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Incentive Regulation Code English AK GOVERNMENT OF PUERTO RICO DEPARTMENT OF ECONOMIC DEVELOPMENT AND COMMERCE SAN JUAN, PUERTO RICO INCENTIVE REGULATION MO-DEC-013 SEPTEMBER 2020 TABLE OF CONTENTS CONTENT PAGES PREAMBLE 5 SUBTITLE A. - GENERAL PROVISIONS 7 Ar6cle 1000.01-1. - Title 7 Ar6cle 1000.01-2. - Legal Basis 7 Ar6cle 1000.01-3. - Scope 7 Ar6cle 1000.01-4. - Purpose 7 Ar6cle 1000.01-5. - Terms Used 8 Ar6cle 1000.02-1. - Classifica6on 8 Ar6cle 1000.02-2. - Organiza6on 8 Ar6cle 1000.04(e)-1. - Most Favorable Terms and Condi6ons; Interrela6onship with other Laws 9 CHAPTER 1. - RESERVED 10 CHAPTER 2 - DEFINITIONS 10 SUBCHAPTER A. - GENERAL DEFINITIONS 10 SUBCHAPTER B. - DEFINITIONS APPLICABLE TO INDIVIDUALS 25 SUBCHAPTER C. - DEFINITIONS APPLICABLE TO EXPORTS OF GOODS AND SERVICES 27 SUBCHAPTER D. - DEFINITIONS APPLICABLE TO FINANCE, INVESTMENT AND INSURANCE 34 SUBCHAPTER E. - DEFINITIONS APPLICABLE TO VISITOR ECONOMY 35 SUBCHAPTER F. - DEFINITIONS APPLICABLE TO MANUFACTURING 54 SUBCHAPTER G. - DEFINITIONS APPLICABLE TO INFRASTRUCTURE AND GREEN OR HIGHLY EFFICIENT ENERGY 55 SUBCHAPTER H. - DEFINITIONS APPLICABLE TO AGRO-INDUSTRIES 56 SUBCHAPTER I. - DEFINITIONS APPLICABLE TO CREATIVE INDUSTRIES 59 SUBCHAPTER J. - DEFINITIONS APPLICABLE TO OTHER INDUSTRIES 63 SUBTITLE B. - ECONOMIC DEVELOPMENT INCENTIVES 65 CHAPTER 1. - INCENTIVES OF GENERAL APPLICATION 65 SUBCHAPTER A. - GENERAL RULE ` 65 SUBCHAPTER B. - SMALL AND MEDIUM-SIZED ENTERPRISES (SMES) 66 SUBCHAPTER C. - VIEQUES AND CULEBRA 67 SUBCHAPTER D. - OTHER INCENTIVES 68 CHAPTER 2. - INDIVIDUALS 71 SUBCHAPTER A. - ELIGIBILITY 71 SUBCHAPTER B. - RESERVED 74 SUBCHAPTER C. - REGISTRATION FOR THE CONCESSION OF EXEMPTION 74 SUBCHAPTER D. - SPECIAL PROVISIONS 74 CHAPTER 3. - EXPORT OF GOODS AND SERVICES 75 SUBCHAPTER A. - ELIGIBILITY 75 SUBCHAPTER B. - TAX BENEFITS 91 Incen6ve Regula6ons Page 2of 373 SUBCHAPTER C. - RESERVED 106 SUBCHAPTER D. - SPECIAL PROVISIONS 106 CHAPTER 4. - FINANCE, INVESTMENTS AND INSURANCE 112 SUBCHAPTER A. - ELIGIBILITY 112 SUBCHAPTER B. - TAX BENEFITS 112 SUBCHAPTER C. - REQUIREMENTS FOR THE GRANTING OF EXEMPTION 113 [RESERVED] 114 SUBCHAPTER D. - SPECIAL PROVISIONS 114 CHAPTER 5. - VISITOR ECONOMY 117 SUBCHAPTER A. - ELIGIBILITY 117 SUBCHAPTER B. - TAX BENEFITS 164 SUBCHAPTER C. - SPECIAL PROVISIONS 176 CHAPTER 6. - MANUFACTURING 177 SUBCHAPTER A. - ELIGIBILITY 177 SUBCHAPTER B. - TAX BENEFITS 180 CHAPTER 7. - INFRASTRUCTURE 201 SUBCHAPTER A. - RESERVED 201 SUBCHAPTER B. - TAX BENEFITS 201 SUBCHAPTER C. - REQUIREMENTS FOR THE GRANTING OF EXEMPTION 203 SUBCHAPTER D. - RESERVED 216 CHAPTER 7B. - GREEN OR HIGHLY EFFICIENT ENERGY 217 SUBCHAPTER A. - RESERVED 217 SUBCHAPTER B. - TAX BENEFITS 217 SUBCHAPTER C. - REQUIREMENTS FOR THE GRANTING OF EXEMPTION 227 CHAPTER 8. - AGRO-INDUSTRIES 229 SUBCHAPTER A. - RESERVED 229 SUBCHAPTER B. - TAX BENEFITS 229 SUBCHAPTER C. - REQUIREMENTS FOR THE GRANTING OF EXEMPTION 231 SUBCHAPTER D. - SPECIAL PROVISIONS (RESERVED) 234 CHAPTER 9. - CREATIVE INDUSTRIES 235 SUBCHAPTER A. - RESERVED 235 SUBCHAPTER B. - TAX BENEFITS 235 SUBCHAPTER C. - SPECIAL PROVISIONS 237 CHAPTER 10. - ENTREPRENEURSHIP 249 SUBCHAPTER A. - RESERVED 249 SUBCHAPTER B. - RESERVED 249 SUBCHAPTER C. - REQUIREMENTS FOR THE GRANTING OF EXEMPTION 249 CHAPTER 11. - OTHER INDUSTRIES 249 Incen6ve Regula6ons Page 3of 373 SUBCHAPTER A. - RESERVED 249 SUBCHAPTER B. - TAX BENEFITS 249 SUBCHAPTER C. - RESERVED 255 SUBCHAPTER D. - SPECIAL PROVISIONS 255 SUBTITLE C. - MONETARY INCENTIVES (''CASH GRANTS'') OR TAX CREDITS 257 CHAPTER 1. - VISITOR ECONOMY TAX CREDITS 267 CHAPTER 2. MANUFACTURING TAX CREDITS 276 CHAPTER 3. - RESEARCH AND DEVELOPMENT TAX CREDITS 278 CHAPTER 4. - RESERVED 288 CHAPTER 5. - CREATIVE INDUSTRIES TAX CREDITS 288 SUBTITLE D. - GRANTS AND OTHER PROGRAMS 294 CHAPTER 1. - WAGE SUBSIDY PROGRAM FOR AGRICULTURAL WORKERS 294 SUBTITLE E. - FUNDS FOR BENEFITS 296 CHAPTER 1. - WAGE SUBSIDY PROGRAM FOR AGRICULTURAL WORKERS 296 SUBTITLE F. - ADMINISTRATIVE PROVISIONS 322 CHAPTER 1. - GENERAL PROVISIONS 322 CHAPTER 2. - PROVISIONS APPLICABLE TO SUBTITLE B 326 CHAPTER 3. - PROVISIONS APPLICABLE TO SUBTITLE C 364 CHAPTER 4. - PROVISIONS APPLICABLE TO SUBTITLE D 369 CHAPTER 5. - PROVISIONS APPLICABLE TO SUBTITLE E 371 SUBTITLE G. - AREAS OF OPPORTUNITY IN PUERTO RICO [RESERVED] 371 SUBTITLE H. - FINAL PROVISIONS 371 Ar6cle 6070.68-1. - Applica6on of other laws and regula6ons. 371 Ar6cle 6070.69-1. - Reserved. 372 Ar6cle 6070.70-1. - Supremacy. 372 Ar6cle 6070.71-1. - Separability. 372 Ar6cle 6070.72-1. - Effec6ve 372 EFFECTIVE DATE 373 Incen6ve Regula6ons Page 4of 373 GOVERNMENT OF PUERTO RICO DEPARTMENT OF ECONOMIC DEVELOPMENT AND COMMERCE INCENTIVE REGULATION Regulation No. MO-DEC-013, of the Department of Economic Development and Commerce of Puerto Rico, to establish and adopt the "Incentive Regulations", as the base regulation to implement the provisions of Act No. 60-2019, as amended, known as the "Puerto Rico Incentive Code", issued under Section 6060.02, which empowers the person who holds the position of Secretary of the Department of Economic Development and Commerce of Puerto Rico, in consultation with the agencies or instrumentalities required by the regulated matter, to adopt the necessary regulations to make effective all the provisions and purposes of Act No. 60-2019, as amended, known as the "Puerto Rico Incentive Code. PREAMBLE On July 1, 2019, the Governor of Puerto Rico, the Honorable Ricardo Rosselló Nevares, signed Act No. 60 known as the "Puerto Rico Incentives Code", which consolidates the dozens of decrees, incentives, subsidies, reimbursements, or tax or financial benefits existing at the date of its approval; promotes the environment, opportunities and adequate tools to foster the sustainable economic development of Puerto Rico; establishes the legal and administrative framework that will govern the application, evaluation, granting or denial of incentives by the Government of Puerto Rico; promotes the effective and continuous measurement of the costs and benefits of the incentives granted to maximize the impact of the investment of public funds; provides stability, certainty and credibility to the Government of Puerto Rico, in all matters related to private investment; improves the economic competitiveness of Puerto Rico through the repeal or amendment of a number of previous incentive laws, as cited in the Puerto Rico Incentive Code, and for other related purposes. All these previous incentive laws have been interpreted over many years by a series of regulations, which were approved by different agencies and repealed from time to time, in many cases making it difficult to locate the interpretative provisions on the various incentive provisions. Incen6ve Regula6ons Page 5of 373 Act No. 60-2019, as amended, known as the "Puerto Rico Incentive Code", has, among its main purposes, to simplify the application process and administration of the incentives offered by Puerto Rico. To this end, it is desirable to group in a single regulation all the interpretative provisions of Act No. 60-2019, as amended, known as the "Puerto Rico Incentive Code. The purpose of this regulation is to establish a base regulation to which the various interpretative articles of the provisions of Law No. 60-2019, as amended, known as the "Puerto Rico Incentive Code", will be added. In this manner, all the interpretative provisions of Law 60-2019, as amended, known as the "Puerto Rico Incentive Code", will be adopted in a single regulation. Incen6ve Regula6ons Page 6of 373 SUBTITLE A. - GENERAL PROVISIONS Article 1000.01-1. - Title. These Regulations shall be known and may be cited as the "Regulations on Incentives", MO-DEC-013, which interprets in its articles, the subtitles, chapters, subchapters and sections of Act No. 60-2019, as amended, known as the "Puerto Rico Incentive Code". Article 1000.01-2. - Legal basis. These Regulations are adopted pursuant to the provisions of Section 6060.02 of Act No. 60-2019, as amended, known as the "Puerto Rico Incentive Code", which authorizes the person who holds the position of Secretary of the Department of Economic Development and Commerce of Puerto Rico, in consultation with the agencies or instrumentalities required by the regulated subject matter, to adopt the necessary regulations to make effective all the provisions and purposes of Act No. 60-2019, as amended, known as the "Puerto Rico Incentive Code". Article 1000.01-3. - Scope. The provisions of this Regulation shall apply to any person, natural or legal, who has established, or intends to establish in Puerto Rico, an Eligible Business, and who applies to the person who holds the position of Secretary of the Department of Economic Development and Commerce of Puerto Rico, for a tax exemption or tax benefit decree, under the subtitles or chapters of Act No. 60-2019, as amended, known as the "Puerto Rico Incentive Code". Article 1000.01-4. - Purpose. The purpose of this Regulation is to establish the rules and regulations that will govern the process of applications, filing of compliance reports, collection of fees or transaction or service charges for the processing of applications for tax exemption decrees or tax benefits, pursuant to the subtitles or chapters of Act No. 60-2019, as amended, known as the "Puerto Rico Incentive Code," and any other procedures related to applications for tax exemption decrees or tax benefits granted. Incen6ve Regula6ons Page 7of 373 Article 1000.01-5. - Terms Used. The words and phrases used in these Regulations shall be interpreted according to the context in which
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