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ALERT New Nautical Guidelines for Puerto Rico Bring Tax Relief

The Office of Air & Maritime Access and Nautical Tourism has released the guidelines to the new Nautical Tourism Act in Puerto Rico. It’s big news as their tax situation is becoming much more friendly to marine businesses and nautical tourism. This is a much needed break for Puerto Rico on the whole and should bring more boats and yachts to their waters.

GUIDELINE TO THE NAUTICAL TOURISM ACT 2009

Eight legislative bills have been introduced and approved by the Puerto Rico Legislative Assembly and were signed into law by Governor Luis G. Fortuño on December 16, 2009. These bills form part of the Puerto Rico Tourist Reform, which is a government initiative to attract more hotel development and more demand to Puerto Rico as a tourist destination.

One of the legislative measures that make up the Puerto Rico Tourist Reform is the Nautical Tourism Act 2009 (“NTA”). This Act sets the standards to define Nautical Tourism and Tourist Marinas, in order to attract and set a quality of standard for this industry in Puerto Rico.

The Nautical Tourist Act 2009 provides:

  1. It grants the Tourism Company the power to regulate all maritime tourism activities under and subject to the parameters established in this Act, including issuing of certificates to the companies carrying out Nautical Tourism activities, in order to receive the incentives provided under the Tourism Development Bill of 2009, which now recognizes nautical tourism as an eligible activity and therefore allows the industry to benefit from the tax exemptions. This streamlines the process which in the past required the approval of the Public Service Commission and The Department of Environmental and Natural Resources (“DENR”). The NTA eliminates the Public Service Commission and transfers its jurisdiction to the Tourism Company.
  2. For boaters who want to set up a Nautical Tourism business, this bill covers vessels such as sail, power and even jet skis or water sports equipment. For yachts 32-feet and greater, the vessel must be rented, chartered or actively used in a tourist-related business for at least 6 months of the year in order to obtain tax incentives and exemptions being offered. Vessels under 32-feet must be engaged in a tourism-related business for the 12 months of the year in order to get tax incentives.
  3. The NTA eliminates the entry fee for in transit vessels, and also allows them to stay in Puerto Rico for periods of up to one (1) year without the need to obtain a license and registration in Puerto Rico (the current law allowed them for a period of 60 days only).
  4. Boaters that want to have their vessels repaired in Puerto Rico can do so and are not going to be charged entry fee for the period of time the boat is being repaired.

Another of the legislative or bills that is part of the Puerto Rico Tourist Reform is a Tax Incentives Bill. The NTA of December 16, 2009 goes hand in hand with the Tourism Development Bill which will be signed into law by the Governor by the end of January. The Tourism Development Bill provides for:

  1. 100% Sales Tax exemption for people who buy a boat in Puerto Rico to use in a Nautical Tourism related business.
  2. 100% Municipal Tax exemption, which is a tax charged by the Municipality based on the profits generated by the business located in such municipality.
  3. 90% Income Tax exemption on Nautical Tourism related businesses. For example, if a Florida-headquartered charter boat company had a base in Puerto Rico and grossed $1 million in revenue from that business in a calendar year. That business would be taxed on only $100,000 at a rate of 29% which is the rate for foreign-based business.
  4. 90% property tax exempted, provided that, if the business operates in the island municipalities of Vieques and/or Culebra the companies will receive 100% tax exemption instead of the 90% for costs related to construction in “mainland” Puerto Rico.

For boaters who want to visit Puerto Rico as Nautical Tourists: Vessels that stopped in Puerto Rico used to be required to pay an entry fee that represented 7% of the dollar value of their vessel. After its signage, there will be no entry fee in the new Nautical Tourism Bill.  Before, vessels that stayed in Puerto Rico longer than 60 days were required to license and register their vessels in the Commonwealth and this resulted in additional fees.

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