R&D Incentives Under Act 60: Overview for Research Operations in Puerto Rico

R&D Incentives Under Act 60

Puerto Rico has a long history in research-intensive industries, particularly pharmaceuticals, medical devices, and biotechnology. Act 60 provides several incentive structures that may be relevant to research and development operations.

Potentially Applicable Incentive Structures

Chapter 3 (Export Services): R&D services provided to clients outside Puerto Rico may qualify for the 4% corporate rate under Section 2032.01(a). This may include contract research, software development, and technical consulting.

Chapter 6 (Manufacturing): Manufacturing operations with significant R&D components may qualify for manufacturing incentives, including preferential rates and property tax considerations.

Individual Researchers: Scientists and researchers establishing bona fide residency (under IRS IRC Section 937) may qualify for Chapter 2 individual investor benefits on qualifying income.

Puerto Rico's Research Ecosystem

Puerto Rico's research infrastructure includes:

• Multiple universities with research programs
• Established pharmaceutical and biotechnology sector
• FDA regulatory familiarity
• Federal court system and intellectual property protections
• Access to federal research grants and programs

Qualifying R&D Activities

Activities that may qualify under various Act 60 chapters include:

• Drug discovery and clinical research
• Software and technology development
• Engineering and product design
• Scientific consulting for international clients
• Biotech research and development

Compliance Considerations

R&D operations under Act 60 are subject to the same general compliance framework:

• DDEC annual report by November 15 (Section 6020.10(a)(3))
• Employment documentation per decree terms
• Export documentation (Chapter 3)
• Annual filing fee of $5,000 (Section 6020.10(d))

Frequently Asked Questions

Are R&D tax credits available under Act 60? The specific incentive structure depends on how R&D operations are structured and which chapter applies. Some R&D expenditures may receive favorable treatment. Specific credit availability should be confirmed with qualified professionals.

Can universities collaborate with Act 60 companies? Yes, university collaborations are generally compatible with Act 60 structures. The specific arrangements should be evaluated for compliance with decree terms.

Virtus Advisory provides this content solely for informational purposes. Nothing in this article should be construed as a guarantee of any particular tax outcome, an endorsement of any specific tax strategy, or an offer to provide professional services. For personalized guidance, contact a licensed CPA or tax professional.