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The Corporation of Individuals is not subject to the corporate income tax, but rather, like an S corporation or a partnership, it is merely a pass-through entity. The income, deductions, gains, losses, and credits flow through to its shareholders with the same characteristics as in the hands of the corporation.
To qualify for the exemptions, you must become a bonafide resident of Puerto Rico. This implies residing on the island for more than 183 days per year, filling out IRS forms, such as form 8898 and applying for a tax exemption decree from the Secretary of Economic Development and Commerce of Puerto Rico.
Act No. 164 of 2009(See), General Corporations Act, places Puerto Rico at the forefront of laws on legal entities. This statute is intended to streamline the management of these legal entities and simplify the procedures contemplated therein.
LLCs are pass-through tax entities, where income and losses pass through the business and onto the members to report on their personal income tax return. Corporations are more advanced for a business owner to take care of during tax season.
Act 22 - The Individual Investors Act In order to encourage the transfer of such individuals to Puerto Rico, the Act exempts from Puerto Rico income tax their passive income, which may consist of interest, dividends, and capital gains. See the Other tax credits and incentives section for more information.
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