How Puerto Rico Rewards Innovation — R&D Tax Credits Under Act 60

Introduction

If your business is involved in research, innovation, or high-tech development, Puerto Rico is one of the most cost-effective places to grow. Thanks to Act 60 and related tax credit programs, companies engaged in R&D activities can access significant tax savings—including credits, exemptions, and a fixed corporate tax rate of 4%.

In this post, we break down how to qualify, what types of R&D expenses are eligible, and how to combine these credits with Puerto Rico’s broader export incentives.

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R&D Tax Benefits at a Glance

Who Qualifies for R&D Incentives?

Eligible companies must conduct qualified research activities in Puerto Rico, which can include:

• Biotechnology, pharmaceuticals, medical devices
• Software development, AI, cybersecurity
• Advanced manufacturing, materials science
• Aerospace, clean energy, engineering
• Scientific data analysis or technical services for external clients

The activity must meet Puerto Rico's definition of experimental development, involve technological uncertainty, and result in new or improved products, processes, or services.

Tip:You don’t need to be a large corporation. Small tech companies and startups can also benefit.

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How the R&D Tax Credit Works

Puerto Rico offers a superior version of the U.S. federal R&D credit. Companies may receive a credit of:

• Up to 50% of eligible research expenses
• Creditable against Puerto Rico tax liability
• Can be carried forward if unused in the current year

Qualifying expenses often include:

• Salaries and wages of researchers
• R&D-related software and cloud costs
• Materials, supplies, and prototypes
• Contract research performed in Puerto Rico
• Lab space and equipment depreciation

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Combine with Act 60 Export Services Decree

If your R&D firm sells services or products to clients outside of Puerto Rico, you may qualify for Act 60 Chapter 3 (Export Services):

• 4% fixed corporate tax rate
• 100% exemption on dividends paid to Puerto Rico residents
• Additional municipal and property tax exemptions
• 15-year tax decree with renewal options

Strategic Insight: Structure your company as an Act 60 Export Services entity, perform R&D locally, and export the services or resulting technology abroad—while enjoying both the low tax rate and R&D credits.

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Additional R&D Incentives Available

Through the Puerto Rico Industrial Development Company (PRIDCO) and the Science, Technology & Research Trust, businesses may also qualify for:

• Infrastructure grants for building or upgrading labs
• Job creation incentives for hiring engineers, chemists, and scientists
• Matching funds for federal R&D contracts (SBIR/STTR)
• Participation in technology clusters and incubators

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Real Example: Tech Company Tax Savings

A software firm headquartered in Dorado:

• Spends $1.5M on qualified R&D
• Receives a $750,000 tax credit (50%)
• Pays 4% tax on $3M in export income = $120,000
• Uses R&D credit to offset total PR tax liability

💡 Net effect: Near-zero corporate tax burden, plus long-term decree protection.

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Is Your Business Eligible?

To benefit, companies must:

1. Be legally established in Puerto Rico
2. Maintain economic substance (office, payroll, activity)
3. Document all R&D expenses with care
4. File the proper incentive applications and annual reports
5. Combine with Act 60 for maximum efficiency

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Work With a Trusted Advisory Firm

At Imperium Management Group, we specialize in combining Act 60 export strategies with R&D tax credits to help clients:

• Reduce their effective tax rate to near-zero
• Qualify for PR Treasury–approved credits
• Build long-term operational and compliance strategies
• Register in municipalities like Dorado for added savings

👉 Schedule a consultation to see if your business qualifies for R&D tax credits under Puerto Rico’s incentive code.

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