Act 60: Puerto Rico Tax Incentives

Puerto Rico's unique structure makes it a part of the US system but gives it autonomy over its own financial affairs. This allows it to grant unique incentives for investors.

All acts and incentives were combined into one act, Act 60, in July 2019. Act 60 has a number of chapters of incentives covering various aspects of the  economy, as well as sections on tax credits.

This is not intended as legal or tax advice. We are not accountants or lawyers. We do our best to give you enough information to get started and recommend you check everything with licensed professionals. If you are aware of any errors on the site, please let us know.

Chapter 2: Incentives for Individuals

SUBCHAPTER A – ELIGIBILITY

Section 2021.01.- Individual Investors Relocated to Puerto Rico.

Any Resident Individual Investor may apply to the Secretary of the DEDC for any of the economic benefits provided in Subchapter B of this Chapter, subject to the limitation provided in Section 2022.03(b).

Section 2021.02.- Hard to Recruit Professionals.

Any hard to recruit professionals may apply to the Secretary of the DEDC for the economic benefits provided for in Section 2022.03 of this Code. New Resident hard to recruit professionals who are granted a Decree under the Chapter shall be exempt from the ten thousand dollar ($10,000)-contribution to nonprofit organizations provided in subsection (b) of Section 6020.10.

Section 2021.03.- Qualified Physicians.

(a) Every individual admitted to the practice of medicine or podiatric medicine, or who is a dental surgeon or a dental specialist, and meets the requirements established in Section 2023.22 of this Code, may request the Secretary of the DEDC to be granted the economic incentives provided in Section 2022.04. Every Qualified Physician who is a resident individual, as defined in Section 1010.01 (a)(30) of the Internal Revenue Code, shall have until September 30, 2019, to apply for a Decree under this Chapter. Moreover, every Qualified Physician who is not a resident individual as of the effective date of this Code, as defined in Section 1010.01 (a)(30) of the Internal Revenue Code, shall have until June 30, 2020, to apply for a Decree under this Chapter. No applications shall be received after the aforementioned dates, except for dental surgeons who do not practice a dental specialty, who shall have until June 30, 2020, to apply for a Decree under this Code. Provided, that applications filed after April 21, 2019, shall be considered under the provisions of this Code.

(b) Qualified Physicians who are granted a Decree under this Chapter shall be exempt from the ten thousand dollar ($10,000)-contribution to nonprofit organizations, provided in subsection (b) of Section 6020.10.

Section 2021.04.- Investigators and Scientists.

(a) Every Eligible Investigator and Scientist, as defined in this Code, may apply to the Secretary of the DEDC for the economic benefits provided in Section 2022.05 of this Chapter.

SUBCHAPTER B – TAX BENEFITS

Section 2022.01.- Tax Exemption to Income Derived from Interest and Dividends Earned by a Resident Individual Investor.

(a) The income derived from all sources by a Resident Individual Investor after becoming a resident of Puerto Rico, but before January 1, 2036, consisting of interest and dividends, including but not limited to interest and dividends from a registered investment company described in Section 1112.01 of the Puerto Rico Internal Revenue Code, shall be fully exempt from income taxes in Puerto Rico, including the alternate basic tax provided in the Puerto Rico Internal Revenue Code. In addition, the income derived by a Resident Individual Investor after becoming a resident of Puerto Rico, but before January 1, 2036, consisting of interest, financing charges, dividends or partnership interest received from International Banking Entities authorized under the “Banking Center Act,” shall be fully exempt from income taxes in Puerto Rico, including the alternate basic tax provided in the Puerto Rico Internal Revenue Code.

Section 2022.02.- Special Tax for Resident Individual Investors on Net Capital Gain.

(a) Appreciation Before Becoming a Resident Individual of Puerto Rico.- The portion of the net long-term capital gain generated by a Resident Individual Investor attributable to any appreciation of the Securities or other Assets owned by such Resident Individual Investor before becoming a Resident Individual of Puerto Rico, which appreciation is recognized ten (10) years after becoming a Resident Individual of Puerto Rico and before January 1, 2036, shall be subject to a five percent (5%)- tax, in lieu of any other tax imposed under the Puerto Rico Internal Revenue Code and shall not be subject to the alternate basic tax provided in Subsection A of the Puerto Rico Internal Revenue Code. If such appreciation is recognized at any other time, the net capital gain with respect to said Securities or other Assets shall be subject to income taxes in accordance with the tax treatment provided by the Puerto Rico Internal Revenue Code. The amount of the net long- term capital gain shall be limited to the portion of the gain related to the appreciation of the Securities or other Assets while the Resident Individual Investor resided outside of Puerto Rico. For taxable years after December 31, 2016, said capital gain shall be considered income from sources outside of Puerto Rico for purposes of the income tax provided in the Puerto Rico Internal Revenue Code.

(b) Appreciation after becoming a Resident Individual of Puerto Rico.- The total net capital gain generated by a Resident Individual Investor related to any appreciation of Securities or other Assets after said Resident Individual Investor becomes a Resident Individual of Puerto Rico, that is recognized before January 1, 2036, shall be fully exempt from income taxes in Puerto Rico, including the alternate basic tax provided in the Puerto Rico Internal Revenue Code. If such appreciation is recognized after December 31, 2035, the net capital gain with respect to said Securities or other Assets shall be subject to income taxes in accordance with the tax treatment provided by the Puerto Rico Internal Revenue Code. The amount of said net capital gain means the portion of the gain related to the appreciation of the Securities or other Assets owned by the Resident Individual Investor at the time of becoming a Resident Individual of Puerto Rico and those acquired by him after becoming a Resident Individual of Puerto Rico.

Section 2022.03.- Special Tax for Hard to Recruit Professionals.

(a) Wage income, as such term is defined in Section 1062.01 of the Puerto Rico Internal Revenue Code, earned by a Hard to Recruit Professional, up to the amount of one hundred thousand dollars ($100,000) shall be subject to income taxes provided by the Puerto Rico Internal Revenue Code. The salaries and wages and benefits in excess of one hundred thousand dollars ($100,000) shall be fully exempt from income taxes in Puerto Rico, including the alternate basic tax provided in the Puerto Rico Internal Revenue Code.

(b) To receive this tax benefit on account of earned wage income, the Hard to Recruit Professional shall have to hold a Full-Time position at an Exempt Business with a valid Decree, as established in this Code. Moreover, to avail himself of the benefits provided in this Section, the Hard to Recruit Professional may not benefit from the provisions of Sections 2022.01 and 2022.02, nor hold a decree under Act No. 22-2012, as amended, known as the “Act to Promote the Relocation of Individual Investors to Puerto Rico.”

Section 2022.04.- Special Tax for Qualified Physicians.

(a) Tax Benefits.-

(1) Income Tax.-

(i) The Eligible Income generated by Qualified Physicians holding a Decree granted under this Code earned shall be subject to a preferential flat income tax rate of four percent (4%), in lieu of any other income tax provided in the Puerto Rico Internal Revenue Code or any other law. The Eligible Income shall be that generated from offering Professional Medical Services for the duration of the Decree, beginning on the effective date thereof. The effective date shall be set as follows:

(A) The effective date of a Decree shall be January 1 of the Taxable Year in which the Qualified Physician files the Decree application.

(B) When the Decree is granted to a Qualified Physician who as of the date of approval of the Decree is not a Resident Individual, the effective date thereof shall be January 1 of the Taxable Year in which the Qualified Physician transfers to Puerto Rico to practice medicine and becomes a Resident Individual of Puerto Rico.

(C) When the Decree is granted to a Qualified Physician who is a Resident Individual of Puerto Rico who is in an accredited residency program as of the approval date of the Decree, the effective date shall be January 1 of the Taxable Year in which the Qualified Physician establishes his practice in Puerto Rico and becomes Resident Individual of Puerto Rico.

(D) When the Decree is granted to a Qualified Physician who is not a Resident Individual of Puerto Rico as of the approval date of the Decree and is in an accredited residency program, the effective date shall be January 1 of the Taxable Year in which the Qualified Physician establishes his practice in Puerto Rico and becomes Resident Individual of Puerto Rico.

(ii) Exemption Applicable to Income from Earned Dividends.- The Eligible Dividends earned by Qualified Physicians shall be exempt from income tax withholding at the source and from the payment of income taxes in Puerto Rico, including the alternate basic tax provided in the Code, up to a maximum of two hundred and fifty thousand dollars ($250,000) per Taxable Year.

(b) Exemption Period.- Every Qualified Physician holding an exemption Decree granted under this Code shall enjoy the benefits of this Code for a period of fifteen (15) years, provided, that during said period he meets the aforementioned requirements.

(c) Decree Extension.- Any Qualified Physician who, throughout his exemption period, has met the requirements and complied with the conditions established in the Decree, and shows to the Secretary of the DEDC that the extension of said Decree shall serve the best economic and social interests of the people of Puerto Rico, may request the Secretary an extension of his Decree for fifteen (15) additional years, for a total of thirty (30) years. Provided, that for a period that shall never exceed three (3) years during which a Qualified Physician renders services as an official of the agencies or instrumentalities of the Government of Puerto Rico or public corporations, even when not rendering medical services, the Qualified Physician may use this fact as the basis to request a dispensation from meeting the requirement of working as a full-time Qualified Physician and not have his Decree revoked. The Secretary shall evaluate the request using at least the same requirements provided in this subsection for the evaluation of Decree extensions.

Section 2022.05.- Exemption for Investigators or Scientists

(a) It is hereby provided an exemption from income tax on compensation earned by an Eligible Investigator or a Scientist for services rendered to the University of Puerto Rico and to all those higher education institutions authorized to operate in Puerto Rico for Eligible Scientific Research up to a sum equal to the maximum established by the NIH for grants for the salaries of investigators who receive grants from the NIH for the applicable period pursuant to the notices published by the Institutes; however, the exempted amount shall not exceed one hundred ninety-five thousand dollars ($195,000). Any income that an Eligible Investigator or a Scientist may earn for services rendered to natural or juridical persons other than the University of Puerto Rico or other Higher Education Institution shall be excluded from this benefit.

(b) It is hereby provided an exemption from income tax on compensation earned by an Eligible Investigator or a Scientist for services rendered on account of science and technology research and development activities carried out in the district established in Section 7 of Act No. 214-2004, as amended, up to the amount of two hundred and fifty thousand dollars ($250,000). For purposes of this subsection, the term “Eligible Investigator or Scientist” means a Resident Individual of Puerto Rico during the Taxable Year, hired by an institution in the district of Act No. 214-2004, who engages mainly in science and technology research and development activities. The Secretary of the DEDC shall make a final determination in accordance with the Incentives Regulations, or any circular letter, administrative determination, or any other information document.

(c) Any investigator or scientist who avails himself of the benefits under this Section shall complete at least sixty (60) annual hours of community service in areas and tasks designated by the Secretary of the DEDC.

Section 2022.06.- Student Loan Repayment Program for Physicians, Dentists, Veterinarians, and Scientific Investigators with Research-Intensive Doctoral Degrees in Health

(a) Subject to the availability of funds, the Secretary of the DEDC shall establish and incentives program geared toward defraying the student debt of physicians, dentists, veterinarians, and scientific investigators with research- intensive doctoral degrees in health who graduated after the effective date of this Code and, in the case of physicians, dentists, veterinarians who meet the requirements of the United States Medical Licensing Examination or the National Board Dental Examinations, or the licensure requirements applicable to veterinarians, as the case may be, who agree to establish a private medical, dental, veterinary, or health-related scientific investigation practice and remain in Puerto Rico for a period of seven (7) consecutive years. The Secretary of the DEDC shall give priority to those physicians, dentists, veterinarians, or scientific investigators who studied medicine, dental medicine, veterinary, or health-related scientific investigation in Puerto Rico. The exemption may be of up to a maximum of sixty- five thousand dollars ($65,000) to defray the student debt, subject to the regulations to be approved by the Secretary and taking into consideration the availability of funds. The exemption shall be payable at the beginning of the seven (7)-year period, which shall begin to elapse once the physician, dentist, veterinarian, or health-related scientific investigator and the Secretary of the DEDC execute the pertinent incentive contract. The seven (7)- year period may be interrupted until a physician completes his specialty or subspecialty studies outside of Puerto Rico. If the seven (7)-year commitment requirement is not met during the first two (2) years, the physician, dentist, veterinary, or health-related scientific investigator shall pay back to the Government one hundred percent (100%) of the grant received. If such noncompliance occurs during the third (3rd) year, the penalty shall be to pay back seventy percent (70%) of the grant received; and if it occurs on the fourth (4th) year, and thereon, it is hereby provided that the aforementioned pay-back percentage shall be reduced at a rate of five percent (5%) per year until the seven (7)-year period elapses.

(b) The Secretary of the DEDC shall prescribe through regulations the eligibility criteria, the maximum amounts, and the terms under which this benefit shall be granted, among which the following may be considered without it constituting a limitation: (i) medical, dental, veterinary, or health-related specialties or subspecialties for which physicians are scarce; (ii) geographical areas where primary physicians, dentists, veterinarians, or health-related scientific investigators are scarce; and (iii) geographical areas where the physician, dentist, veterinarian, or health-related scientific investigator shall render services. In the case of pediatric medicine, however, this geographical area criteria shall not apply. Provided, however, that the rest of the criteria shall apply to pediatric medicine.

(c) The funds for this program shall derive from the Economic Incentives Fund.

(d) Every scientific investigator who availed himself of the benefits of either Section 2022.05 or 2022.06 of this Code shall complete at least sixty (60) annual hours of community service in areas and tasks designated by the Secretary of the DEDC.

Section 2022.07.- Resident Individual Investor Trust.

(a) Grantor Trust.- Any Resident Individual Investor to whom a Decree has been issued under the provisions of this Code may set up trusts under the laws of Puerto Rico and, in doing so, such investor may elect that such trust be treated as a grantor trust for Puerto Rico income tax purposes. Such election shall be made in accordance with the rules established by the Secretary of the Treasury, regardless of whether such trust is not otherwise deemed to be a grantor trust under the applicable income tax rules of the Puerto Rico Internal Revenue Code. In such case, the nature of any item of income, gain, loss, deduction, or credit included in the income attributable to the grantor under the Puerto Rico Internal Revenue Code shall be determined as if such item were realized directly from the source from which it was realized by the trust or incurred in the same manner as incurred by the trust. An election made under this subsection, once realized, may only be revoked through the procedure established by the Secretary of the Treasury for such purposes.

(b) Revocable Trust.- Any Resident Individual Investor to whom a Decree has been issued under the provisions of this Code may set up revocable and irrevocable trusts under the laws of Puerto Rico, as established by the grantor in the trust instrument; provided, that absent a provision to such purposes, it shall be presumed irrevocable. Revocable trusts set up in accordance with this provision may only be revoked by the grantors, or by the grantor who retains such authority under the trust instrument.

(c) Trusts Created Outside of Puerto Rico.- The provisions of any trust validly created outside of Puerto Rico by a Resident Individual Investor to whom a Decree has been issued under the provisions of this Code shall not be challenged by any person based on any Law or Regulation of Puerto Rico that may be contrary to or inconsistent with the provisions of said Trust. This Section shall continue to apply to such Trusts after the expiration of the exemptions granted under this Code, provided that the Decree has not been revoked in accordance with Section 6020.09(a).

(d) Any Resident Individual Investor to whom a Decree has been issued under the provisions of this Code may freely transfer or donate during his lifetime, and at his entire discretion, all or part of his assets to the trusts described in this Section, regardless of whether such property is real or personal, tangible, or intangible, of the location thereof, and of any other legal or regulatory provision in Puerto Rico that is contrary or inconsistent with said transfer, donation, the testamentary provisions of the estate and/or the terms and conditions of said Trusts including, but not limited to, the provisions of the Civil Code of Puerto Rico. This Section shall continue to apply to such individuals after the expiration of the exemptions granted under this Code, provided that the Decree has not been revoked in accordance with Section 6020.09(a).

SUBCHAPTER C – REQUIREMENTS FOR GRANTING EXEMPTIONS

Section 2023.01.- Decree Application Requirements.

(a) General Rule.- Any individual who qualifies for the benefits established in this Chapter may request the benefits of this Code by filing an application with the Secretary of the DEDC in accordance with the provisions of Subtitle F of this Code.

(b) Any person may apply for the applicable benefits of this Code, provided that such person meets the eligibility requirements of Subchapter A of this Chapter, and any other criteria as prescribed by the Secretary of the DEDC in the Incentives Regulations, an administrative order, a circular letter, or any other general communication, including as an evaluation criteria the contribution of such Eligible Business to Puerto Rico’s economic development.

(c) Every Resident Individual Investor shall enclose evidence of payment of the annual contribution of at least ten thousand dollars ($10,000) to nonprofit entities that operate in Puerto Rico, are certified under Section 1101.01 of the Puerto Rico Internal Revenue Code, and are not controlled by the same person holding the Decree, nor his ascendants or descendants. The evidence of payment of the annual contribution to nonprofit entities shall be included as part of the annual report required in subsection (a) of Section 6020.10.

Section 2023.02.- Qualified Physicians Decree Application Requirements

(a) Applicants shall meet the following requirements:

(1) To maintain their Qualified Physician status, as defined in this Code;

(2) To practice medicine or podiatric medicine, or be a dental surgeon or a dental specialist on a Full-time Basis;

(3)  To be a Resident Individual of Puerto Rico;

(4)  To comply with their tax liability in accordance with this Code or any other applicable law;

(5) To complete community service hours as provided in paragraph (1) of subsection (b) of this Section;

(6) Medical Practice-

(i) When the applicant is a Qualified Physician who is in an accredited residency program, regardless of whether or not he is a Resident Individual of Puerto Rico, if the Secretary of the DEDC makes a favorable determination, the Decree may be granted and the Qualified Physician shall have one hundred and twenty (120) days from the date he obtained his specialty or subspecialty degree to establish his medical or dental practice in Puerto Rico. This subparagraph shall also apply to Qualified Physicians who are not Resident Individuals of Puerto Rico, who are not in a residency program and have an established medical or dental practice outside of Puerto Rico.

(ii) When the applicant is a Qualified Physician who is not Resident Individual of Puerto Rico, if the Secretary of the DEDC makes a favorable determination, the Decree may be granted and the Qualified Physician shall have one hundred and twenty (120) days from the date to become a Resident Individual and establish his medical or dental practice in the geographical area indicated in the application.

(7) To fulfill any other requirement as established in the Decree.

(b) Requirements-

(1) Community Service.-

(A) Every Qualified Physician holding a Decree granted under this Code shall complete the equivalent of one hundred and eighty (180) annual hours of community service without pay, in accordance with the rules adopted by the Secretary of Health.

(B) The eligible community service that a Qualified Physician may provide includes, without limitation: (i) assisting, or being part of the faculty at a teaching hospital or schools of medicine, in the education of medical students, residents or other health professionals, and in the Intramural Practice Plans of schools of medicine; (ii) rendering medical services in regions that have been identified by the Puerto Rico Surgeons Association or the College of Dental Surgeons of Puerto Rico, as the case may be, in conjunction with the Department of Health of Puerto Rico as having shortages of certain specialized medical and dental care services; (iii) providing nightshift services at the hospitals selected by the Puerto Rico Surgeons Association and the Department of Health of Puerto Rico; (iv) offering seminars on prevention and other health topics to the community or for the training or continuing education of medical and dental students and professionals in Puerto Rico; (v) rendering Professional Medical Services to underserved populations though nonprofit entities.

Alternatively, a Qualified Physician may meet the requirement provided in this subparagraph of rendering medical or dental services as part of a service contract with the Health Insurance Plan of the Government of Puerto Rico. In this alternative, the Qualified Physician shall fulfill the requirement of one hundred and eighty (180) hours, but the services do not have to be offered free of charge and may be offered as an employee or independent contractor of the person or entity contracting with the Health Insurance Plan of the Government of Puerto Rico.

The Secretary of the DEDC may prescribe in the Incentives Regulations, a circular letter, or administrative determination, the community service requirements provided for in this Code. The Secretary of the DEDC shall request and consider the proposals of the Surgeons Association. The rules to be adopted shall establish the oversight methods necessary to ensure compliance by Qualified Physicians with their obligation to render community service.

(c) Evaluation Criteria for Decree Applications Filed by Qualified Physicians.-

(1) Prior to the granting of a Decree under this Code, the Secretary of the DEDC shall determine whether such Qualified Physician shall serve the best economic and social interests of the people of Puerto Rico.

(2) The criteria to determine whether the granting of a Decree shall serve the best economic and social interests of the people of Puerto Rico are the following:

(i) The Decree’s economic impact.

(ii) The specialties and subspecialties that the applicant physician has or shall have upon completing an accredited residency program.

(iii) Whether there is a shortage in Puerto Rico of this type of specialized physicians, and the number of physicians with this specialty or subspecialty rendering services in Puerto Rico.

(iv) The geographical areas where the physician renders or shall render services.

(3) It shall be understood that a Decree serves the best economic and social interests of the people of Puerto Rico when:

(i) The physician has a specialty or is completing his residency to obtain said specialty and the Secretary of Health has indicated that said specialty warrants the incentive by reason of shortage of physicians; or

(ii) The applicant is a general practitioner who provides primary healthcare services in a geographical area where, according to the Department of Health, there is a shortage of physicians or a pressing need that warrants the granting of the incentive.

(iii) Qualified Physicians who are not Resident Individuals of Puerto Rico, as defined in Section 1010.01(a)(30) of the Internal Revenue Code for Code for a New Puerto Rico, and who apply for a Decree by June 30, 2020, under Section 2021.03 of this Code, may not be subject to the requirements established in this subsection (c), as prescribed by the Secretary of the DEDC in the Incentives Regulations, an administrative order, a circular letter, or any general communication.

SUBCHAPTER D – SPECIAL PROVISIONS

Section 2024.01.- Qualified Physicians – Decree Revocation

(a) Grounds for the Decree Revocation:

(1) A Decree issued in favor of a Qualified Physician shall be revoked immediately and be rendered ineffective when any of the following occurs:

(i) The residency requirement established in paragraph (3) of subsection (a) of Section 2023.02 of this Code is not met or the Qualified Physician ceases to be a Resident Individual of Puerto Rico;

(ii) He ceases to be a Qualified Physician, as defined in this Code;

(iii)  He ceases to practice his profession on a Full-Time basis in Puerto Rico;

(iv)  He fails to fulfill the annual community service hours in required under Section 2023.02(b) of this Code; or

(v) He fails to meet any other requirement established in this Code or in the Incentives Regulations, a circular letter, or administrative determination.

(b) If a Decree is revoked under the aforementioned grounds, the individual shall be required to remit to the Department of the Treasury an amount equivalent to all the unpaid income taxes on account of Eligible Income and Eligible Dividends of Qualified Physicians for the three (3) Taxable Years prior to the revocation of the Decree or for the duration of the Decree, whichever is less. Said payment shall be remitted not later than sixty (60) days after the effective date of the revocation of the Decree. If the physician, however, furnishes satisfactory evidence attesting to the fact that such noncompliance was due to a disability or illness whether his, his spouse’s, his children’s, or his parents’, the Secretary of the DEDC shall proceed with the Decree revocation, but the individual shall only be required to remit to the Department of the Treasury an amount equivalent to all the income taxes unpaid on account of Eligible Income and Eligible Dividends of Qualified Physicians beginning the Taxable Year of the revocation.

SUBCHAPTER E – YOUTH PROGRAMS, STUDENT INTERNSHIPS, ENTREPRENEURSHIP, AND FIRST JOB EXPERIENCE FOR YOUTHS, AND ELDERLY PROGRAMS

Section 2025.01.- Youth Programs, Student Internships, Entrepreneurship, and First Job Experience for Youths

(a) It shall be the public policy of the Government of Puerto Rico to develop and promote programs, initiatives, internships, and first job experiences for youths as well as initiatives that promote the creation of microbusinesses or the development of self-sufficiency and the entrepreneurial culture within out youths in a manner that is not limited to formal teaching in a classroom. Through these programs, Youths shall have development experiences that foster an enterprising and innovation culture that allows Youths to enter the labor market having acquired the best skills and/or have enough support to become new entrepreneurs.

For purposes of this Section, the term “Youths” means every Resident Individual of Puerto Rico between the ages of thirteen (13) and twenty-nine (29) years.

(b) Our goal with these programs is for Youths to be able to acquire experiences, knowledge, and educational skills, and become part of the forward- thinking culture open to entrepreneurship which allows them to have the utmost professional and social development and performance as well as guarantee their socioeconomic wellbeing, and promote the development and the attainment of their aspirations as citizens of Puerto Rico.

The Secretary of the DEDC shall prescribe in the Incentives Regulation the criteria and requirements applicable to the internship applications, provided that participants shall be students at the vocational, technical, undergraduate, graduate or postgraduate level who have completed at least one academic semester leading to the appropriate degree and are enrolled in duly accredited institutions. In doing so, the Secretary of the DEDC shall prescribe in the Incentives Regulations the criteria and requirements that promote entrepreneurship, an enterprising culture, innovations, as well as their scope and operations.

(d)[sic] The funds for the program described in this Section shall derive from the Economic Incentives Fund.

Section 2025.02.- Programs for the Elderly

(a) It shall be the public policy of the Government of Puerto Rico to promote and achieve the full development of Elderly Persons through education and training so they can enter the workforce and/or become entrepreneurs and thus contribute to Puerto Rico’s economic development.

(b) The intent of the Programs for the Elderly is that they are able to enter the workforce and contribute as part of the productive sector, as well as develop their potential as entrepreneurs so that, in turn, they further economic growth through their entrepreneurial efforts, thus guaranteeing their economic welfare in the long-term.

(c) The Secretary of the DEDC shall prescribe in the Incentives Regulations the criteria and requirements applicable to the Programs for the Elderly as well as their scope and operations.

(d) The funds for the program described in this Section shall derive from the Economic Incentives Fund.

SUBCHAPTER F – MY FUTURE ACCOUNT

Section 2026.01.- My Future Account

(a) For purposes of this subchapter, the term My Future Account shall mean a trust created or organized by the Government of Puerto Rico under the laws of the Government of Puerto Rico for the exclusive benefit of students of the public education system of the Government of Puerto Rico who meet the following requirements, which shall be stated in the trust instrument:

(1) The account shall be for the sole benefit of students who enroll in the public education system of the Government of Puerto Rico, starting in kindergarten. The account may be available for students in the private schools of Puerto Rico, subject to the regulations to be issued by the Secretary of the DEDC, in accordance with subsection (d) of this Section.

(2) The fund shall be administered by a bank, a savings and loan association, a savings bank, a brokerage firm, a trust company, an insurance company, a federation of savings and credit unions, a savings and credit union, a life insurance cooperative, or any other financial institution designated by the Puerto Rico Fiscal Agency and Financial Advisory Authority (FAFAA) and duly certified by the Financial Institutions Commissioner to act as trustee. The trustee designated in accordance with this subsection shall meet the requirements herein established.

(3) The funds in the My Future Account shall be invested pursuant to Act No. 113 of 1995 and consistent with the objectives of this program to guarantee their feasibility and maintenance in the long-term.

(4) The Government shall make an initial contribution of one thousand dollars ($1,000) for each eligible beneficiary. Provided, that any other person may make additional contributions to the My Future Account, including natural persons whether or not related to the beneficiary, private entities, any agency, instrumentality or public corporation of the Government of Puerto Rico, the Legislative Assembly through special appropriations, the municipalities, and any other public or private natural or juridical person, whether domestic or foreign, to be defined through regulations.

(5) The initial contribution of the Government of Puerto Rico shall derive from the General Fund or any other source as established through special legislation. A private individual or entity may make annual contributions in cash which shall not exceed the maximum amount allowable as contribution to an education savings account, in accordance with Section 1081.05 (a)(5)(A) of the Internal Revenue Code.

(6) The funds shall be held in a common trust or a common investment fund, however, a separate accounting shall be held for each account.

(7) The total balance of the My Future Account shall be distributed to each beneficiary after graduating from high school. Said funds may be used only to pay for the college, technical, or vocational studies, or as initial capital for the business of the beneficiary, and shall be distributed pursuant to the regulations approved for such purposes by the Secretary of the DEDC, in consultation with FAFAA, in accordance with the provisions of subsection (d) of this Section.

(8) If the beneficiary abandons his studies or fails to meet the requirements established in the regulations to receive the distributions from the account, ceases to be a resident of Puerto Rico before graduating from high school, or dies before the entirety of the account funds have been distributed, the My Future Account shall be rendered inactive and the available balance shall be distributed to the persons who contribute, proportionately to their respective contributions; provided, that the money contributed by the Government of Puerto Rico shall revert to the General Fund to be used in the My Future Accounts Program under this Section.

(9) The ownership of the account shall belong to the eligible beneficiary for whom the account was created. The Government of Puerto Rico, however, and any person who has contributed therein shall retain the rights stipulated for in paragraph (i)[sic] of this subsection (a), regarding the return of the amounts contributed under the circumstances described in said Section.

(10) Except as provided in this Section and Section 1081.05 of the Internal Revenue Code, the total balance of the my future account created in the name of the eligible beneficiaries: (i) shall be irrevocable and non-transferable by law, (ii) shall not be subject to forfeiture, revocation, or withdrawal by the persons who contributed the funds, (iii) may not be pledged as collateral for a loan, and (iv) shall remain in the trust until distributed for the purposes established in this Section.

(b) The Puerto Rico Fiscal Agency and Financial Advisory Authority shall be responsible for organizing the trust, executing the appropriate trust instrument, and ensuring that the latter is administered in compliance with the provisions of this Section.

(c) The My Future Account shall be subject to the provisions of Section 1081.05(c) of the Internal Revenue Code pertaining to the distribution of the account assets, Section 1081.05(d) of the Internal Revenue Code pertaining to the tax treatment of the accounts, and Section 1033.15(a)(8) of the Internal Revenue Code pertaining to the tax deduction for account contributions. Likewise, the My Future Accounts trustees shall meet the requirements established by the Financial Institutions Commissioner applicable to the trustees of education savings accounts under Section 1081.05 of the Internal Revenue Code.

(d) The Secretary of the DEDC, in consultation with the Secretary of the Treasury and the Executive Director of the Puerto Rico Fiscal Agency and Financial Advisory Authority shall establish through regulations the eligibility criteria and any other requirements for the My Future Account.

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