caribbeanbusinesspr.com THURSDAY, NOVEMBER 4, 2010 WEEKLY $2.00 ©2010 CASIANO COMMUNICATIONS INC. OOffshoreffshore firmsfirms ssubjectubject toto permanentpermanent ttaxationaxation underunder newnew ‘‘SourceSource Rule’Rule’

A multinational fi ght expected over ’s precedent-setting new tax

By John Marino Luis Fortuño pages 20-27

TOP STORY INSIDE SPECIAL FEATURES Agriculture program New law eases commercialization of UPR patents page 60 saves dollars and jobs in island Camarero Racetrack to be powered by chicken industry $8.4 million renewableenergy plant page 8 page 2 Puerto Rico ranks among Top 10 island destinations in the world page 30

For up-to-the-minute local, national, international and economic news in English, go to caribbeanbusinesspr.com now on 20 CARIBBEAN BUSINESS THURSDAY, NOVEMBER 4, 2010

Puerto Rico reaches offshore to fi nance its tax reform New tax strategy called a threat to multinational business model

RREACHEACH all the Chairmen, Presidents, General Managers, Financial Offi cers, Executives, Supervisors,

Gov. Luis Fortuño, left center, confers with members of his Tax Reform Commission, which worked for months on the proposal unveiled by the governor last week. Business Owners and Licensed Professionals

BY JOHN MARINO found to be sourced to Puerto Rico Also, “if the excise tax does not the Source Rule is an income tax on in Puerto Rico. [email protected] under the new regulation, the experts apply for any reason, then the Source the offshore fi rm that does business added. Rule applies,” the legal opinion with an island affi liate and the excise In CARIBBEAN BUSINESS your ad than 100,000 readers. In a daily, they nder changes to the island’s Moreover, while the excise tax states. “If purchasers were to succeed tax is “in lieu” of that income tax. will be seen for at least one week as are maybe 10% of the readers. UInternal Revenue Code that expires after six years, and reduces in a challenge to the excise tax, this “The Source Rule should be con- accompanied a new tax enacted by down over that time to 1% in its last would simply subject the purchasers sidered part of Puerto Rico’s gen- it’s being passed from Executives Gov. Luis Fortuño last week, the Call your advertising agency or our year, the amended “Source Rule,” to the Source Rule instead.” erally applicable Corporate Income to Managers and Supervisors, and in Puerto Rico government would be and the tax responsibility it spells Because the law states that either Tax,” the analysis states. many cases saved for reference. Senior V.P. Sales, Manoly Ponce at able to permanently levy income tax- out, is permanent, experts say. the Source Rule or the excise tax On Oct. 25, the Saturday during 787-728-3000, ext. 4480/3540 or es on offshore fi rms benefi ting from “The Source Rule applies to in- will apply to the offshore affi liated which the Legislature passed the 95% island production of goods and ser- come accruing after Dec. 31, 2010. company, once the excise tax ex- legislation, top government offi cials, Business people are of our more email: [email protected] vices, according to tax experts and a The Source Rule does not contain pires in six years, the Source Rule including Government Development legal opinion of the recent changes. any expiration or ‘sunset’ provision. should apply to the fi rms, said Carlos Bank President Carlos García, met THIS IS NO TIME TO WASTE! While administration offi cials have It is anticipated that the Source Rule Bonilla, chairman of the Puerto Rico with island tax attorneys to brief highlighted the temporary nature of will be a permanent change to Puerto Manufacturers Association (PRMA) them on the development. There a proposed 4% excise tax for fi rms Rico’s law,” states a legal opinion Tax Committee. was confusion among the offi cials with gross sales above $75 million for the government of Puerto Rico by The main thrust of the legal opin- over whether the Source Rule was annually to offshore affi liates, fi rms the Steptoe & Johnson law fi rm, one ion is aimed at arguing why the ex- permanent, according to one par- with lower sales will be exposed to of the top fi rms in Washington, D.C., cise tax should be fully credible for ticipant, but Philip R. West, the tax the normal 39% corporate income that was obtained by CARIBBEAN federal taxes, and the crux of the ar- attorney who developed the new tax Smarter advertising for better results at less cost. tax on the portion of their income BUSINESS. gument consists of establishing that Continued on next page 60 CARIBBEAN BUSINESS TECHNOLOGY THURSDAY, NOVEMBER 4, 2010 FRONT PAGE 21 CARIBBEAN BUSINESS THURSDAY, NOVEMBER 4, 2010

New law eases commercialization of UPR patents Continued from previous page Then the Irish, Singapore and Spain may try to emulate Puerto Rico,” said BY JOSÉ ALVARADO VEGA with Law 150, enacted last month by Gov. “I’m elated,” he told CARIBBEAN BUSINESS. initiative, clarifi ed that the Source Bonilla, the PRMA Tax Committee [email protected] Fortuño, which could accelerate the entry of “It is about time; now the university will be able Rule was permanent and would ap- chief. “Puerto Rico is saying it has the UPR system into the knowledge economy. to put its patents to use.” ply to all companies after the six-year the right to impose a tax on a for- n early 2006, Raphael Raptis, a professor of The law amends the Government Ethics Law Since getting off the ground in 2007, IFN excise tax phases out (see sidebar). eign company that has never been Iinorganic chemistry at the University of Puerto (Law 12 of July 24, 1985) to lift the prohibition research has generated “at least” 20 patents, with The private sector is reportedly in Puerto Rico. This is something Rico (UPR) Río Piedras campus, and his col- against UPR professors and researchers working 11 of them produced in 2009 alone, said Gómez, mulling a push for clarifi cation and totally new.” league, Ricardo González Méndez, a biology as consultants for private fi rms the UPR licenses who noted that none have been put to commercial an amendment stipulating a sunset No other country has a similar tax, professor at the UPR Medical Sciences campus, to develop patented technologies, or starting up use yet. He said the Massachusetts Institute of clause for the Source Rule as well, West told the island’s tax attorneys, used cutting-edge bio-nanotechnology research their own commercial ventures. Technology generates up to 20% of its income according to one account. Admin- but he expressed confi dence that to develop a safer contrasting agent for patients Law 150 allows the UPR to draw up contracts from royalties. istration offi cials have declined to Puerto Rico has the ability to levy undergoing MRI scans. with professors and researchers to facilitate the The Senate bill’s justifi cation states that in discuss the technical aspects of the the tax and that it would qualify for Raptis and González developed a contrasting transfer of technology and commercialization of 2007, a total of 194 nonprofi t institutions in new tax. a federal tax credit. West told the agent based on iron compound nanoparticles intellectual property approved by the university the reported $2.69 billion in Around 30 fi rms are expected to be tax attorneys that discussions with that can safely be absorbed by the body. The president, who must submit an annual report to royalties. taxed under the excise tax and an- the Internal Revenue Service (IRS) agent in use contains gadolinium, a heavy metal the Government Ethics Offi ce on such transac- “You can have an industrial base built around other 30 fi rms under the Source Rule, “have been favorable but are at a that has been linked to health problems. tions approved during the year. such patents,” said Gómez, noting the $150 mil- for a total of 60 fi rms, Bonilla said. critical point in the discussion,” one The researchers quickly set up a start-up com- Manuel Gómez, head of the UPR Resource lion a year in royalties the University of Florida As a general rule, nonresident cor- participant recalled. The fi rm is be- pany—FE8—in March 2006 to further develop Center for Science and Engineering and co- receives from sales of Gatorade, invented there porations are not subject to Puerto lieved to have asked for an IRS rul- the technology for commercial use. Four years director of the UPR-based Institute for Functional in 1965. Rico taxes if they are not engaged ing on the matter. later, however, their patented invention is no Nanomaterials (IFN), said the new law will not Charles E. Seeney, president & CEO of in trade or business here. Under cur- As soon as the affected corpora- closer to benefi ting patients. only allow the university to fully contribute to the Oklahoma City-based NanoBioMagnetics Inc., rent law, tax authorities will subject tions found out about the new tax, “We have a company, but it is just on paper,” establishment of a homegrown high-tech indus- and a member of the IFN advisory board, said a corporation to local taxation if it they immediately began to quantify Raptis told CARIBBEAN BUSINESS. try, but also will bring in much-needed patent- that between 2% and 10% of technology sales receives income deemed to be attrib- Gov. Luis Fortuño Government Development Bank its costs, to re-examine their invest- The fate of such research could change radically royalty-fee income. go back to universities as royalties. Ⅲ utable to an offi ce or fi xed place of President Carlos García ment plans and to begin an analysis business in Puerto Rico. The amend- of their corporate structure, several ments broaden the scope of the sources said. Source Rule to include transactions “They are analyzing all the alterna- between a local business and its off- deftly avoids violating existing tax- from all interested parties, over a pe- tives. And that includes going to the shore affi liates. If these transactions exemption decrees with local manu- riod of months. This has been well Congress,” one industry executive surpass a certain threshold, a portion facturers, while levying an income documented,” he said. told CARIBBEAN BUSINESS. of the offshore affi liate’s income is tax on their related fi rms that benefi t Puerto Rico will likely need wise Island manufacturers could also considered Puerto Rico-source in- from their production. counsel, however, as its bold move be exposed to similar taxes levied come and is subject to Puerto Rico Because the tax is placed on the to tax offshore companies has by competitors, since most import taxation under the new rule. offshore, U.S. or foreign corporation, sparked not only sharp criticism, products from other destinations and The amended regulation and the the island government is not violat- but also is expected to ignite fi erce use them in completing production new 4% excise tax only apply to ing its tax-exemption decrees with legal, political and public relations of specifi c products. the offshore fi rms that purchase the local manufacturer, and a tax battles against the new tax. That is Industry leaders said they will wait goods and services from affi liated should be able to be used as a dollar- because there is much more at stake for a ruling by the IRS on the matter local manufacturers. Such transac- for-dollar tax credit against federal than just the $6 billion the tax aims before gauging the full effect of the tions must account for at least 10% taxes owed, according to the admin- to raise over the next several years, new tax’s impact. Many can’t see the of the offshore affi liate’s total and istration’s top fl ight, Washington, industry observers say. U.S. Treasury Department blessing meet other conditions in order for D.C. legal counsel. What has really roiled the industry the new tax, given that it will cost the income-tax rule to apply. Moreover, both taxes also are easy is that Puerto Rico is the birthplace $6 billion over the next six years. Under the Source Rule, the appor- to enforce as the local manufacturer of tax exemption to spur offshore And while the island government tionment of the offshore fi rm’s earn- must collect the tax at the moment investment. It was the lynchpin of is confi dent in its ability to levy the ings that is sourced to Puerto Rico of sale from the affi liate and re- the successful Operation Bootstrap tax, industry leaders and opposition will be determined by an analysis mit it to the Puerto Rico Treasury model in the 1940s and 1950s which Popular Democratic Party (PPD) involving the quantity and type of Department. successfully transformed the island lawmakers believe the new tax will transactions taking place between “This is all set,” Senate President into a modern industrial economy not only be open to legal challenges, the island and offshore affi liates, and said of the from a poor agricultural-based but also that such challenges are cur- a comparison of their property, pay- new excise tax on the multination- economy, offi cials said. Now, the rently being drawn up. roll and other holdings. An alternate als, saying it was carefully planned island is leading the charge with a Many of the potential challenges formula would levy an income tax for months by La Fortaleza and its precedent-setting tax that could up- are discussed in the legal opinion pro- on the earnings from 50% of Puerto tax experts in Washington, and was set the multinational-development duced on behalf of the government, Rico property sales, which would written up in consultation with U.S. model that has grown as more and including a constitutional challenge mean an effective tax rate of 19.5%, Treasury Department offi cials. “It more nations across the world have of the Source Rule for potential vio- if applying half the current corporate had the input from the top law fi rms begun adapting the Puerto Rico lations of the Commerce and Export- tax rate. in Washington, D.C. and the federal model of offering tax exemptions Import clauses, and why the govern- government.” to investors. ment’s attorneys believe the new law A MULTINATIONAL TAX FIGHT The process leading up to the enact- “If they allow Puerto Rico to get will survive these challenges. Written by the best tax law minds ment of this law was a well-planned away with this, then it may become in the United States, the tax initiative and thought-out process, with input a threat to the multinational model. Continued on page 22 FRONT PAGE 22 CARIBBEAN BUSINESS THURSDAY, NOVEMBER 4, 2010 Continued from page 21 the last 22 months has contributed, and hopefully these offshore af- Besides potential legal challenges, fi liates also will contribute. It is Your ad in the 2011 Book of Lists critics also say the new tax may not in their interest to have a viable raise what it intends, as corporations Puerto Rico, and tax reform will will work to adjust their corporate help bring that. will be seen hundreds of times structure or their interaffi liate activity “The governor never met a tax that to try to narrow or eliminate its ap- he liked. But he also believes it is plication. That analysis also is already unconscionable that local fi rms are underway, industry offi cials said. over the course of the year 2011! paying an effective tax rate of 41%. “They said the U.S. Treasury would That’s why the corporate tax rate is get $10 billion from Section 936’s coming down to 30% right away, Savvy businesspeople simply cannot do without their yearly issue of repeal,” recalled PPD Sen. Eduardo and we hope to lower it even more the Book of Lists—it’s become one of their most valuable business tools! Bhatia, referring to the federal tax over the next few years,” the source break that was phased out over a added. All year long—and countless times throughout the year—they consult decade beginning in 1996. “They Securing more corporate income this extremely vital publication fi lled with thoroughly researched, got nothing. The companies simply revenue was a central objective of the reorganized as controlled foreign Tax Reform Commission appointed highly reliable and fully updated information. corporations [CFCs] to avoid fed- by Gov. Luis Fortuño last February eral taxation.” to reform the island tax system, ac- cording to the Steptoe & Johnson le- THE CASE FOR THE NEW TAX gal opinion. Administration offi cials Fortuño administration offi cials ac- said the decision to impose taxes on knowledge the fi erce backlash from offshore affi liates stemmed from the business community, both on the Only the Book of Lists If you want your Puerto Rico Manufacturers calls for a more just tax burden for island and stateside, over the swift Puerto Rico Manufacturers Association Tax Committee Chairman island businesses. can offer: company, product or passage of legislation that aims to Association President Carlos Bonilla “Since last year, different sectors service to be seen raise $5.8 billion over the next six Pedro Watlington • Listings of the top locally have been clamoring for a hundreds of times years to fund huge local tax cuts un- more balanced distribution of the companies in more der tax reform, but insist that the im- the tax will fi nance a tax reform that Those sacrifi ces include the fi ring tax burden and a larger contribution than 125 different in the course of one pact of the new taxes will be blunted will help the island economy, and of 13,000 government employees from the industrial sector,” Economic year—and by the in most cases by the ability to claim industries that it actually replaced a bill to slap and other measures that governors Development & Commerce Secretary people with decision- a dollar-for-dollar federal tax credit a permanent, minimum 10% tax on stateside “would not dare take” José Ramón Pérez-Riera said. “This • Essential information for the additional tax paid to Puerto making capabilities— offshore corporations, which had to deal with the huge $3.2 billion year, four bills authored by legisla- on more than 1,500 Rico. Offi cials also assert that the large support among both the ma- defi cit he encountered upon assum- tors from both the majority and the you must place your island’s deep fi scal crisis warranted jority New Progressive and minority ing offi ce in January 2009, the of- minority delegations seeking to im- companies the extraordinary move. ad in the 2011 edition Popular Democratic parties. fi cial added. pose a much larger contribution on • A list of the top Moreover, they argue, by using the The governor also is personally “The truth of the matter is that the corporate sector than the gover- of the Book of Lists! money raised to fi nance a sweeping 400 locally-owned making the case to the CEOs and Puerto Rico has been at the tipping nor pushed for have been fi led and DON’T BE LEFT OUT! tax reform, which will not only cut CFOs of the affected companies that point. We haven’t really grown in discussed at public hearings.” businesses taxes but also restructure the system Puerto Rico is encountering an ex- the last decade. Our fi scal situation, When asked to respond to criticism Reserve your space so that it rewards investment, sav- traordinary economic situation and despite extremely aggressive mea- that the administration is changing • Vital statistics and today; in 2011 it ings and hard work, the administra- that the tax has been levied only after sures, is still not healthy enough,” the ground rules for offshore inves- information about tion also is laying the groundwork will be too late to huge sacrifi ces were made by other the administration source said. tors on the island, Pérez-Riera reiter- Puerto Rico for a stronger island economy, which sectors of the island. “Every sector in Puerto Rico in ated that the law “does not apply to advertise! will help the companies operating manufacturing companies operating • Informative industry in Puerto Rico in the end. The tax Call our Senior Vice in Puerto Rico, but to the distribution overviews by reform will cut corporate taxes by an companies operating outside Puerto President of Sales, average 30% and individual taxes by Rico that purchase the products that Caribbean Business’ Manoly Ponce, at an average 50%. manufacturing companies produce expert staff 787-728-1240 or Gov. Luis Fortuño has been per- in Puerto Rico. sonally reaching out to the heads of “The law expands the base of send her an email at: the largest fi rms, which are largely worldwide income that ought to be [email protected] pharmaceuticals, to both justify the recognized as income generated in move and try to do everything pos- Puerto Rico because the sales of the sible to blunt the negative impact distribution company benefi t from the laws might have on company Puerto Rico’s labor and infrastruc- operations. ture,” he said. Part of these discussions involves P érez-Riera and other adminis- focusing on how the new tax will tration offi cials acknowledge the impact a particular fi rm, and what impact of the 4% excise tax, but additional help the local government believe its fallout will be limited Your Most Valuable Business Tool. might be able to provide. The gov- ernor also is stressing the fact that Continued on next page SPECIAL FEATURE 58 CARIBBEAN BUSINESS THURSDAY, NOVEMBER 4, 2010 FRONT PAGE 23 CARIBBEAN BUSINESS THURSDAY, NOVEMBER 4, 2010

Continued from previous page jobs in Puerto Rico “This [tax] could signifi cantly re- and that reforming the tax system, duce the ability of PhRMA’s mem- coupled with the other initiatives the bers to operate in the commonwealth administration has undertaken, will and to continue to make signifi cant Capitol Security unveils 2011 products & services bring much more positive economic investments in researching and de- BY JAMES FERRÉ which will control and monitor all transactions. benefi ts. veloping innovative new medicines This will allow Capitol to provide conventional The excise tax on “some transac- for patients,” he said. tarting in 2011, Capital Security will unveil security as well as inventory security. tions of some companies…will not Biotechnology Industry Orga- Sa full line of new products and services. In a For the banking and fi nance industry, Capitol outweigh the positive, pro-growth nization (BIO) President & CEO recent interview with CARIBBEAN BUSINESS, will complement its physical security with ana- effect of our tax reform and the Jim Greenwood echoed similar Ángel Burgos, Capitol Security’s newly appoint- lytics to raise existing security levels and work other pro-competitive reforms that criticism. ed chief technology offi cer, highlighted the new to prevent fraud attempts. Deployed surveillance we have implemented,” Pérez-Riera “The bioscience industry has re- offerings. In fact, Burgos was contracted, and his systems will have instant alarm visualizations, added. mained a bright spot through one position created, to launch these new products. notifying security personnel of any threats. “Our vision is that a lower tax bur- of the worst economic recessions Burgos, who is new to the security industry, Furthermore, surveillance equipment, like that den on both individuals and compa- on record. This is particularly true has an extensive background in the telecommu- for automatic teller machines (ATMs), will be nies is indispensable to foster an in Puerto Rico, where the biosci- nications- and Internet-related industries. It is upgraded. economically stronger and more ence industry accounts for provid- thus no surprise that his work at Capitol Secu- For industrial facilities, the company establishes competitive Puerto Rico. But given ing stable, high-paying jobs,” said rity revolves around launching a state-of-the-art security systems that allow Capitol to provide an the challenges Puerto Rico has right Greenwood, referring to the 20,000 command and control center in his company’s additional layer of security. This additional layer now, there is an imperative need to people employed in the pharmaceuti- San Juan location. In fact, the facilities will be can include security for hazardous environments achieve a better balance of the tax cal industry. “Without a doubt, the Capitol Security’s hub, not only for Puerto Rico and production monitoring, improving quality burden among all the members of bioscience industry is crucial to the but also for the U.S. Virgin Islands and Panama, assurance and control. our society,” he said. economic health of Puerto Rico.” where Capitol already provides services. Capitol will complement existing educational The revenue raised from the tax He said the new tax “places an un- “Capitol Security wants to move on to more (schools, universities and technical schools), gov- will be used to pay for the tax reform precedented and excessive burden integrated and analytical security-based systems ernment, transportation and hospitality security Gov. Fortuño proposed last month, on many of the biopharmaceutical to reinforce its solid physical security (armed to reduce vandalism and theft. Capitol’s services which will deliver an average 50% Popular Democratic Party President Popular Democratic Party and medical-device companies lo- guards, armored cars, etc). There is a clear under- allow for the cost-effective monitoring of large cut for individual taxpayers and 30% Héctor Ferrer Sen. cated in Puerto Rico. This particu- Ángel Burgos, Capitol Security’s cut for businesses when it is fully standing that we have to migrate to newer more chief technology offi cer areas, as system analytics can detect threats al- larly ill-timed tax increase is a dras- advanced technologies if we want to maintain lowing existing security and police to quickly implemented over the next several between the affected companies and Engler said. “These manufacturers tic change to longstanding tax law competitiveness,” said Burgos, who is analyzing respond. years. the government of Puerto Rico.” provide stable and high-paying jobs and is potentially detrimental to new and evaluating all Capitol Security offerings and In the retail industry, Capitol will provide se- It is with these new offerings that Capitol Secu- Engler argued the six-year excise for . The Puerto Rican and existing foreign investment in its target segments to see how they will fi t with curity services that will include point of sale in- rity will continue to grow and expand in Puerto BIG BUSINESS STRIKES BACK tax will hit U.S.-based manufactur- government’s decision to impose Puerto Rico. the new command center. tegration in combination with video analytics, Rico and abroad. Ⅲ Just as swiftly as the Legislature ers that have invested in Puerto Rico, this discriminatory tax could pro- “Puerto Rico has historically prov- and administration enacted the mea- which represents about 80% of all foundly impact companies as they en itself to be a center of excellence sure, business groups responded manufacturing on the island and ac- consider both existing and future in attracting foreign investment and with force, with the powerful U.S. counts for nearly 26% of the island’s operations.” venture capital from innovative bio- Chamber of Commerce in Washing- gross domestic product (GDP). Pharmaceutical Research and science companies and investors,” ton, D.C. leading the charge. “By increasing costs for these Manufacturers of America (PhRMA) Greenwood said. ‘That is why it is U.S. Chamber of Commerce Presi- manufacturers, the Puerto Rican President John Castellani said biop- particularly vexing that this legisla- dent Thomas J. Donohue denounced government is jeopardizing jobs and harmaceutical companies last year tion moved through both houses in a the tax as “punitive and discrimina- economic growth at a time when our invested more than $65.3 billion in weekend, offering no time for public tory” in a letter to Gov. Fortuño, and global economy is struggling to re- research and development through- hearings, discussions or review of Kelly Services is among 31 winners of the American Society for warned him it would hinder Puer- cover from a crippling recession,” out the world and helped to create comments on the bill. to Rico’s ability to attract outside “This new tax increase will pro- Training & Development’s 2010 BEST Awards. investment. foundly affect the decision-making of “By imposing a discriminatory foreign corporations as they consider new tax, without notice or the ben- whether to continue to do business The BEST Awards recognize organizations that demonstrate enterprise-wide success through employee learning and efi t of public hearings, a negative and deploy their capital in Puerto development. “The ASTD BEST Awards are the training industry’s most rigorous and coveted recognition,” message is sent to new and existing Rico or not,” he said. investment in Puerto Rico. A strong said Tony Bingham, ASTD’s president and CEO. “These 31 organizations excel in creating innovative learning cultures that incentive is created for foreign com- A VITAL INDUSTRY FACES clearly align with strategic business goals.” Congratulations Kelly Global Learning! panies to look elsewhere for their UNCERTAINTY manufacturing and distribution,” Award winners show that they are BEST at While the new tax may legally cir- Donohue added. cumvent tax decrees with the local ·Building talent, ·Enterprise-wide, ·Supported by the organization’s leaders, fostering a ·Thorough learning culture. Joining the chorus was the National operations by placing the tax on re- Association of Manufacturers Presi- lated offshore companies, they break The BEST Awards recognize organizations that demonstrate enterprise-wide success through employee learning and dent & CEO John Engler, who said the spirit of them, critics say. development. “The ASTD BEST Awards are the training industry’s most rigorous and coveted recognition,” the new excise tax on multinational “This is irreparably damaging said Tony Bingham, ASTD’s president and CEO. “These 31 organizations excel in creating innovative learning cultures manufacturers “could jeopardize Puerto Rico’s credibility,” said that clearly align with strategic business goals.” the jobs of over 100,000 people and longtime PRMA Executive Director could damage business relationships that have taken years to develop Continued on page 24 CARIBBEAN BUSINESS THURSDAY, NOVEMBER 4, 2010 57 SPECIAL FEATURE FRONT PAGE 24 CARIBBEAN BUSINESS THURSDAY, NOVEMBER 4, 2010 Continued from page 23 “The responsible public policy William Riefkohl. “Anything that would have been to enact the tax might have been in the pipeline is for a two-year period and gauge now under review.” the behavior of the industry,” Bhatia The island was already in a diffi - said. Antilles provides its clients top-quality services While the plan to tax multina- cult competitive position because of BY CB STAFF its high energy costs and infl exible tionals had been in the works for behind each and every policy. Trends change and so do consum- labor laws, maintaining a competi- months, it was kept under wraps Nowadays, consumers should in- ers, and also how they spend their ntilles has proven to be a solid tive standing mainly due to its tax until the Legislature had passed the quire more about the company from money. Right now, the consumer and trustworthy company with incentives, PRMA offi cials said. legislation enacting the new tax. A which they acquire their product,” is “budgeting” everything he or she many years’ experience in the insur- “With this measure, Puerto Rico “It was Pearl Harbor,” one Hato Alemán said. buys. That goes for insurance, too. ance market. The company, which loses its competitiveness,” PRMA Rey business consultant said of the “We keep up with the times and Although Antilles has a comprehen- offers commercial, personal, mari- President Pedro Watlington add- move. “The administration won. we put out there what the market sive line of policies, its core prod- time and fi nancial products, is clas- ed. “Puerto Rico is closed for Now, they have to run with the ball needs and demands. Everything we ucts are targeted to consumers’ bare sifi ed “A” by the prestigious A.M. business.” and hope it works out all right.” do, we think about consumers fi rst insurance necessities. Best Co., a 100-year-old credit- The impact of the new tax will be “It was regrettable that the tax was and then we make it happen,” he “With that said, we have seen a rating agency. As a committed in- different in different manufactur- passed over the weekend, without said. reduction in optional coverage, but surance company, it is developing ing sectors, with those operating opportunity for those impacted to Antilles has seen many differ- what moves our business has grown, the best products for its clients. on the thinnest margins probably weigh in. Everyone impacted by the ent trends over the years when it and that has remained stable,” he Over the years, the insurance com- getting hurt the most, manufactur- tax reform should have the opportu- comes to insurance products and said. “We are investing [internally] pany has created and maintained a ing industry offi cials said. The new nity to provide input on all aspects has trained its staff accordingly to in technology and state-of-the-art corporate culture whose top-notch Ⅲ tax will essentially double the tax of the tax reform proposals,” said effectively understand them. work tools.” service appeals to islanders. burden that exempt companies now Stephen J. Ubl of the Advanced “Employees usually refl ect man- face, Riefkohl said. In 2009, the Medical Technology Association. Patrick A. Alemán, Tax Reform Commission President agement’s behavior and treatment PRMA accounted for $1.4 billion, Puerto Rico Manufacturers Ferrer said the process destroyed Antilles Insurance Co. Because Xenia Vélez of others,” Patrick A. Alemán, vice or 57.9%, of all corporate income Association Executive Director “the transparency that should be at vice president of marketing president of marketing for Antil- tax collections. That is about the William Riefkohl the core of a democratic society,” Electronic les Insurance Co. said. “I guess our promise clients unreasonable poli- amount the administration expects and said New Progressive Party care and respect for our employees cies. Alemán explained Antilles of- to raise during the new tax’s fi rst shrunk 35.3% since 2006, includ- non-U.S. fi rms or fi rms selling the (NPP) lawmakers did not even know Surveillance is what they project on a daily basis fers realistic policies that clients can year in effect. ing a 13.3% contraction in 2009, majority of their products outside what it was they were approving. to our customers.” confi de in and trust. Four of the largest fi rms in Puerto the steepest single-year drop in the the United States. “Ninety percent of them have no and Operational Controls Antilles also provides a unique “Our strategy is to extend a com- Rico also have written letters to period, and a decrease of 2.9% this Puerto Rico Pharmaceutical In- idea what they have done,” he said. product called identity-theft recov- plete and affordable insurance prod- are key to any business... Fortuño expressing their displeasure year until August, according to the dustry Association President Da- “Just ask them if they know what an ery coverage. uct in a responsible manner to mar- over how the tax was implemented same data. neris Fernández said for many the excise tax is. They won’t.” Call Fire Control Corporation for all of your Electronic Surveillance Systems needs “If clients suspect their identity ket demands,” he said. and for what they say will be its ne- The pharmaceutical sector’s share federal tax credit would do little to has been compromised, they call The marketing executive described • Smartphone Vigilance System farious effects, the PRMA said. of the island’s GDP—the total value soften the blow because the top eight A SHIFTING ECONOMIC PARADIGM our hotline number where our in- Antilles’ signature products and • CCTV (DVR’s-Cameras -Megapixel IP Cameras, High Defi nition) PDP offi cials allege that as many of all goods and services produced pharmaceutical fi rms on the island, NPP offi cials note, however, that vestigators will open a case and those that are in highest demand. as fi ve projects in the pipeline are by a country in a year, including represented by the association, sell previous legislation, authored by • FIRE Alarm Systems • Access Control make a thorough inquiry about He said property and casualty-in- now under review as a result of the income earned domestically by most of their products to jurisdic- Senate President Rivera Schatz, the claim,” Alemán said. “Other surance company products in Puerto • FIRE Suppression Systems FM-200 & NOVEC 1230 development. foreigners but not income earned tions outside the United States. would have imposed a minimum companies just offer reimburse- Rico are virtually homogeneous. “The approval of a new tax on the by domestic residents overseas— “This varies from companies sell- 10% tax on exempt manufacturing 1044 JT Piñero Avenue, San Juan, PR 00920 ment while the client has to fend “Most policies are standard. Com- manufacturing sector will have se- grew slightly from 24.8% in 2007 ing 40% of their products outside the fi rms on the island. Private industry Tel. 787-793-606 Fax. 787-793-4905 for him or herself and fi gure out panies, more often than not, offer rious repercussions on the stability to 25.7% in 2009, according to United States, which would not feel had ample opportunity to comment what steps to take to recover a sto- basically the same coverage on each • E-mail: carlos@fi recontrol.net and security of jobs for thousands of commonwealth Planning Board much of an impact, to companies during public hearings held on that len identity.” line of insurance. The variable is • Web: www.fi recontrol.net mothers and fathers,” PDP President fi gures. selling between 75% and 90% of legislation. In fact, the bill that es- Some insurance companies tend to the fi nancial soundness and service Héctor Ferrer said. The nearly 20,000 jobs in the their production outside the United tablished the new excise tax was a While the manufacturing sector pharmaceutical industry made up States, which would receive the big- substitute bill for Rivera Schatz’s has been shrinking over the last 22.4% of the island’s 89,400 manu- gest blow,” she said original legislation, they added. decade, it is still a source of well- facturing jobs and 2.2% of the total She also said the 4% tax on off- Other observers said the course paid jobs, employing about 90,000, 921,500 nonagricultural salaried island corporations could jeopar- chosen by the government, which and still accounts for 45% of the jobs, according to commonwealth dize plans by the largest pharma- was to keep the plan a well-guarded island economy and pays 58% of Labor Department fi gures. ceutical multinationals to expand secret until the fi nal moment and the corporate taxes the Treasury The administration is trumpeting operations on the island, and may only begin disclosure after the leg- Department receives. the ability of companies to take a even drive corporations to lower-tax islation had been approved, might The number of jobs in the pharma- federal tax credit for the new island jurisdictions. have been the best, given the fi erce ceutical sector has steadily declined tax to which the manufacturers’ af- Both Bhatia and Ferrer attributed reaction it has provoked from the in the past fi ve years to 19,725 in fi liates will be exposed, and in many the administration decision to politi- fi rms, and their ability to infl uence August, down from 28,567 in cases this could effectively blunt the cal considerations aimed at winning outcomes because of their vast 2005, according to data from the damage infl icted by the new tax. re-election for the governor. They resources. U.S. Bureau of Labor Statistics Many companies, however, may said that because of the island’s open “The pharmaceuticals would not Establishment Survey. After phar- not need a federal tax credit, and economy, tax cuts alone won’t spark have given an inch,” one consultant maceutical employment expanded they are nontransferable, Riefkohl economic development, especially by as much as 3.5% in 2003, it has said. That is especially the case with given the protracted recession. Continued on next page SPECIAL FEATURE 56 CARIBBEAN BUSINESS THURSDAY, NOVEMBER 4, 2010 FRONT PAGE 25 CARIBBEAN BUSINESS THURSDAY, NOVEMBER 4, 2010

Continued from previous page “This will help lift a burden on business, Pérez-Riera is also upbeat. local taxpayers. If the governor He said the Puerto Rico Industrial noted. “The government had no manages to solve the island’s re- Development Co. (Pridco) is in choice but to proceed this way.” cession, the UPR will get more discussions with many companies Vigilantes offers award-winning strategic security outsourcing Life-sciences and biotechnology money to cover its deficit and have on the island to expand their opera- fi rms, which the government hopes more funds left over for research tions. While the new law will im- BY CB STAFF The fi rm, in addition to providing will play an important role in the and development,” said Gómez, pact their analysis, he said the gov- professional and experienced secu- island’s economic future, also have who is codirector of the four- ernment is working with them to espite the continuing rise in rity and safety-offi cer teams, also railed against the new tax. year-old Institute for Functional move these expansions forward. Dcrime and the need to imple- supports its client’s technology, in- However, Manuel Gómez, direc- Nanomaterials, which aims to find “Puerto Rico—with all the pro- ment a barrage of state and federal cluding the installation, upgrade and tor of the University of Puerto Rico commercial applications for the competitiveness and pro-growth re- agency regulations that require a maintenance of access control, video (UPR) Resource Center for Science emerging technology that could forms we are implementing in the company to provide a safe and se- surveillance, and fi re and intrusion and Engineering, praised the tax, turn the island into a new Silicon areas of public-private partnerships, cure working environment, many detection systems. calling it “a brilliant decision by Valley. permits, energy and government corporations continue to downsize Vigilantes has an international the governor because he taxed the He said the tax will not undermine services, as well as the 50% and or eliminate their security, safety staff of specialized consultants that industry at the point of least harm. efforts to make the island a global 30% reductions in individual and staff and their respective adminis- include American Society for In- “He is taxing the net profi t these center for biotechnology and nano- corporate tax rates, respectively— trative departments as part of their dustrial Security (ASIS)-certifi ed companies transfer to other sites technology, given that “inventions will continue to be a competitive reorganization efforts. protection professionals, security- anyway. With taxation as low as 0% do not yield profi ts directly, they jurisdiction for these companies, Understanding the obligation to technology specialists, former FBI on these companies, Puerto Rico is only do when these are commer- and a signifi cant portion of these continue addressing security and and other law enforcement agents, cialized.” He said start-ups for such expansions being negotiated will not getting anything back,” Gómez Ⅲ safety threats, and avoid subsequent and investigators to provide a full said, noting that the massive transfer emerging technologies already have take place,” Pérez-Riera said. fi nes and liabilities for noncompli- range of support and consulting ser- of wealth overseas due to drug ex- tax incentives. ance with agency regulations, many Edgar Pedrosa, vices to intercontinental and domes- ports has opened an ever-widening “I’m convinced the 4% tax will CARIBBEAN BUSINESS Economics of Puerto Rico’s industry leaders Vigilantes president & COO tic clients. gap between the island’s annual not drive away any industries, but, Senior Editor Carlos Márquez, have chosen to outsource these de- The fi rm has been awarded nu- GDP of $90 billion, which includes instead, will strengthen Puerto Legislative Affairs Editor Mario partments and partner with Vigilan- company performance standards act as fi rst responders. merous recognitions that include the multinational transactions, and Rico’s economic development,” Santana and Staff Reporter José tes Inc. for these day-to-day man- available at the time, and have be- A 24/7 operations and emergency- “Service Company of the Year” its gross national product (GNP) of Gómez said. Alvarado Vega contributed to this agement responsibilities. come the premier security provider response center coupled with an is- from both the U.S. Small Business $60 billion, which do not. Despite the furor raised by big report. Established in 1970, Vigilantes specialized in manufacturing en- landwide management and supervi- Administration and the Puerto Rico was contracted as the sole service vironments,” said Edgar Pedrosa, sion infrastructure provides essential Products Association, and the “Inter- provider by the U.S. government to Vigilantes president & COO. “whenever-wherever” response and national Star Award” for Quality in screen, train and manage over 1,500 Vigilantes’ employees are re- support to diverse client-emergency Paris based on the company’s cost, Philip R. West: The architect of the excise tax offi cers deployed at federal facilities quired to undergo a strict 10-part conditions from workplace-violence reliability and responsiveness. throughout Puerto Rico and the U.S. pre-employment screening that in- alerts to labor disturbances to indus- Vigilantes presently manages a Virgin Islands for over 15 years. cludes drug-abuse testing by an in- trial accidents. wide variety of security and safety and change in the ‘Source Rule’ “With the rapid evolution of Puer- dependent laboratory, seven years’ Unlike its industry counterparts, programs for many of Puerto Rico’s to Rico’s manufacturing sector in employment background investiga- Vigilantes’ division directors and leading industries in manufacturing, BY CARLOS MÁRQUEZ tax practitioner and former high- and other leading law schools, and Johnson website, West has deep and [email protected] the 1980s, Vigilantes management tion, and participation in ongoing regional managers perform weekly communications, distribution and ranking government offi cial “who is a frequent speaker and writer for substantive knowledge of income decided to enter the private-securi- refresher and professional-devel- client contact, conducting security- warehousing, medical/pharmaceu- just gives phenomenal deal professional audiences. deferral, foreign tax credit, trans- ty market, applying strict pre-em- ticals, as well as educational and opment seminars. Offi cers also are offi cer performance evaluations, hilip R. West, a partner in the advice.” Reportedly, the government has a fer pricing and tax treaty matters, ployment screening, training and required to become certifi ed by the quarterly business reviews, and en- fi nancial institutions. PWashington, D.C. offi ce of With over 25 years of experi- $600,000 contact for legal services as well as the tax aspects of merg- supervision guidelines developed American Red Cross in providing suring that all continuous improve- Information or confi dential inqui- Steptoe & Johnson LLP (Steptoe), ence, West focuses on complex with Steptoe and West is their lead ers, acquisitions, joint ventures and as a federal security contractor. We fi rst aid, CPR and the use of auto- ment adjustments are implemented ries are available through the fi rm’s is considered by insiders to have and sensitive international tax mat- man. Not a bad deal for the gov- fi nancings, investment funds and radically changed local security- mated defi brillation equipment to in a timely manner. website: www.vigilantespr.com. Ⅲ been the architect of the excise tax ters involving advocacy before the ernment if you are considering po- structure on exports of major manu- Internal Revenue Service (IRS), tential revenue of approximately $6 tax-minimization structures and facturing companies and the perma- Treasury and Congress, as well as billion in six years. transactions. nent change in the “Source Rule” in corporate, partnership and fi nancing In more than 65 years of prac- He also devotes signifi cant at- Puerto Rico. transactions and tax minimization tice, Steptoe, with more than 500 tention to helping clients resolve controversies with, and obtain rul- West is considered by planning. lawyers, has gained a national ings from, the IRS, and he has been CARIBBEAN BUSINESS’ West has particular expertise in and international reputation for particularly active with “competent Washington, D.C. sources to be deferral, foreign tax credit, treaty vigorous representation of clients authority matters,” according to the one of “super lawyers” in the U.S. and transfer pricing matters. He before government agencies, suc- website. capital and one of the world’s served for nearly four years as cessful advocacy in litigation and Earlier in his career, West liti- leading business lawyers regarding the U.S. Treasury Department’s arbitration, and creative and prac- gated tax cases with the Justice international taxation. International Tax Counsel—the tical advice in guiding business Department, advised Judge Carolyn Having served as international tax senior international tax lawyer in transactions. Miller Parr as a tax court clerk, counsel for the U.S. Treasury De- the U.S. government—playing a Steptoe has offi ces in Beijing, counseled fi nancial institutions and partment, “West is a good choice central role in virtually all interna- Brussels, Chicago, London, Los other clients with a Wall Street law for foreign tax credits, transfer tional tax developments during his Angeles, City, Phoenix fi rm, and practiced in the national pricing and tax treaty issues,” a tenure. West has taught at Harvard, and Washington, D.C. offi ce of an international account- source said. He is an international New York University, Michigan According to the Steptoe & ing fi rm. Ⅲ CARIBBEAN BUSINESS THURSDAY, NOVEMBER 4, 2010 SPECIAL FEATURE FRONT PAGE 26 CARIBBEAN BUSINESS THURSDAY, NOVEMBER 4, 2010 55

Senate president fi ercely defends new excise taxes on offshore corporations EVERTEC secures all clients from information breaches BY CARLA LEWIS Every year, EVERTEC’s systems go through the necessary controls and an adequate security vulnerability tests to establish the controls needed system, they will achieve their goals,” Ramírez he world of information technology changes to eliminate any vulnerability that may exist. assured. Rico, the tax would not increase Tevery day, according to Carlos Ramírez, ex- On another note, Colón said that in the past peo- “Most companies don’t even realize how vulner- BY MARIO SANTANA U.S. federal income tax. ecutive vice president of EVERTEC Inc.’s busi- [email protected] costs to Puerto Rican consumers. ple would get into your system without necessar- able they are or that they have lost information,” Rivera Schatz rejected the ar- ness development. “Before, there used to be an ily trying to do harm. “Now, these professionals Colón said. According to a study conducted in gument that some of the offshore Rivera Schatz also said the new excise tax would be temporary. isolated computer that had access to information study, analyze and have tools to get into different the mainland U.S., he said companies realize they enate President Thomas Rivera corporations to be taxed under the through a cable. Nowadays, access has diversi- systems to look where vulnerability exists to make have a breach an average of 156 days after it has Schatz defended the excise tax new legislation will not be able “As you know, this will begin at a S 4% [rate] and then will be reduced fi ed and expanded through the Internet. With this, money out of transactions.” occurred. on offshore corporations that pur- to claim a credit under the U.S. hackers now have more opportunities to access One of the most common practices for hackers is “It is important for companies to become con- chase goods or services produced Internal Revenue Code because the each year until a 1% [rate is applied] during the sixth year,” he said. information. to sell credit-card numbers they have stolen. scious about these common practices. It defi nitely is on the island, saying the impact of destination of the purchases they Ⅲ But he did not say the excise tax According to Miguel “If your system is vulnerable and you don’t have a great benefi t to clients,” Ramírez concluded. the levy on businesses would be made in Puerto Rico is not in the Colón, EVERTEC’s risk minimal. mainland U.S. would be repealed after the six-year period. What he did say is that re- management manager, In an exclusive interview with “History has told us that these cor- people are so vulnerable CARIBBEAN BUSINESS, Rivera porations are wise enough to fi nd pealing the new tax is one of several MMonitoreoonitoreo RResidencialesidencial possibilities. to these kinds of attacks Schatz emphasized that the new ex- a subterfuge to claim the credit,” that statistics indicate SSinin CContratoontrato cise tax will fi nance the initial phas- he said. “From 2014 on, by examining the numbers and seeing the economic three in fi ve companies $$24.9924.99 / MMensual*ensual* es of the announced tax reform. He pointed to Chile, which levies will experience data loss, “The tax reform terms offered to a 17% excise tax on offshore com- behavior and how events have un- folded, it will be decided if it will although 90% don’t pub- individuals and business taxpayers panies, the Dominican Republic, lish this information. will be guaranteed from 2010 to which has a 25% excise tax and continue, be revised or repealed,” he said. “Many of the hack- 2013 with this legislation,” he said. some U.S. states that levy a 7% to ers are found within the “These fi rst four years will be guar- 8% excise tax. Carlos Ramírez, ¿Ya tienes tu alarma y no quieres RIVERA SCHATZ REBUTS LACK company. Although their ¡La Seguridad ¿Por qué Capitol? anteed without problems.” “What they will pay in Puerto executive vice president renovar tu contrato…? OF PUBLIC HEARINGS actions may look inno- de Puerto Rico “We want to lower taxes on ev- Rico is much less, and it is reason- of EVERTEC Inc.’s cent, they may harm the ¡Tenemos la solución! erybody, but in this critical mo- When asked why the excise tax business development es Nuestro • Contamos con nuestra able given the profi ts they make on company.” Solo pagas $100.00 por la transferencia y ment we need to make those who the transactions here,” he said. on offshore corporations cleared Compromiso! propia Central de Monitoreo the Legislature on Saturday, Oct. Ramírez acknowledged that having an infor- programación de tu alarma* contribute absolutely nothing to “What we are saying,” the Senate mation protection program is very expensive and en P.R. (24/7) contribute a reasonable amount to president said, “is that the collec- 23 without the benefi t of public hearings, Rivera Schatz answered complex. “We have a department dedicated to se- No arriesgue la vida de Si no tienes alarma… reach a balance in the fi scal health tion of the excise tax is reasonable • Contamos con nuestras that the Senate previously heard the curity and data protection,” he explained. “There sus seres queridos ¡No hay problema! of the government of Puerto Rico,” and is not burdensome in terms of are always new ways to send a virus or hack in- propias patrullas y personal positions of the companies to be af- Sistema de Alarma Inalámbrico he added. making them move elsewhere to do formation. You have to constantly analyze how Somos especializado para He said that the excise tax was business. In that sense, we do not fected when his Senate Bill 1355 Honeywell que incluye: was discussed in public hearings. to block them.” especialistas en: responder sus emergencias consulted “with law fi rms in the U.S. see danger, but rather that it is fair EVERTEC includes control of your information • 4 Sensores de Puerta y Ventana inmediatamente. and with the federal government.” that they contribute more.” “The legislative process was typi- as part of doing business with them. “This is part -Sistema de Alarmas • 4 Sensores de Movimiento Infrarrojo Rivera Schatz explained that the Asked whether the new excise cal because public hearings were held on Senate Bill 1355,” he said. of the company’s DNA,” Colón said. • 2 “Beepers” Inalámbricos con Botón de Pánico • Ofrecemos el nuevo e excise tax on offshore corporations tax could be changed if Congress “Every client who operates within EVERTEC “We summoned to the public hear- -Cámaras Digitales *Incluye equipo, programación e instalación. innovador servicios que le that purchase goods or services in amends the U.S. Internal Revenue has to comply with our security policies,” Ramírez ings all sectors that could be af- (CCTV) permite controlar y acceder Puerto Rico “has the virtue of al- Code provisions that deal with “History has told us said. “I can’t risk having clients suffer the conse- lowing the collection of the new tax foreign-controlled corporations, fected, and there were statements in a su alarma desde su quences of information breaches. Security isn’t -Control de Acceso at the moment of the transaction,” as Rivera Schatz answered that “any that these corporations favor and against, along with sug- teléfono celular o an option here.” Residenciales y opposed to a more complex unitary movement in federal legislation that gestions and a voluminous report on computadora desde are wise enough to what we are discussing here.” This department, which works 24 hours a day, Comerciales system of combined reporting with would affect Puerto Rico’s econom- cualquier parte del mundo. fi nd a subterfuge to But Senate Bill 1355 dealt with a seven days a week, boasts more than 20 certifi ed formulary apportionment. ic stability will be examined.” analysts and technicians in different security lines, (Total Connect Services) He further explained the new He also said the excise tax will tax proposal that differed from the ¡Estimados claim the credit.” excise tax on offshore corporations. including Windows and Cisco. EVERTEC, which excise tax would affect “35 com- not affect any corporation operat- has been certifi ed for fi ve years to process and panies, maybe a bit more or a bit ing in Puerto Rico that enjoys a tax- That bill aimed to set a minimum Gratis! —Thomas Rivera Schatz manage information, hasn’t detected one breach less,” adding that “the government exemption decree under Law 73 of 10% tax on all corporations with at least $10 million in annual revenue. in its system. has begun to hold a series of meet- 2008—the Economic Incentives from tax decrees,” he said. “What This system identifi es hackers who are trying to get ings with these corporations.” Law for the Development of Puerto The measure was meant to apply happens is that some are affi liates specifi cally to those corporations into the system and quickly sends an email to alert He said the offshore corporations Rico—or the previous industrial in- of corporations based in Puerto EVERTEC professionals. These analysts quickly that purchase goods or services in centive taxes. that enjoy tax-exemption decrees Rico that enjoy a tax-exemption under Law 73 or the previous in- monitor the situation and block the hacker. Puerto Rico “will not be affected as “These are corporations that are *Se requiere débito directo. Aceptamos tarjetas de débito y crédito (Visa o Master Card) decree.” dustrial incentive laws. According to Ramírez, 80% of stolen infor- has been presumably represented” based outside of Puerto Rico, that He added that because the corpora- mation is detected through a regulation system, Para mayor información favor comunicarse a los teléfonos: because what they pay with the new simply do trade transactions in tions subject to the excise tax do not such as EVERTEC’s, while companies discover 787-727-1700, 787-727-2400 y 787-299-5790 e-mail: [email protected] Continued on next page excise tax will be creditable against Puerto Rico, but are not benefi ting have a physical presence in Puerto only 9%. [email protected] [email protected] SPECIAL FEATURE CARIBBEAN BUSINESS THURSDAY, NOVEMBER 4, 2010 54 FRONT PAGE 27 CARIBBEAN BUSINESS THURSDAY, NOVEMBER 4, 2010

Continued from previous page

Business groups like the Puerto Fire Control brings 25 years of experience to security cameras Rico Manufacturers Association and the Chamber of Commerce at BY JAMES FERRÉ that time attacked Rivera Schatz’s bill, arguing that it would damage e have a solution for every security need the island’s investment climate, es- “Wand budget,” said Carlos Quilichini Jr., pecially for the manufacturing sec- president of Fire Control Corp. Specializing in the tor, which accounts for 41.5% of sale, installation and servicing of fi re-detection and Puerto Rico’s gross product. protection technology, Fire Control brings its 25 Rivera Schatz’s bill hit an in- years of security excellence to the CCTV (closed- surmountable hurdle during the circuit TV) market by offering equipment and in- fi rst of the two public hearings the stallation that will match any security need. Combining Fire Control’s fi re alarm & protec- tion systems, surveillance equipment, fi rst aid, and access-control offerings, Fire Control is a one-stop “The legislative shop for all security needs, Quilichini Jr. explained. “We distinguish ourselves because, when clients process was typical call us, we are able to solve all of their problems because public with that one call.” Most recently, Fire Control made a name for hearings were held on itself among fast-food chains and condominiums Senate Bill 1355.” given its one-stop shop offerings; however, Quili- chini Jr. explained that its full lines of security cameras, as well as all of its products, have some- —Thomas Rivera Schatz thing to suit every industry. Senate President Thomas Rivera Schatz, left, said the excise tax on offshore corporations will be creditable against “I enjoy customers giving me Senate Treasury Committee held federal income taxes. From right, CARIBBEAN BUSINESS Executive Editor José L. Nieto, Editor of Government special requests and being able on the measure when committee Affairs John Marino, Executive Editor of Economics Carlos Márquez and Editor of Legislative Affairs Mario Santana Chairwoman Migdalia Padilla ac- to tell them, ‘yes, we can do Screenshot of Apple iPad with Exacq Vision software provided by Fire Control Corp., knowledged that the bill violates House bill was “identical to mine,” offshore corporations that purchase can contribute more than they are that.’” which displays live security-camera feed. Article 3, Section 17 of the Puerto adding that the lower chamber ap- goods or services produced on the contributing,” he said. “It might not Rico’ Constitution, which mandates proved the bill. island. necessarily be 10%, but they can — Carlos Quilichini Jr. affordability,” Quilichini Jr. said, highlighting the Quilichini Jr. explained, clients can access live that all bills to levy taxes be originat- What really happened was that Rivera Schatz also acknowledged contribute more because they make capabilities that can be built into the system. camera footage from any part of the world on most ed in the House of Representatives. House Bill 2526 was suddenly that his 10% minimum tax rate on large profi ts in Puerto Rico.” For the CCTV market, Fire Control distributes “The next big thing in surveillance equipment is operating systems: Microsoft Windows, Macin- A few days later, on March 5, a changed to Substitutive House Bill all corporations making at least $10 He said that the legislation less sub- and installs Bolide Technology Group products in that no matter where you are, or the equipment you tosh, Linux or even smartphones like BlackBerrys group of 11 House New Progressive 2526 on Oct. 22 and a day later it million annually has not been with- ject to legal attacks is that which es- Puerto Rico. Bolide is a major worldwide manu- have, you will be able to access your surveillance and iPhones. Party (NPP) representatives headed cleared the House and the Senate. drawn or repealed and that he still tablishes a prospective application of facturer and International Organization for Stan- camera feed,” said Quilichini Jr., explaining that Quilichini Jr. enjoys the challenges customers by José Luis Rivera Guerra fi led This is precisely the bill that amend- believes it is good legislation. a minimum tax rate, shielding from dardization ISO 9001:2008 certifi ed distributor of Fire Control already offers this feature. bring. “I enjoy customers giving me special re- House Bill 2526 in the lower cham- ed the Puerto Rico Internal Revenue “What I believe is that the cor- the tax those corporations that enjoy CCTV surveillance products and accessories. In fact, Fire Control even offers equipment that quests and being able to tell them, ‘yes, we can do ber. Rivera Schatz recalled that the Code to levy a six-year excise tax on porations that are under this law tax-exemption decrees. Ⅲ “The Bolide surveillance equipment we of- will add remote-viewing capabilities to most ex- that.’ I always give them the best solution money fer at Fire Control offers excellent quality and isting surveillance systems. With this equipment, can buy.” Ⅲ Casa Mofongo, Puerto Rican Gourmet Food Restuarant is entering the franchise market. Our product presentation will held on November 6th, 2010 in our Rexville Town Center Location in Bayamón starting at 1pm. For information and reservations please contact: Mr. Roman T. 787-799-3700 - 787-649-6272 Mr. Ayala T. 787-447-8930