Incentives

for Film Production

Puerto Rico is a world-class destination for film production. With about 70% of foreign shoots portraying remote places, the Island has thrived thanks to a host of factors. From incentives to inspiration, Puerto Rico provides the atmosphere for creative projects to flourish. Now, it is expanding on this success and attracting top global projects, brands, and superstars through Act 27-2011.

If you’re looking for scenic adaptability, great locations, technological resources, and award-winning international talent to help transform your vision into reality, look no further. Puerto Rico offers all of this, as well as a vast array of locations to portray remote places such as Iraq, Dubai, Brazil, and Colombia, as well as more familiar settings like Miami and Los Angeles. Also, Puerto Rico offers one of the most attractive tax incentive packages in the world.

Incentives for Film Production (ACT 27-2011)

• 40% Production Tax Credit on all payments to Puerto Rico resident companies and individuals, with the opportunity to go up to 90% if the project complies with other requirements
• 20% Production Tax Credit on all payments to qualified non-resident individuals
• 25% Infrastructure Tax Credit on development or expansion costs
• 4% fixed income tax rate on income derived from the production
• 100% tax exemption on dividend distributions

Contact us to coordinate a free consultation and learn more about these incentives.

Tax Credits

Act 27-2011 offers up to 40% tax credit on all payments to Puerto Rico resident companies and individuals, as well as the following:

• 20% tax credit on all payments to non-resident “Above-the-Line” talent, including actors, producers, directors and writers. No annual cap is established on non-resident “Above-the-Line” payments. However, the grantee of a decree under the Act (or its representative) will be responsible for withholding, remitting and reporting to the Puerto Rico Treasury Department a 20% tax on payments to non-resident “Above-the-Line” talent. Under a foreign tax credit system, the 20% tax withheld from payments made to non-resident “Above-the-Line” talent should be credited against the income tax liability determined on such income in his/her primary tax jurisdiction. Each non-resident “Above-the-Line” individual should consult their tax advisor.
• 10% additional production tax credits to feature films and TV programs, series in episodes, mini-series, and pilots, in which the main story occurs in and expressly mentions Puerto Rico.
• Additional production tax credits on all payments to Puerto Rico Resident Companies and individuals if a film project meets Act 27's new General Rule of a Puerto Rico Resident producer or co-producers earning no less than 30% of the net profits of the film project to be distributed. The Act provides an annual limit of $50,000,000 of tax credits available for film projects. However, film projects may apply for up to $50,000,000 additional tax credits more than the $50,000,000 limit if any portion of its Puerto Rico production expenses is incurred within a Film Development Zone. An additional $150,000,000 will be available if the film project is produced within a Film Development Zone having a film studio with a cost of $200,000,000 or more. The Act provides that, after attaining the previous limits, additional tax credits in an amount of $100,000,000 will be available if the film credits program has conceded at least $250,000,000 for two consecutive years.
• 25% infrastructure tax credit on costs incurred in the development of a film studio or other eligible infrastructural projects. The Act provides an annual limit of $10,000,000 of tax credits available for infrastructural projects. Excess credits not taken in a particular year may be rolled over to a subsequent year. These credits have a lifetime cap for all projects of $150,000,000. The minimum investment for individual infrastructural projects is $1 million.

Contact us to coordinate a free consultation and learn more about these incentives.

Related requirements include a $50,000 minimum spend requirement per project, and $25,000 for documentaries, short films, and original soundtrack & dubbing recordings. In a non-principal photography movie, a full development, partial development, pre-production, and post-production are eligible activities. There are no per project or individual wage caps. Recognizing the importance of complementing a low-cost structure with a state-of-the-art infrastructure specially dedicated to the industry, the Act also provides incentives for eligible infrastructural projects, including the development, construction, and operation of studios, laboratories, post-production, animation, and special effects facilities, transmission facilities and related infrastructure.

Tax Exemptions:

• 100% tax exemption on dividend distributions
• 90% tax exemption from personal property taxes. The taxable portion will be subject to the regular tax rate, which currently can be up to 8.83%; therefore, after considering the 90% exemption, the effective tax rate would be up to 0.883%
• 90% tax exemption from real property taxes. The taxable portion will be subject to the regular tax rate, which currently can be up to 10.83%; therefore, after considering the 90% exemption, the effective tax rate would be up to 1.083%
• 100% tax exemption on municipal license taxes, construction taxes, and other municipal taxes
• 100% tax exemption on excise taxes on articles imported by the grantee to be used in the eligible activities

To benefit from the Act, the film development company or studio operator needs to submit an application with the PR Film Commission to obtain a tax exemption decree, which will provide full detail of tax rates and conditions mandated by the Act and will be considered a contract between the Government of Puerto Rico and the applicant. Once the applicant obtains the tax exemption decree, the benefits granted will be secured during the term of the decree, irrespective of any changes in the applicable Puerto Rico tax laws.

Tax exemptions are available for eligible production businesses, including film producers and studio operators. The evaluation of applications to receive the incentives and benefits described here are subject to the dispositions applicable under the law and regulations of Act 27 of 2011. An exempt business operating in Puerto Rico under the Act by means of a Puerto Rico entity should not be subject to any taxes (such as a dividend tax, tollgate tax or other similar taxes) on its income from its eligible activities in Puerto Rico, other than the Puerto Rico fixed income tax rate established in the tax decree, regardless if said income is distributed or retained by the entity. Upon repatriation, the distributed income would be subject to the tax imposed by the jurisdiction in which the owners of the Puerto Rico entity reside, if any.

Puerto Rico also offers other complementary incentives for Manufacturing, Tourism, and Financial Services, among other sectors. Every tax incentive granted constitutes a contract with the government of Puerto Rico that is legally guaranteed and protected by United States law, thus providing a favorable environment to forge alliances and drive investment.

Contact us to coordinate a free consultation and learn more about these incentives.