Thomas Rivera Schatz

NPP Sen. Thomas Rivera Schatz >Carlos Rivera Giusti

The spokesperson of the New Progressive Party (NPP) in the Senate, Thomas Rivera Schatz, introduced a new bill to amend Acts 20/22 by implementing new tax rates, in a bid to obtain greater government revenues and create new jobs, while providing attractive benefits for high-end investors.

The presented amendments contain two alternatives to be applied prospectively. The first scenario decrees a 12 percent tax rate for all capital earnings by every individual who relocates to Puerto Rico but is not investing or creating jobs on the island. The second offers a preferential tax rate of 5 percent on capital gains as long as it meets a minimum investment of $5 million and the creation of five to 10 jobs.

“There is no reason why today, whoever moves to Puerto Rico, should pay 0 percent when the national average is over 24 percent. The idea of these changes is to promote a bigger impact on the local economy, either through investment, job creation and higher income to the Treasury. It is important to make clear that this is prospective. In Puerto Rico, we are a jurisdiction of law and order and therefore, we will comply with the word that has been committed in the decrees granted,” the pro-statehood senator explained.

Rivera Schatz recognized the impact of said law, mainly in the real-estate market. “A greater openness is necessary over the years. Contributions of 5 percent and 12 percent are very attractive when here, employees pay between 25 percent to 30 percent, and local entrepreneurs about 33 percent. It is about providing a fair and adequate balance. It is to remain attractive while investors contribute something more to the country,” he said.

He concurred with Economic Development Secretary Manuel Cidre in creating a balance between improving employment conditions and investments of large and small companies, as well as developing space that generates well-paid jobs.

Treasury Calls for More Scrutiny

Meanwhile, Treasury Secretary Francisco Parés Alicea called on lawmakers to develop mechanisms for greater scrutiny on Acts 20/22 grantees. He noted that since 2017, the Treasury Department (Hacienda) began auditing grantees with initiatives like digitalization programs, cost measurements and the 100 percent electronic filing of income tax returns for individuals and corporations.

“Our audit program included hiring a tax expert who is helping us to define an action plan and the scope of the audits that we will work on starting in October. We also started conversations with the IRS (Internal Revenue Service) to collaborate on the processes that they do at the federal level, which is their jurisdiction. We have a Tax Coordination Agreement, which will increase the visibility of the decrees,” Parés said.

Parés noted that the agency will work with the IRS to regularly update the names of individuals who claim residence in Puerto Rico and benefit from the island’s incentive laws. Treasury will also disclose the exclusion requirements of Section 933 of the U.S. Internal Revenue Code regarding income sources from Puerto Rico and the residence rules under Section 937 to ensure that the interaction of both laws results in appropriate taxation in the U.S. mainland and Puerto Rico.

He said that Hacienda is in the process of integrating all the tax decrees under Laws 20 and 22 of 2012 and the information compiled by the Department of Economic Development and Commerce (DDEC by its Spanish acronym) into its SURI platform

The official asked the Senate Committee that is evaluating Acts 20/22 to grant greater discretion to the Treasury secretary so that, prospectively, it would be a requirement to obtain the agency’s endorsement and input for the approval of the decrees. In addition, he said Treasury should be granted the power to regulate, in conjunction with DDEC, the tax provisions for decree holders under the Incentives Code, especially under the chapters of the export of services and individual investors, among other capacities.

(1) comment

justin cobb

does this have the votes to pass? it's being introduced by the minority party. I'm not very familiar with PR politics yet.

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