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Hospitality and Hotel Development

Puerto Rico’s tax incentives package offers hotel developers a competitive advantage over other destinations. The “Tourism Development Act of Puerto Rico” – Act No. 74 of 2010 depicts the parameters of such benefits. The benefits under this law will remain valid for a period of 10 years from the starting date of the eligible tourism-related project, and the business operation will be entitled to a 10 year extension.

“Tourism Development Act of Puerto Rico” – Act No. 74 of 2010 facilitates the establishment of tourism projects on the island. Following are details of requirements, eligibility and benefits under this Act.

To request benefits under this act, the business must engage in tourism-related activities using:

New facilities Existing facilities that have not been in use for three or more years Existing facilities where substantial renovations or expansion will take place The following business activities qualify as tourism-related activities:

Ownership or administration of:

Hotels, condo-hotels, timeshares/vacation clubs, hostels, guesthouses, excluding the operation of casinos
Theme parks, golf courses, marinas for tourism purposes, port facilities in areas that promote tourism activities Natural Resources as a source of entertainment value

Other entertainment or recreational tourism-related facilities
A business operation dedicated to renting or leasing to an exempt business dedicated to tourism-related activitiesBenefits under this law will remain valid for a period of 10 years from the starting date of the eligible tourism-related project, and the business operation will be entitled to a 10-year extension:

Tax credit of 10% of the total project cost, or 50% of cash from investors

(whichever is lowest)
100% exemption on municipal construction excise tax
100% exemption on taxes on imported goods and sales tax
100% exemption on municipal licenses
90% exemption on income tax
90% exemption on property tax

Attracting capital investment for ambitious tourism projects, particularly in highly competitive markets, requires appropriate economic incentives. This Act, known as the “Tourism Incentives for the Economic Development of Municipalities Act” – Act No. 118 of 2010 shall be a key tool in the economic development of tourism in Puerto Rico, with an emphasis on developing tourism projects in the municipalities that are most in need and in places that offer new opportunities to develop economic activity. The Act intends to facilitate the development of world-class resorts in strategic locations.

The main criteria for eligibility under this act include:

Being a world-class hotel with at least a 4-star rating
Planning for diverse commercial and recreational establishments
Other tourist attractions and facilities typical of 4-star hotels, including casinos
The project must be developed exclusively with private capital
This act will grant a rebate on net income tax payment rates from tourist facilities gambling operations according to the following scale:

Investment of $500 MM – fixed tax rate of 25%
Investment of $750 MM – fixed tax rate of 15%
Investment of $1.0 B – fixed tax rate of 10%
Investment of $1.25 B – fixed tax rate of 8%
Contact us to learn all about hospitality and hotel development incentives.