In this issue: As a supplement to the tax incentives provided by Acts 20 and 22, some municipalities of Puerto Rico have added benefits to promote the development of businesses and enterprises in their regions. In the following article, we present a summary of the actions taken by the City of Guaynabo.
By means of Municipal Ordinance No. 44 of February 2017, the City of Guaynabo grants a 50% reduction to the current rate for the municipal patent to any organization, business, or individual that has been certified under Acts 20 and 22 and that is located within the geographical areas determined by the City. The special rate is geared to people that export eligible services as well as to any individual/resident/investor that generates any kind of business subject to paying municipal patent to the City of Guaynabo and whose operations are within the designated areas.
Municipal Patent Special Rate for Businesses that Own a Decree Under Act 20-2012
This special rate includes any natural or legal person or entity that is considered an “eligible exempt business” as stated in Act 20-2012, and whose main place of business is located within the designated geographical areas. The rate will apply only to the business volume generated by the eligible services and activities covered under Act 20.
Municipal Patent Special Rate for Individuals/Residents/Investors that Own a Compliance Certificate under Act 22-2012
This special rate includes any individual/resident/investor that owns a business and provides any service; that sells any goods; to any financial business or to any industry or business whose main place of business is located within the designated geographical areas.
However, this Municipal Ordinance states the following Limitations to the Benefits granted to businesses that have been running their operations in the City of Guaynabo at any moment during the three tax years prior to the date of approval of such Ordinance. This has been named the “Base Period”. Thus, the eligible business may enjoy the Municipal Patent special rate only with regards to the increase of business volume of any activity that is over the average business volume of the Base Period. This is called the “Base Period Business Volume”.
Term of the Patent Special Rate
The special rate will be in effect for a time period of ten (10) years. This will apply as follows:
Businesses or Individuals with Act 20 Benefits:
Any eligible business that owns a decree under Act 20 may enjoy the special tax rate for a time period of ten (10) consecutive years. The dates for determining such term are as follows:
- Any eligible business that owns a decree under Act 20 and moves its main place of business to the City of Guaynabo: The benefit will begin on the date when the exempt business starts the business operations covered by this decree at the City of Guaynabo and for the following semesters covered by this incentive.
- Any business that has been operating within the City of Guaynabo before obtaining the Act 20 benefits: The benefit will start on the first day of the semester following the beginning of the activities covered by Act 20.
- Eligible businesses that begin operations within the City of Guaynabo: The benefit will commence at the date it starts conducting the business activities covered under Act 20, but never after the first two (2) years.
Businesses or individuals with Act 22 Compliance Certificate
Any individual/resident/investor that owns the Compliance Certificate will enjoy the special rate for a time period of ten (10) years when the Certificate is in effect. This term shall not exceed the tax year that ends on December 31, 2025.
The specific date on which the benefit begins will be determined for each particular case.
Designated Geographical Areas by the City of Guaynabo
The following areas have been designated by the City of Guaynabo as eligible to receive the special rate:
Area 1: Amelia Industrial Park
Area 2: City View Plaza
Area 3: Metro Office Park
Compliance Requisites
In order to be eligible to receive these benefits, entities, organizations, individuals or businesses must comply with the following:
- Annual and in effect Compliance Certificate issued by the Secretary of Economic Development and Commerce.
- Individuals/residents/investors must certify at the Planning Office of the City that they acquired a residential or commercial property in the City and that they have opened a personal account at a financial institution located in Guaynabo.
- Establish its main place of operations and conduct its commercial activities within the areas designated by the City.
- Must have filed and paid its Business Volume Declaration at the City of Guaynabo.
- Must have paid all municipal and state taxes.
- Must have filed and paid all property and movable taxes attributable to the City.
The tax incentive or 50% Special Rate is considered a tax decree contract between the taxpayer and the City of Guaynabo. The tax benefit may be revoked for failure to comply; and will end during the semester when the non-compliance is detected. In such cases, the City will assess and charge as default the municipal patent and will also apply the regular rates plus interests and additions to the patent according to law.
