Our beautiful natural wonders are not the only attractive selling point for the global tourism industry. Our Business Star Proposition’s tax incentive package for the tourism and hospitality industry is equally enticing.
Hospitality and Hotel Development
Puerto Rico's tax incentives package offers hotel developers a competitive advantage over other destinations. The “Tourism Development Act of Puerto Rico" - Act No. 74 of 2010 depicts the parameters of such benefits. The benefits under this law will remain valid for a period of 10 years from the starting date of the eligible tourism-related project, and the business operation will be entitled to a 10 year extension.
“Tourism Development Act of Puerto Rico" - Act No. 74 of 2010 facilitates the establishment of tourism projects on the island. Following are details of requirements, eligibility and benefits under this Act.
- To request benefits under this act, the business must engage in tourism-related activities using:
- New facilities
- Existing facilities that have not been in use for three or more years
- Existing facilities where substantial renovations or expansion will take place
- The following business activities qualify as tourism-related activities:
- Ownership or administration of:
- Hotels, condo-hotels, timeshares/vacation clubs, hostels, guesthouses, excluding the operation of casinos
- Theme parks, golf courses, marinas for tourism purposes, port facilities in areas that promote tourism activities
- Natural Resources as a source of entertainment value
- Other entertainment or recreational tourism-related facilities
- A business operation dedicated to renting or leasing to an exempt business dedicated to tourism-related activities
- Benefits under this law will remain valid for a period of 10 years from the starting date of the eligible tourism-related project, and the business operation will be entitled to a 10-year extension:
- Tax credit of 10% of the total project cost, or 50% of cash from investors (whichever is lowest)
- 100% exemption on municipal construction excise tax
- 100% exemption on taxes on imported goods and sales tax
- 100% exemption on municipal licenses
- 90% exemption on income tax
- 90% exemption on property tax
Attracting capital investment for ambitious tourism projects, particularly in highly competitive markets, requires appropriate economic incentives. This Act, known as the "Tourism Incentives for the Economic Development of Municipalities Act" - Act No. 118 of 2010 shall be a key tool in the economic development of tourism in Puerto Rico, with an emphasis on developing tourism projects in the municipalities that are most in need and in places that offer new opportunities to develop economic activity. The Act intends to facilitate the development of world-class resorts in strategic locations.
The main criteria for eligibility under this act include:
- Being a world-class hotel with at least a 4-star rating
- Planning for diverse commercial and recreational establishments
- Other tourist attractions and facilities typical of 4-star hotels, including casinos
- The project must be developed exclusively with private capital
This act will grant a rebate on net income tax payment rates from tourist facilities gambling operations according to the following scale:
- Investment of $500 MM - fixed tax rate of 25%
- Investment of $750 MM - fixed tax rate of 15%
- Investment of $1.0 B - fixed tax rate of 10%
- Investment of $1.25 B - fixed tax rate of 8%
Contact us to learn all about hospitality and hotel development incentives.
Cruise Ship Incentives
An aggressive act was created to promote the development of Puerto Rico’s cruise industry and boost the economy: Act No. 113 (PDF-Download), also known as the Cruise Industry Incentives Act.
The Cruise Industry is an important economic sector, which contributes about $250MM on a yearly basis. The Cruise Industry Incentives Act seeks to increase both homeport and transit cruise visits to Puerto Rico by providing tiered port tariff discounts based on passenger volume, tiered cash incentives for homeport passenger movement, cash incentives per passenger based on time on port, incentives for purchases of goods and services, coop marketing program, and incentives for tour transportation providers. This program of incentives should result in an increase of both, cruise passenger and cruise line expenditures, which accelerates the economy of Puerto Rico.
Cruise ship visits to Puerto Rico have a direct economic impact of:
- More than $245,000,000.00 per year
- 1.2 million passengers’ visits annually
- Maintains over four thousand (4,000) direct and indirect employments
- Cruise industry’s economic impact is driven by wages (about $63.2MM), passenger and crew expenditures ($148MM), and cruise line purchases of goods and services ($34.2MM)
Recognizing the economic importance of the cruise industry, a robust and aggressive incentives law was developed to promote cruise industry activity in Puerto Rico with the establishment of an annual fund that amounts to $11MM.
The main components of the cruise incentives are:
Tiered Port Tariff Incentives (Puerto Rico’s main port has a current tariff of $13.25)
- For the first 140,000 total passengers that a cruise line manages in Puerto Rico in a one year period, a tariff discount or reimbursement of $4.95 is provided
- After the 140,000th passenger, this incentive per passenger increases to $7.45. If the tariff of a port is different to San Juan’s tariff, the lower tariff will be applied
- If there is any diminution in the determined official tariffs, the incentives here are reduced in equal proportion
Tiered Cash Incentive for Homeport Passenger Movement
- Homeport cruise passenger’s impact flights to Puerto Rico, hotel stays, tourism transportation, local supply companies, service providers, and other businesses like restaurants and stores, among others.
- It is estimated that the economic impact of one homeport passenger is $159.33
- A contribution of one $1.00 per passenger is made by the Puerto Rico Ports Authority to the cruise companies that homeport in any port in Puerto Rico’s jurisdiction.
- After the cruise company has reached its 20th berth, the contribution increases to $2.00 per passenger. If the cruise company exceeds 120 berths, the incentive increases to $4.00 per passenger after the 61th berth.
Cash Incentive for Time in Port
- It is estimated that each cruise passenger on a transit ship spends $69.74 in Puerto Rico in restaurants, shops, tourism transportation, excursions, among many others.
- A cash incentive of $1.00 per passenger is provided by the Puerto Rico Ports Authority to cruise ships that berth in any port in Puerto Rico’s jurisdiction for a minimum of 8 hours during a one year period.
Incentives for purchases of goods and services
- Each cruise that berths in any port in Puerto Rico’s jurisdiction will be eligible to receive an incentive equivalent to 10% of the cost of the purchases of provisions and/or the hiring of maintenance services or repairs of the cruise ships in Puerto Rico, excluding materials, products or equipment installed as part of the service.
- An additional 5% reimbursement applies to the purchase of products manufactured in Puerto Rico as certified by the Industrial Development Company of Puerto Rico or agricultural products of Puerto Rico as certified by the Department of Agriculture. This incentive is provided by the Puerto Rico Tourism Company.
Coop Marketing Program
- Increases awareness of Puerto Rico as a homeport and to position Puerto Rico as the primary port of the Caribbean
- Creates a fund for this program based on $1 per homeport passenger during a one year period, asides from cruise lines’ contributions to the fund
- The funds are required to be used for marketing and promotion initiatives outside of Puerto Rico
Incentive for Tour Transportation Providers
- Promote the offering of tours and expand current on board tour offerings, which should result in higher revenues for cruise ships in Puerto Rico ports and therefore increased transit visits
- Is based on $1 per passenger that buys an excursion on board.
Contact us to learn more about incentives for cruise ships.
The Puerto Rico Tourism Company has developed a set of incentives to promote new airline routes and to maintain existing ones. The airline industry in Puerto Rico has a significant economic impact. For example, each new domestic daily flight has an annual economic impact of $77MM, while a new international flight has an annual economic impact of over $100MM.
The incentives to promote new routes are developed on a case-by-case basis, but could include:
- Start Up reimbursement costs of up to $50,000
- Coop Marketing Program of between $5 - $10 per inbound seat depending on whether the route is domestic or international
- Revenue Guarantee of between 10-15% of direct operating cost of the flight
- 50% of landing fee reimbursement
In order to maintain and improve performance of existing routes, the Tourism Company provides a marketing coop program for airlines that service domestic, regional or international.
Contact us to learn more about incentives for airlines.