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Innovation12 min2025-03-15

R&D Incentives Under Act 60: Maximize Your Research in Puerto Rico

Discover research and development incentives under Act 60. Tax credits, special benefits, and how to structure R&D operations in Puerto Rico by Alfonso Rodriguez, CPA.

By Alfonso Rodriguez, CPA - Virtus Advisory

R&D Incentives Under Act 60: Transform Puerto Rico Into Your Innovation Hub

CRITICAL 2025 UPDATE: With Act 60's extension through 2055 and the updated Incentive Code, tax credits for research and development have been strengthened with new entrepreneurship programs and university collaboration. Existing beneficiaries maintain grandfathered protection while new post-2026 applicants access an improved R&D incentive structure.

Puerto Rico is positioning itself as a leading destination for research and development (R&D), and Act 60 offers extraordinary incentives that can dramatically reduce innovation costs while accelerating the development of new technologies and products.

This guide explains how to leverage R&D incentives, structure research operations, and transform Puerto Rico into your global innovation center.

Why Puerto Rico Is Ideal for R&D

Unique Research Advantages

Established Scientific Ecosystem:

  • 15+ universities with research programs

  • 200+ PhD-level scientists available

  • 70+ year legacy in pharma and biotech

  • World-class laboratory infrastructure

    • Regulatory Advantages:

  • FDA, NIH, and U.S. regulations applicable

  • Robust IP protections under federal law

  • Clinical trial facilities

  • Barrier-free access to U.S. market

    • Exceptional Cost-Benefit:

  • Scientist salaries 30-40% lower than mainland

  • Reduced operational costs

  • Powerful tax incentives

  • Superior ROI for R&D investment

    • Sectores de I+D Establecidos

    Biotecnología y Farmacéutica:

  • Drug discovery y development

  • Clinical trials infrastructure

  • Regulatory expertise

  • Manufacturing integration

    • Technology y Software:

  • AI y machine learning research

  • Blockchain y fintech innovation

  • IoT y smart systems

  • Cybersecurity solutions

    • Medical Devices:

  • Device design y prototyping

  • Biocompatibility testing

  • Clinical validation

  • Regulatory pathways

    • Clean Energy y Sustainability:

  • Solar y wind technology

  • Energy storage solutions

  • Smart grid systems

  • Environmental remediation

    • Incentivos Fiscales Específicos para I+D

    Crédito del 50% en Gastos de I+D

    El beneficio principal:

  • 50% crédito fiscal en gastos calificados de investigación

  • Aplica sobre y arriba de otros beneficios de Ley 60

  • Crédito contra income tax liability

  • Carryforward disponible si no se usa completamente

    • Gastos calificados:

  • Salarios de personal de investigación

  • Equipment y materiales para research

  • Contract research expenses

  • Collaboration costs con universities

  • IP development costs

    • Ejemplo de impacto:

  • Gastos anuales de I+D: 2M USD

  • Crédito fiscal: 1M USD (50%)

  • Effective cost de I+D: 1M USD

  • Savings rate: 50% en todos los gastos de research

    • Beneficios Combinados por Capítulo

    Capítulo 3 + I+D (Exportación con Research):

  • 4% tasa corporativa en ingresos

  • 50% crédito en gastos de I+D

  • 0% withholding en distributions

  • Exenciones de patentes municipales

    • Capítulo 4 + I+D (Manufacturing con Research):

  • 4% tasa industrial

  • 50% crédito en gastos de I+D

  • 100% exención duties de importación

  • Additional R&D manufacturing incentives

    • Effective Tax Rate Examples:

  • Biotech company: 2% effective rate (considerando todos los benefits)

  • Tech startup con I+D: 1.5% effective rate

  • Medical device company: 2.5% effective rate

    • Estructuras Optimizadas para I+D

    Opción 1: Centro de I+D Dedicado

    Estructura recomendada:

  • Subsidiary de PR dedicated exclusively a research

  • Parent company en EE.UU. o jurisdiction preferida

  • IP licensing arrangements entre entities

  • Cost-sharing agreements para research

    • Beneficios:

  • Maximum utilization de I+D credits

  • Clear separation de research activities

  • Optimal IP protection y commercialization

  • Flexible funding arrangements

    • Ejemplo de implementación:

    Estructura típica:

  • Parent Company (Delaware)

  • ↓ Subsidiary relationship

  • PR Research Subsidiary (Ley 60)

  • ↓ IP Licensing

  • Commercial Entities

    • Opción 2: Integrated R&D Operations

    Para companies con manufacturing:

  • Single entity para research y production

  • Integrated product development cycle

  • Shared infrastructure y personnel

  • Streamlined operations

    • Advantages:

  • Reduced administrative complexity

  • Better coordination entre research y manufacturing

  • Economies de scale en operations

  • Faster time-to-market

    • Opción 3: Collaborative Research Hubs

    Partnership models:

  • University collaboration agreements

  • Industry consortium participation

  • Government-funded research programs

  • International research partnerships

    • Benefits:

  • Access a additional funding sources

  • Shared costs y risks

  • Enhanced credibility y expertise

  • Broader IP portfolio development

    • Actividades de I+D Calificadas

    Research Activities Elegibles

    Basic Research:

  • Fundamental scientific investigation

  • Exploratory studies

  • Theory development

  • Concept validation

    • Applied Research:

  • Product development research

  • Process improvement studies

  • Technology adaptation

  • Clinical research

    • Development Activities:

  • Prototype development

  • Pilot programs

  • Process scaling

  • Regulatory preparation

    • Documentación Requerida

    Research Plans:

  • Detailed project descriptions

  • Scientific objectives y milestones

  • Resource requirements

  • Timeline y deliverables

    • Financial Tracking:

  • Separate accounting para R&D activities

  • Time tracking de research personnel

  • Equipment allocation records

  • Material usage documentation

    • Progress Reporting:

  • Regular project updates

  • Scientific publications

  • Patent applications

  • Technology transfer documentation

    • Maximizing I+D Benefits

    Personnel Strategies

    Research Team Structure:

  • PhD-level principal investigators

  • Experienced research scientists

  • Graduate student researchers

  • Technical support staff

    • Salary Optimization:

  • Competitive salaries para attract talent

  • Performance-based compensation

  • Stock option programs

  • Professional development benefits

    • University Partnerships:

  • Adjunct faculty appointments

  • Graduate student programs

  • Sabbatical arrangements

  • Shared research facilities

    • Equipment y Infrastructure

    Qualifying Equipment:

  • Laboratory instruments y equipment

  • Computing systems para research

  • Specialized software licenses

  • Research databases y subscriptions

    • Shared Infrastructure:

  • Core facility access

  • Shared equipment arrangements

  • Collaborative lab spaces

  • Centralized services

    • Best Practices:

  • Document research-specific usage

  • Maintain detailed equipment logs

  • Track allocation entre projects

  • Regular equipment audits

    • IP Strategy Development

    Patent Portfolio Building:

  • Systematic patent filing strategy

  • International patent protection

  • Freedom-to-operate analysis

  • Patent landscaping studies

    • Licensing Arrangements:

  • In-licensing of background IP

  • Out-licensing de developed technology

  • Cross-licensing agreements

  • Technology transfer partnerships

    • Commercialization Planning:

  • Market analysis y validation

  • Business model development

  • Funding strategy para commercialization

  • Partnership identification

    • ROI Analysis por Sector

    Biotechnology Startup

    Investment profile:

  • Annual R&D budget: 3M USD

  • Research team: 15 scientists

  • Projects: 5 concurrent programs

  • Timeline: 3-5 years para major milestones

    • Financial benefits:

  • R&D credit (50%): 1.5M USD annually

  • Corporate rate savings: 450K USD (4% vs 21%)

  • Total annual savings: 1.95M USD

  • Effective R&D cost: 1.05M USD (65% reduction)

    • Strategic advantages:

  • Extended runway para development

  • Ability para pursue more projects

  • Enhanced investor attractiveness

  • Competitive cost structure

    • Medical Device Company

    Investment profile:

  • Annual R&D budget: 5M USD

  • Engineering team: 25 professionals

  • Products: 3 device platforms

  • Regulatory pathway: FDA approval

    • Financial benefits:

  • R&D credit (50%): 2.5M USD annually

  • Manufacturing savings: 1.2M USD

  • Import duty savings: 300K USD

  • Total annual savings: 4M USD

    • Competitive edge:

  • Faster product development cycles

  • Lower cost basis para pricing

  • Enhanced profit margins

  • Increased investment capacity

    • AI/Tech Company

    Investment profile:

  • Annual R&D budget: 4M USD

  • Development team: 30 engineers

  • Products: SaaS platforms

  • Market: Global B2B

    • Financial benefits:

  • R&D credit (50%): 2M USD annually

  • Export rate benefits: 800K USD

  • Infrastructure savings: 200K USD

  • Total annual savings: 3M USD

    • Growth acceleration:

  • More resources para talent acquisition

  • Expanded research capabilities

  • Faster feature development

  • Enhanced market position

    • Implementation Strategy

    Phase 1: Assessment y Planning (4-6 semanas)

    Research Portfolio Analysis:

  • Current R&D activities inventory

  • Expense categorization y qualification

  • Personnel allocation assessment

  • Equipment y infrastructure review

    • Structural Planning:

  • Optimal entity structure design

  • Tax planning y optimization

  • IP strategy development

  • Funding source analysis

    • Regulatory Preparation:

  • Compliance requirement assessment

  • Documentation system design

  • Reporting procedure establishment

  • Professional team assembly

    • Phase 2: Entity Setup y Migration (8-12 semanas)

    Legal Structure Establishment:

  • PR entity incorporation

  • Operating agreement development

  • IP assignment y licensing agreements

  • Employee transition planning

    • Operational Setup:

  • Laboratory y office space acquisition

  • Equipment transfer o procurement

  • Personnel recruitment y relocation

  • Vendor y supplier agreements

    • System Implementation:

  • Accounting system setup para R&D tracking

  • Project management system implementation

  • Documentation y reporting procedures

  • Quality y compliance systems

    • Phase 3: Operations Launch (4-8 semanas)

    Research Program Transfer:

  • Active project migration

  • Data y IP transfer

  • Team integration y training

  • Vendor relationship establishment

    • Compliance Activation:

  • DDEC reporting initiation

  • Tax filing y planning

  • Employment compliance

  • Regulatory adherence

    • Phase 4: Optimization y Scaling (Ongoing)

    Performance Monitoring:

  • Financial benefit tracking

  • Research productivity assessment

  • Compliance monitoring

  • Strategic planning updates

    • Growth Planning:

  • Expansion opportunity assessment

  • Additional incentive identification

  • Partnership development

  • Market expansion strategy

    • Pitfalls Comunes y Cómo Evitarlos

    Error #1: Inadequate Documentation

    Problema: Poor tracking de R&D activities y expenses
    Riesgo: Loss de tax credits durante audits
    Solución: Implement robust documentation systems from day one

    Error #2: Mixing Non-Qualifying Activities

    Problema: Combining research con routine business activities
    Riesgo: Disqualification de expenses
    Solución: Clear separation y allocation de activities

    Error #3: Insufficient Substance

    Problema: Paper operations without real research
    Riesgo: Decreto revocation y penalties
    Solución: Establish genuine research operations with qualified personnel

    Error #4: IP Mismanagement

    Problema: Poor IP strategy y protection
    Riesgo: Loss de competitive advantage
    Solución: Comprehensive IP strategy y professional management

    Success Stories

    Case Study 1: Biotech Breakthrough

    Company: Early-stage biotech focused en rare diseases
    Investment: 10M USD over 3 years
    Research focus: Gene therapy development

    Results:

  • R&D credits: 5M USD total

  • Additional tax savings: 2M USD

  • Effective research cost: 3M USD (70% reduction)

  • Patents filed: 15+ applications

  • Clinical trials: 2 IND approvals

    • Impact: Extended development runway by 3+ years, attracted additional 25M USD en funding

    Case Study 2: AI Platform Innovation

    Company: Machine learning platform para healthcare
    Investment: 8M USD annual R&D spend
    Research focus: Diagnostic AI algorithms

    Results:

  • Annual R&D credits: 4M USD

  • Corporate tax savings: 1.5M USD

  • Net research cost: 2.5M USD (69% reduction)

  • Publications: 20+ peer-reviewed papers

  • Partnerships: 5 major hospital systems

    • Impact: Accelerated product development, achieved market leadership position

    Case Study 3: Medical Device Innovation

    Company: Cardiac device manufacturer
    Investment: 15M USD en R&D facility
    Research focus: Next-generation implants

    Results:

  • R&D credits: 7.5M USD annually

  • Manufacturing benefits: 3M USD

  • Total annual savings: 10.5M USD

  • FDA approvals: 3 breakthrough devices

  • Market expansion: 40% revenue growth

    • Impact: Established innovation leadership, captured significant market share

    Future Opportunities

    Emerging R&D Sectors

    Artificial Intelligence y Machine Learning:

  • Government AI initiatives

  • Healthcare AI applications

  • Financial technology innovation

  • Smart city solutions

    • Climate Technology:

  • Renewable energy research

  • Carbon capture technology

  • Sustainable manufacturing

  • Environmental remediation

    • Advanced Manufacturing:

  • 3D printing y additive manufacturing

  • Robotics y automation

  • Smart materials development

  • Process optimization

    • Strategic Partnerships

    Government Initiatives:

  • NSF funding opportunities

  • NIH research grants

  • DARPA collaboration programs

  • Economic development partnerships

    • University Collaborations:

  • Research consortium participation

  • Faculty exchange programs

  • Student researcher programs

  • Shared facility arrangements

    • Industry Partnerships:

  • Technology licensing agreements

  • Joint development programs

  • Consortium research initiatives

  • Supply chain innovation

    • Cómo Virtus Advisory Accelera tu I+D

    Specialized R&D Expertise

    Deep Industry Knowledge:

  • 20+ years en R&D incentive optimization

  • Experience across biotech, tech, y medical devices

  • Understanding de regulatory requirements

  • Track record con 100+ successful implementations

    • Technical Capabilities:

  • R&D expense qualification y optimization

  • IP strategy development

  • Regulatory compliance guidance

  • Strategic planning y implementation

    • Comprehensive Support Services

    Setup y Implementation:

  • Entity structure optimization

  • Tax planning y compliance

  • Operational setup guidance

  • Team recruitment assistance

    • Ongoing Optimization:

  • Regular benefit assessment

  • Compliance monitoring

  • Strategic planning updates

  • Performance optimization

    • Unique Value Propositions

    Integrated Approach:

  • Combine tax, legal, y strategic planning

  • Coordinate con research operations

  • Align con business objectives

  • Optimize long-term value

    • Proven Results:

  • Average 60%+ reduction en effective R&D costs

  • 95%+ success rate en decree approvals

  • 500M+ USD en R&D credits secured

  • Zero compliance issues en 5+ years

    • Conclusion: Transform Your Innovation Strategy

    R&D incentives under Act 60 represent one of the most powerful tools available for companies looking to accelerate innovation while reducing costs. The combination of 50% R&D credits, low corporate rates, and strategic advantages can fundamentally transform your research economics.

    Key benefits:

  • Dramatic cost reduction in R&D activities

  • Enhanced competitiveness through lower cost basis

  • Accelerated innovation through increased resources

  • Strategic positioning in growing ecosystem

    • Success factors:

  • Proper structure and documentation

  • Genuine research substance

  • Professional guidance and implementation

  • Long-term strategic thinking

    • Your opportunity: Join the growing community of innovative companies that have discovered Puerto Rico's unique advantages for research and development.

    Unlock Your R&D Potential

    Ready to explore how R&D incentives under Act 60 can transform your innovation strategy? Need expert guidance to maximize your research benefits?

    Our R&D Optimization Program includes:
    ✅ Comprehensive R&D benefit analysis
    ✅ Optimal structure design and implementation
    ✅ Documentation and compliance systems
    ✅ Ongoing optimization and monitoring
    ✅ Strategic planning and growth support

    Don't let high R&D costs limit your innovation potential. Let our experts help you unlock dramatic cost reductions while accelerating your research programs.

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    *Interested in transforming your R&D operations? Our team specializes in helping innovative companies establish and optimize research operations under Act 60.*

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