Puerto Rico’s Tax Incentive Architecture:

A Capital Allocator’s Guide to the Most Overlooked Opportunity in U.S. Jurisdictions

"Agriculture accounts for over 7,430 eligible businesses, the largest single category. Incentives include personal income tax exemptions for qualifying agricultural entrepreneurs and access to federal programs and grants."

By Gustavo Diaz Skoff

A Conversation Worth Having

SAN JUAN, Puerto Rico — Most conversations about Puerto Rico’s tax advantages stop at the Resident Individual Investor decree. That program, formerly Act 22, was recently extended through 2055 under Act 38-2026, with a 4 percent rate on capital gains, interest and dividends for post-2026 applicants.

For the GPs, family offices and institutional allocators at Uncorrelated Alts, the real thesis is elsewhere.

Approximately 45 percent of the island’s incentive-eligible businesses have never filed for a tax decree, according to internal research conducted by IncentivesPRO, an AI-powered platform that helps businesses and investors identify, apply for and maintain compliance with Puerto Rico's federal, state, municipal and zone-specific tax incentive programs.

The firm’s data identifies over 49,356 businesses in Puerto Rico. More than 22,000 are estimated to be eligible based on NAICS classification and business activity for programs under the Incentives Code, known as Act 60, or other municipal and federal programs. Nearly half operate without any decree.

Act 60, enacted in 2019, consolidated decades of prior legislation — including the former Acts 20, 22, 73 and 74 — into a single framework designed to promote economic development through investment, innovation and job creation. It covers manufacturing, ‍‍export services, tourism, agriculture, creative industries, financial services and individual investors.

Under Section 933 of the Internal Revenue Code, qualifying Puerto Rico-source income is exempt from federal tax. Corporate rates under Act 60 start at 4 percent. Layered incentives span federal, territorial, municipal, and zone-specific programs. The inefficiency is the opportunity.

I.   Market Opportunities by Sector

Research & Development

Puerto Rico offers a 50 percent transferable tax credit on eligible R&D investment. It is volume-based and dollar-for-dollar — structurally superior to the incremental framework under IRC Section 41, according to a comparative analysis published by Exactera (“Why Puerto Rico’s R&D Tax Credit is a Game-Changer?”).

A company spending $1 million on qualified R&D in Puerto Rico generates $500,000 in credits. The same spend under the federal structure, after calculating incremental excess against a historical base, might yield $28,000 to $65,000. Credits require an active tax exemption decree, a DDEC certification supported by an Agreed-Upon Procedures report from a licensed Puerto Rico CPA, and are subject to reinvestment requirements.

Credits may be sold to Hacienda, Puerto Rico's Treasury Department, at a refund equal to 90 percent of face value for credits granted after June 30, 2021, according to Grant Thornton Puerto Rico ('The Ins and Outs of Puerto Rico Tax Credits as a Tax Savings Tool,' June 2023). Hacienda may adjust this percentage based on market conditions.

Credits may also be used internally to offset the company's own tax liability, sold to third parties, or financed by capital partners.

Eligible activities include new product and process development, acquisition and relocation of intellectual property to Puerto Rico (subject to transfer pricing and economic substance requirements), and development of R&D facilities committed to research for 15 years. Clinical trials, infrastructure, renewable energy and operational expenditures also qualify. IP-related claims require additional documentation. In the ‍‍current AI cycle, machine learning R&D, computational experimentation and data-intensive model development all apply.

The underlying infrastructure supports the thesis. Puerto Rico generates over $53 billion in life sciences exports annually to more than 120 countries, according to Pharma Boardroom’s “Puerto Rico Pharma Report 2025.” Eleven of the world’s top pharmaceutical companies and more than 30 medical device manufacturers operate locally. Six of the top 10 biologics are produced on the island.

Puerto Rico R&D Tax Credits as Non-Dilutive Capital for Manufacturing Expansion

In September 2025, Amgen announced a $650 million expansion of its biologics manufacturing facility in Juncos, according to a company press release dated Sept. 26, 2025. In October 2025, Eli Lilly announced a planned investment of more than $1.2 billion to expand and modernize its Lilly del Caribe manufacturing site in Carolina, according to a company press release dated Oct. 29, 2025.

Selling credits converts R&D spend into non-dilutive capital, extending runway without equity dilution. Firms like Green Isle Capital actively finance tax credits on the island, converting future tax value into deployable capital.

The credit can offset up to 100 percent of a business’s tax liability, taken in installments: up to 50 percent claimable in the certification year, with the remainder in subsequent years. Cash received from a credit sale is excluded from taxable income under Act 60, according to Grant Thornton Puerto Rico (“Tax Benefits for Investing in Local R&D and Innovation,” October 2024).

Manufacturing & Reshoring

Gov. Jenniffer González-Colón signed Executive Order 2025-012 in March 2025, formalizing a Reshoring Task Force. The group comprises DDEC, PRIDCO, Invest Puerto Rico and the Puerto Rico Science, Technology & Research Trust.

DDEC Secretary Sebastián Negrón-Reichard said the agency has identified 51 companies for active pursuit. Last fiscal year: 626 new businesses, 4,900 job commitments and $733 million in investment, according to News Is My Business (“DDEC outlines results of 1st 100 days,” April 2025).

Products manufactured in Puerto Rico carry the “Made in USA” designation. There are no tariffs and no customs barriers.

Manufacturing constituted 44.2 percent of the island’s GDP in fiscal year 2024, according to the DDEC’s “Puerto Rico’s Manufacturing Profile 2025.”

Chapter 6 of Act 60 extends well beyond pharmaceuticals. Eligible activities include: exporting unfinished goods, manufacturing services at scale, industrial development machinery, animal raising for research, recycling, hydroponics, aquaculture, milk pasteurization, agricultural biotechnology, industrial-scale agriculture, packaging, value-adding at island ports including Roosevelt Roads, software development, telecom and data storage centers, IP licensing, repair and maintenance of sea and air transport vehicles, and videogame development.

Over 2,100 manufacturing businesses selected by NAICS code and performing activities that may qualify under Chapter 6 of Act 60 operate without a tax decree. These businesses can access: 4 percent corporate tax, 75 percent property tax exemption, full exemption on raw materials and machinery/equipment, and 30 percent or greater cash grants from PRIDCO for job creation, machinery/equipment purchases and infrastructure. WIOA workforce training funds and the 50 percent R&D credit stack on top.

The opportunity lies in acquiring these businesses and applying for a new decree post-acquisition. The cash flow improvement comes from future operations under the decree — not from prior unclaimed periods. Leveraging SBA manufacturing loans for capitalization and unlocking incentives, cash grants and credits creates immediate value from the point of decree issuance forward.

Tourism

‍‍In three decades, only 3,000 to 4,000 new hotel rooms were added to the island’s inventory. Between 2014 and 2020, more than 30,000 unique short-term rental listings were documented on Airbnb and Vrbo, with 83 percent classified as entire homes, according to “The Impact of Short-Term Rentals in Puerto Rico: 2014-2020” published by the Center for a New Economy.

Revenue has concentrated among professional operators: 39 percent of Airbnb hosts managed 69 percent of total listings and captured 79 percent of revenue, the report found.

Senate Bill 238 is advancing municipal registries and uniform STR licensing, according to News Is My Business (“Puerto Rico revisits short-term rental regulation,” April 2025).

IncentivesPRO has identified over 2,300 of those listings that meet minimum unit or bed requirements for transition into endorsed tourism businesses under Act 60.

The transition requires job creation, infrastructure development, front desk staffing and compliance with Regulation 8856, the Reglamento de Hospederías enacted by the Puerto Rico Tourism Company in 2016.

Tourism projects qualify for a 30 to 40 percent tax credit covering property purchase, remodeling or construction, and the first 12 months of operating expenses, subject to minimum investment thresholds, job creation commitments and endorsement by the Puerto Rico Tourism Company. Additional income and property tax exemptions apply.

As STR operations face growing regulatory headwinds and municipalities formalize licensing requirements, the window to acquire, transition and endorse properties at attractive basis is narrowing.

Agriculture & Export Services

Agriculture accounts for over 7,430 eligible businesses, the largest single category. Incentives include personal income tax exemptions for qualifying agricultural entrepreneurs and access to federal programs and grants.

Depending on size and scope, agricultural projects may also qualify for manufacturing or tourism incentives, creating additional layering opportunities.

Export services: 5,755 eligible businesses spanning consulting, software, R&D, creative industries, financial services and shared services centers. The framework delivers a 4 percent corporate tax on services performed in Puerto Rico for off-island clients, 75 percent property tax exemption (100 percent for the first five years for businesses under

$3 million in volume) and full exemption on dividends. Decree terms run 15 years.

Additional sectors include housing (1,530 eligible businesses) and the film industry (1,040).

II.   The Incentive Architecture: The Value is in Layering

A manufacturing company in an Opportunity Zone can simultaneously access: 4 percent corporate tax under Act 60, 50 percent R&D credit, 30 percent-plus PRIDCO cash grants, federal OZ tax deferral and gain exclusion, WIOA training funds, municipal license tax exemptions, and 75 percent property tax reductions.

Approximately 95 percent of Puerto Rico is designated as a Federal Opportunity Zone — 863 tracts out of roughly 8,700 nationally, according to BLS Strategies and PwC Tax Summaries. Local OZ provisions add an 18.5 percent rate on OZ fund income, a 100 percent exemption on interest and dividends, and up to 25 percent investment tax credits.

For fund managers structuring vehicles around Puerto Rico assets, the OZ overlay provides both a capital-raising narrative and a structural tax advantage that layers on top of Act 60 benefits.

The Individual Investor program, extended through 2055 under Act 38-2026, preserves 0 percent on qualifying passive income for existing decree holders. Post-2026 applicants face a 4 percent rate, a six-year prior non-residency requirement and a property purchase within two years recorded in the Puerto Rico Property Registry.

The IRS has increased audit activity specifically on Individual Investor decree holders. The U.S. Government Accountability Office reported that 381 individuals who claimed the incentive in 2021 had relocated from California alone, according to GAO-26-107225 (“Puerto Rico: IRS Should Improve Oversight of Taxpayers Claiming Exemption from Federal Taxes,” December 2025). Compliance documentation — travel logs, utility records, 183-day presence verification — is nonnegotiable.

For local founders and long-term residents without an Individual Investor decree, capital gains exemptions can be structured through a Puerto Rico Private Equity Fund when properly structured in compliance with applicable law. This gives homegrown entrepreneurs an edge when building, exiting and capturing generational wealth. Professional tax counsel is essential.

The barrier is complexity. Overlapping programs, agency-specific compliance and historically expensive professional services leave over $1 billion in incentives uncaptured annually, according to IncentivesPRO estimates.

III.   IncentivesPRO: The Operating System That Manages Tax Credit Financing & the Full Incentive Lifecycle

IncentivesPRO is the first and only AI-powered tax incentive platform — the operating system for the full incentive lifecycle from discovery through compliance and credit monetization.

Unified Incentive Discovery & Management

The platform consolidates federal, state, municipal and special-zone incentives into a single interface. It is built on a proprietary Incentive Knowledge Graph with more than 28,000 tax rules.

It maps every program a business qualifies for and every program it’s missing. Real-time qualification tracking, compliance monitoring, renewal management and audit-ready ‍‍evidence generation are automated — over 85 percent of application and compliance tasks.

AI Transaction Classification

The engine monitors and classifies financial transactions against Act 60 and other applicable codes in real time. It tracks every benefit, tax exemption, rebate, cash grant and tax credit — whether Tourism, R&D, Film, Machinery & Equipment, WIOA or other programs — as transactions occur, not retroactively at tax time.

Automated classification against each program’s criteria, projected credit and grant value modeling, compliance risk flagging and incentive-adjusted return forecasting through scenario analysis.

Tax Credit Financing

IncentivesPRO provides access to capital partners with preferential terms. Clients do not have to wait until the last moment to sell at the market. They do not have to forgo 50 percent of the tax credits they’ve earned. They do not have to incur 20 percent interest on capital used to finance credits. And they do not have to sell all their credits in bulk.

All credits are tracked, monitored and communicated through the platform to the client and pertinent parties.

The Thesis

Puerto Rico: 4 percent corporate tax. Fifty cents recovered per R&D dollar through transferable credits. Tariff-free manufacturing with 30 percent-plus cash grants. Ninety-five percent Opportunity Zone coverage. Tourism credits at 30 to 40 percent on property, construction and first-year operations.

An estimated 45 percent of eligible businesses operate without a decree. Acquiring or developing those businesses — and securing decrees that generate job creation, economic development and community impact — unlocks immediate cash flow improvement and reduces effective tax rates.

IncentivesPRO is the infrastructure that makes this executable — without a $20,000-plus upfront price tag and without forgoing 40 percent or more of all your tax credits. IncentivesPRO offers a tiered subscription based on the complexity and number of incentives, with AI-driven precision.

The question for this audience is no longer whether Puerto Rico’s incentives are real. It ‍is whether you have the operating system to capture them. Schedule a call with IncentivesPRO at www.incentives-pro.com.

Gustavo Diaz Skoff is the president of IncentivesPRO, the first AI-powered tax incentive platform, headquartered at the Puerto Rico Science, Technology & Research Trust in San Juan. Contact: support@incentives-pro.com.‍ ‍

Gustavo Diaz Skoff
Co-Founder & Chief Executive Officer
IncentivesPRO

We exist to make capital certainty the default, not the exception.

Every year, billions of dollars in tax incentives go unclaimed—not because companies don't qualify, but because the system is broken. Complex regulations, expensive consultants, and fragmented processes lock out the very businesses that need support most.

We're building the infrastructure that makes tax incentives accessible, automated, and trustworthy. From Puerto Rico's reimbursement programs to federal and municipal opportunities, we're creating a future where every founder has the tools to maximize their capital efficiency—without the Big 4 price tag.