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Having helped several entrepreneurs move to and establish themselves in Puerto Rico, I’ve noticed that the island’s tropical lifestyle, enticing tax incentives and booming financial sectors have attracted many successful business owners. The business leaders I work with daily view Puerto Rico as a land of opportunity.
Even though Puerto Rico’s economy experienced a downturn starting in the 1990s, recent years have been more favorable. In an effort to jumpstart the economy, the Act 20 and Act 22 tax incentives were passed in 2012. These two pieces of legislation became Act 60 in 2019.
Act 60’s positive impact
Under Act 60, individuals from the mainland United States pay zero taxes on any income garnered from investment interest, dividends and capital gains. Cryptocurrency earnings are also included. Businesses receive a corporate tax rate of 4% on export services, and no taxes are owed on earnings and profits distributions.
With these unprecedented incentives, Puerto Rico has set the stage for attracting world-class entrepreneurial talent.
The underinvestment caused by Puerto Rico’s prolonged economic downturn has created numerous opportunities for investment and growth. The service and real-estate industries are particularly promising for U.S. entrepreneurs.
Related: Puerto Rico Receives More Than $900 Million in Education Funds That Were Held Back by Trump Administration
Service industries: filling the gaps
The influx of entrepreneurs moving to Puerto Rico has opened up a valuable opportunity for service-business owners. I advise entrepreneurs in the service industry to take a look at the trends surrounding the migration of business owners and other wealthy individuals to Puerto Rico. They should design their service offerings to fill the needs of this growing population.
For example, service businesses might offer personal or administrative assistance or consulting. Really, any service that will make entrepreneurs’ lives easier has a good chance of succeeding in Puerto Rico. A wide variety of businesses and services can provide the convenience and time savings that entrepreneurs seek.
Real-estate development projects
A number of communities in Puerto Rico are now seeing high real-estate prices — even by U.S. standards. This trend is largely due to the migration of entrepreneurs and other individuals to the island. However, this isn’t the only driver. The delay between supply and demand for new real-estate development projects is affecting the industry as well. Moreover, obtaining construction permits can be a lengthy process, partly because of stringent hurricane-safety building codes. In light of these factors, we can expect real-estate prices in Puerto Rico to continue increasing.
While it’s a great time to invest in residential real estate, there may be even more opportunities in the booming hospitality sector. As there is a limited supply of hotels, hospitality-development projects will likely thrive. Business owners could also consider operating hotels.
Related: Federal Judge Signs Plan to Resolve Puerto Rico’s Bankruptcy in a Record-Setting Move
Four keys to succeeding in Puerto Rico
Businesses leaders interested in relocating to Puerto Rico should keep four crucial factors in mind as they make their plans.
Take a trip to the island before you relocate and plan to visit multiple areas. Spend time exploring to get a true feel for the lifestyle. Figure out where you might fit best. Despite our best efforts, moving to a place with a different culture will undoubtedly have some aftershocks.
2. Tax compliance
Making sure you qualify for the Act 60 tax incentives will likely require careful research, and owning a business in Puerto Rico does add a layer of complexity. This territory has its own set of tax laws. Moreover, keep in mind that employment regulations and the overall bureaucracy are different from those of the mainland United States.
A key to success is to stay focused on the many benefits of living and working in Puerto Rico. Island life is amazing, but some conveniences may be more difficult to access than in the mainland. A realistic view of the negatives is fine, but dwelling on them is unproductive.
Patience, persistence and flexibility are three characteristics you will undoubtedly need when moving to Puerto Rico. Day-to-day operations are likely to be different from what you are used to. However, if you embrace the changes and work hard to adapt, you may experience unprecedented business success.
Adjusting to business life in Puerto Rico certainly has its fair share of challenges, but with the enticing tax incentives and a promising economy, dedicated entrepreneurs who can accept the challenges will reap several unique benefits.
Related: How Entrepreneurship Is Helping to Save Puerto Rico