Puerto Rico Incentives Code
In order to promote the necessary conditions to attract investment from industries, support small and medium merchants, face challenges in medical care and education, simplify processes, optimize and provide greater transparency, Act 60-2019 was signed, which establishes the new Puerto Rico Incentives Code.
Puerto Rico Incentives Code Act: An economic development tool based on fiscal responsibility, transparency and ease of doing business. In order to promote the necessary conditions to attract investment from industries, support small and medium merchants, face challenges in medical care and education, simplify processes, optimize and provide greater transparency, Act 60-2019 was signed, which establishes the new Puerto Rico Incentives Code. Its main objective is to promote economic development on our island. It provides certainty related to the types of incentives that Puerto Rico offers to attract investment and create jobs in very important and traditional sectors such as manufacturing, tourism and agriculture; as well as aerospace, biosciences, technology, renewable energy, entrepreneurship and export services. In addition, it defines new incentives to support emerging sectors, such as the creative, eSports and entertainment industries. And it is based on metrics that will measure its effectiveness and the return on investment of all the incentives granted.
One of the benefits of Act 60-2019 is that it consolidates in one place dozens of previously approved incentive Acts, harmonizing and standardizing as much as possible, tax incentives applied to income, royalties, dividends and distribution of interest, and profits from capital. It also adjusts municipal contributions to provide more participation to municipalities and increase their capacity to generate income, while maintaining a competitive level and the certainty required to attract investment. Furthermore, the small and medium businesses eligible under this Act, as well as exempt companies with operations in Vieques and Culebra, could receive additional tax incentives during the first five years of operation; and new incentives are added.
This new tool will be an important component to promote job creation, investment in strategic sectors, innovation, exports, talent retention, international competitiveness and economic development of Puerto Rico. All changes are forward looking and do not apply to existing incentive contracts.
EB-5 Visa Program
I. General Information
USCIS administers the EB-5 Program. Under this program, investors (and their spouses and unmarried children under 21) are eligible to apply for a Green Card (permanent residence) if they:
- Make the necessary investment in a commercial enterprise in the United States; and
- Plan to create or preserve 10 permanent full-time jobs for qualified U.S. workers.
USCIS administers the EB-5 Immigrant Investor Program, created by Congress in 1990 to stimulate the U.S. economy through job creation and capital investment by foreign investors. Under a program first enacted as a pilot in 1992 and regularly reauthorized since then, investors may also qualify for EB-5 classification by investing through regional centers designated by USCIS based on proposals for promoting economic growth. On Dec. 27, 2020, President Trump signed a law extending the Regional Center Program through June 30, 2021.
USCIS policy on EB-5 adjudications is in Volume 6, Part G of the USCIS Policy Manual.
All EB-5 investors must invest in a new commercial enterprise that was established:
- After Nov. 29, 1990; or
- On or before Nov. 29, 1990, that was:
- Purchased and the existing business is restructured or reorganized in such a way that a new commercial enterprise results; or
- Expanded through the investment, resulting in at least a 40% increase in the net worth or number of employees.
Commercial enterprise means any for-profit activity formed for the ongoing conduct of lawful business, including:
- A sole proprietorship;
- Partnership (whether limited or general);
- Holding company;
- Joint venture;
- Business trust; or
- Other entity, which may be publicly or privately owned.
This definition includes a commercial enterprise consisting of a holding company and its wholly owned subsidiaries, if each such subsidiary is engaged in a for-profit activity formed for the ongoing conduct of a lawful business.
This definition does not include noncommercial activity, such as owning and operating a personal residence.
II. Job Creation Requirements
An EB-5 investor must invest the required amount of capital in a new commercial enterprise that will create full-time positions for at least 10 qualifying employees.
- For a new commercial enterprise not located within a regional center, the new commercial enterprise must directly create the full-time positions to be counted. This means that the new commercial enterprise (or its wholly owned subsidiaries) must itself be the employer of the qualifying employees.
- For a new commercial enterprise located within a regional center, the new commercial enterprise can directly or indirectly create the full-time positions.
- Direct jobs establish an employer-employee relationship between the new commercial enterprise and the persons it employs.
- Indirect jobs are held outside of the new commercial enterprise but are created as a result of the new commercial enterprise.
- In the case of a troubled business, the EB-5 investor may rely on job maintenance.
- The investor must show that the number of existing employees is, or will be, no less than the pre-investment level for a period of at least two years.
A troubled business is one that has been in existence for at least two years and has incurred a net loss during the 12- or 24-month period before the priority date on the immigrant investor’s Form I-526. The loss for this period must be at least 20% of the troubled business’ net worth before the loss. When determining whether the troubled business has been in existence for two years, USCIS will consider successors in interest to the troubled business when evaluating whether they have been in existence for the same period of time as the business they succeeded.
A qualifying employee is a U.S. citizen, lawful permanent resident, or other immigrant authorized to work in the United States, including a conditional resident, temporary resident, asylee, refugee, or a person residing in the United States under suspension of deportation. This definition does not include immigrant investors; their spouses, sons, or daughters; or any alien in any nonimmigrant status (such as an H-1B nonimmigrant) or who is not authorized to work in the United States.
Full-time employment means employment of a qualifying employee by the new commercial enterprise in a position that requires a minimum of 35 working hours per week. In the case of the regional center program, full-time employment also means employment of a qualifying employee in a position that has been created indirectly that requires a minimum of 35 working hours per week.
A job-sharing arrangement where two or more qualifying employees share a full-time position will count as full-time employment provided the hourly requirement per week is met. This definition does not include combinations of part-time positions even if, when combined, the positions meet the hourly requirement per week.
Jobs that are intermittent, temporary, seasonal, or transient do not qualify as permanent full-time jobs. However, jobs that are expected to last at least two years are generally not considered intermittent, temporary, seasonal, or transient.
III. Capital Investment Requirements
Capital means cash, equipment, inventory, other tangible property, cash equivalents, and indebtedness secured by assets owned by immigrant investors, if they are personally and primarily liable and the assets of the new commercial enterprise upon which the petition is based are not used to secure any of the indebtedness. All capital will be valued at fair-market value in U.S. dollars. Assets acquired, directly or indirectly, by unlawful means (such as criminal activities) will not be considered capital for the purposes of section 203(b)(5) of the Act.
Note: Immigrant investors must establish that they are the legal owner of the capital invested. Capital can include their promise to pay (a promissory note) under certain circumstances.
The minimum investment amounts by filing date and investment location are:
Petition Filing Date
Minimum Investment Amount – 8 CFR 204.6(f)(1).
Targeted Employment Area Investment Amount – 8 CFR 204.6(f)(2)
High-Employment Area Investment Amount – 8 CFR 204.6(f)(3)
On or After 11/21/2019
Future adjustments will be tied to inflation (per the Consumer Price Index for All Urban Consumers, or CPI-U) and occur every five years.
A targeted employment area can be, at the time of investment, either:
- A rural area; or
- An area that has experienced high unemployment (defined as at least 150% of the national average unemployment rate).
A rural area is any area other than an area within a metropolitan statistical area (MSA) (as designated by the Office of Management and Budget) or within the outer boundary of any city or town having a population of 20,000 or more according to the most recent decennial census of the United States.
A high-unemployment area may be any of the following areas, if that area is where the new commercial enterprise is principally doing business and the area has experienced an average unemployment rate of at least 150% of the national average unemployment rate:
- An MSA;
- A specific county in an MSA;
- A county in which a city or town with a population of 20,000 or more is located; or
- A city or town with a population of 20,000 or more outside of an MSA.
A high-unemployment area may also consist of the census tract or contiguous census tracts in which the new commercial enterprise is principally doing business, which may include any or all directly adjacent census tracts, if the weighted average unemployment for the specified area based on the labor force employment measure for each tract is 150% of the national unemployment average.
IV. Additional links for more information
- EB-5 Investors - How to apply
- EB-5 Immigrant Investor Regional Centers - View information about regional centers
- EB-5 Resources - View EB-5 resources, such as protocols
- EB-5 Support - How to contact USCIS with questions
V. Changes to the Program
Under a new rule published by the U.S. Department of Homeland Security, several changes to the EB-5 Immigrant Investor Program went into effect Nov. 21, 2019.
- Priority date retention - Certain immigrant investors will keep the priority date of a previously approved EB-5 petition when they file a new petition.
- Increased minimum investments
- The standard minimum investment amount has increased to $1.8 million (from $1 million) to account for inflation.
- The minimum investment in a TEA has increased to $900,000 (from $500,000) to account for inflation.
- Future adjustments will also be tied to inflation (per the Consumer Price Index for All Urban Consumers, or CPI-U) and occur every 5 years.
- Targeted employment area (TEA) designations
- We will now directly review and determine the designation of high-unemployment TEAs; we will no longer defer to TEA designations made by state and local governments.
- Specially designated high-unemployment TEAs will now consist of a combination of census tracts that include the tract or contiguous tracts in which the new commercial enterprise is principally doing business, including any or all directly adjacent tracts.
- Provided they have experienced an average unemployment rate of at least 150% of the national average unemployment rate, TEAs may now include cities and towns with a population of 20,000 or more outside of metropolitan statistical areas.
- These changes will help direct investment to areas most in need and increase the consistency of how high-unemployment areas are defined in the program.
- Clarified procedures for the removal of conditions on permanent residence
- The new rule specifies when derivative family members (for example, a spouse and children whose immigration status comes from the status of a primary benefit petitioner) who are lawful permanent residents must independently file to remove conditions on their permanent residence;
- The new rule includes flexibility in interview locations; and
- The new rule updates the regulations to reflect the current process for issuing Green Cards.
VI. Why Puerto Rico?
Almost all of Puerto Rico has been designated as a Targeted Employment Area (TEA), which means that it has been identified as an area with high unemployment.
A U.S. jurisdiction nestled in the middle of the Caribbean, Puerto Rico has been-and continues to be-an important social and economic bridge between the Americas. U.S. citizens can travel freely between the island and the U.S. mainland.
Puerto Rico enjoys fiscal autonomy, which means that it can offer very attractive tax incentives not available on the mainland U.S., with the advantages of being in a U.S. environment. Local government has legislated a series of incentives to attract investment, of which EB-5 Visa program participants can also take advantage.
The U.S. dollar is the official and only currency and is subject to U.S. Federal Court System and Laws, but with valuable tax advantages for individuals and corporations that are not available on the mainland. All U.S. banking regulations apply, including the credibility and protections afforded by the Federal Deposit Insurance Corporation (FDIC).
U.S. federal law, and all the framework and protections that go with it, apply in Puerto Rico, including intellectual property and patent protection.
To learn more about investing in Puerto Rico please click here: Invest Puerto Rico (investpr.org)
To learn more about Puerto Rico please click here: Puerto Rico Travel Guide | Visitor Information | Discover Puerto Rico
VII. Local resources for you
Click on the following link to access a verified, official and updated list of the regional centers approved in Puerto Rico: Approved EB-5 Immigrant Investor Regional Centers | USCIS
Partick ONeill, Esq. – O’Neill & Gilmore – email@example.com
NOTE: this information in based on that provided by USCIS and Invest Puerto Rico through their websites as of June 21, 2021. List of resources provided by the Colegio de Abogados y Abogadas de Puerto Rico (Bar Association).