Puerto Rico’s Comprehensive Tax Cut Law for Businesses, Individuals

In January 2011, I signed a comprehensive new law to dramatically cut Puerto Rico’s corporate and individual tax rates, a key element of our fiscal reform agenda to create jobs and promote growth for an economic turnaround on the Island.

The law provided immediate tax relief for the 2010 tax year, and starting Jan. 1, 2011, is providing significant individual and corporate tax reductions across the board.  Average rates are being reduced 50 percent for individuals and 30 percent for corporations providing an average $1.2 billion in tax relief annually for the next 6 years.

For corporations, effective Jan.1, 2011, the top rate dropped from 41 percent to 30 percent. A myriad of corporate income brackets will be simplified into three lowered rates – 20 percent, 25 percent and 30 percent. By 2014, the top rate is slated to go down to 25 percent.

For individuals, average tax rates will drop 25 percent starting in 2011, increasing to a 50 percent reduction over six years. The local Alternative Minimum Tax (AMT) will be eliminated over a four-year period. To encourage work, the local earned income tax credit has been doubled from $300 to $600, and the qualification limit increased from $20,000 to $35,000. And for the elderly, a $400 tax credit will be provided to everyone 65 year or older with income of $15,000 or less.

Comprehensive tax cuts are a central tool we are using in Puerto Rico to ensure our businesses and our citizens are the heart of the economic recovery.  We have made tough choices to tackle our inherited budget deficit and are turning the full weight of our focus to adding jobs and creating the best economic and business climate in the nation in Puerto Rico.

As Puerto Rico takes another step toward fiscal responsibility, we are moving to strengthen our economy.  When our economy is strong, businesses flourish. It is with well-founded optimism about the future of Puerto Rico that we move forward with fundamental tax reform.

Sincerely,

For the Press Release on the Governor’s tax cut plan, click here.

For the Fact Sheet on the Governor’s tax cut plan, click here.

To see how Governor Fortuño Corporate Tax Cuts are Good for Business, click here.