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A New Platform for Financial Innovation
When the Incentives Code (Act 60-2019) replaced Puerto Rico’s patchwork of tax statutes, one of its quiet revolutions occurred in Chapter 4 – Export Services. By merging legacy programs such as Act 20 (Export Services) and Act 185 (Private Equity Funds) into a single architecture, the Island positioned itself as a jurisdiction for cross-border finance and digital-asset infrastructure.
The concept is straightforward: companies that serve clients outside Puerto Rico may qualify for a 4 percent fixed income-tax rate and companion exemptions once they secure a decree from the Department of Economic Development and Commerce (DDEC). For financial institutions, advisers, and fintech platforms, this redefines how operations can be structured within a U.S. jurisdiction yet remain globally oriented.
The Policy Objective
Chapter 4 aims to attract high-value intellectual and financial capital rather than passive investment income. By focusing on exported services, the Code turns Puerto Rico into a base for financial expertise, compliance operations, and technology development. The government’s message is clear: manage risk, data, and capital from here—serve the world from San Juan.
What “Exporting Finance” Means
The DDEC interprets eligible export-service income as revenue from services rendered to non-resident clients. Section 2040.01 of Act 60 specifically lists:
- Investment-banking, brokerage, and asset-management services for offshore clients;
- Fund-administration, risk-management, and actuarial work;
- Insurance and reinsurance support functions;
- Back-office, compliance, and data-processing centers for foreign institutions; and
- Software, blockchain, and payment-technology development serving users outside Puerto Rico.
Together these provisions capture investment managers, insurers, reg-tech providers, and fintech developers under a unified incentive framework.
The Fiscal Architecture
Instead of a maze of credits, Act 60 provides a single, predictable structure:
| Incentive | Benefit | Duration |
|---|---|---|
| Income tax | 4% fixed rate on net export income | 15 years + renewal option |
| Dividend distributions | 100% exemption from Puerto Rico income tax | During decree |
| Property & municipal taxes | 75% exemption on real and personal property and municipal license taxes | During decree |
| SUT / excise | Exemption on equipment and software used in the exempt operation | As authorized in decree |
Decrees are issued under Regulation MO-DEC-012, which standardizes application, renewal, and compliance across sectors. Each decree acts as a 15-year contract fixing the rate and confirming annual-reporting obligations.
Where Fintech Fits
Act 60’s language explicitly includes software development, blockchain services, and electronic data-processing centers. This makes Puerto Rico one of the few U.S. jurisdictions that legally recognizes fintech as an export service.
Typical qualifying models include:
- Payment-gateway or digital-wallet platforms transacting abroad;
- Blockchain infrastructure and custody providers for digital assets;
- Reg-tech and compliance-automation vendors to foreign banks; and
- Cyber-risk and anti-fraud monitoring services for international institutions.
Firms must still comply with licensing requirements administered by the Office of the Commissioner of Financial Institutions (OCIF), which regulates money-services and financial-technology companies separately from tax incentives.
Integration With Insurance and Asset Management
The same chapter covers actuarial and risk-management services for insurers outside Puerto Rico and fund-administration services for offshore investment vehicles. These provisions allow multinational groups to centralize back-office, accounting, investor-relations, and compliance operations on the Island while benefiting from the 4 percent rate.
For asset managers and private-equity sponsors, operating from Puerto Rico provides access to a bilingual professional base and the protections of U.S. jurisdiction, while achieving a globally competitive effective rate.
Strategic Advantages
- Regulatory clarity: Coordination between DDEC and OCIF ensures parallel compliance.
- U.S. legal certainty: Federal IP and contractual protections apply.
- Workforce & cost: Lower overhead and bilingual talent for finance and technology.
- Predictability: 15-year decree contracts offering long-term stability.
- Geographic reach: Convenient time zone between New York and London.
Implementation Considerations
Before filing a decree application, financial and fintech firms should:
- Confirm client geography – income from Puerto Rico clients disqualifies.
- Segregate operations – establish dedicated export-service subsidiaries.
- Align licensing – verify OCIF registration or exemption.
- Address transfer-pricing – apply U.S. arm’s-length standards for related-party services.
- Plan for compliance – decrees require CPA-audited statements and annual reports to DDEC.
MZLS Perspective
For investors and institutions, Chapter 4 offers more than a tax benefit—it is a policy framework combining financial regulation, technology innovation, and international commerce under one U.S. jurisdiction. Properly structured, it can support everything from traditional asset-management desks to next-generation fintech ecosystems.
