal entities, secure facilities, establish trading relationships, and plan logistics. Evidence of trading capability and market knowledge strengthens applications.
The formal application is submitted to PRIDCO and includes trading company descriptions, traded goods and markets, Puerto Rico operations plans, financial projections, and employment plans.
PRIDCO reviews the application over approximately sixty (60) to ninety (90) days. Staff evaluate trading viability and Puerto Rico's substantive role in operations.
Upon approval, the decree is issued specifying terms and obligations. After issuance, the company must establish trading operations and implement 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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