Offshore Banking License in Puerto Rico

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Offshore Banking License in Puerto Rico

In 1989 Puerto Rico (PR) adopted the International Banking Center Regulatory Act Number 52 (Act 52) to promote international banking to compete with the offshore banking centers in the Caribbean. Act 52 granted tax exemptions to international banks and give a broad range of powers in leasing, insurance, securities and international banking. In 2012 Act 273 replaced the Act 52 with the objective of improving the conditions for conducting international banking in PR. Act 273 authorizes International Financial Entities to engage in traditional banking and financial transactions with non-residents of PR.The PR Office of the Commissioner of Financial Institutions (OCFI) is the entity responsible to license International Financial Entities (IFE) to conduct specified financial transactions. Once licensed the IFE can request a Tax Grant from the PR Department of Economic Development of Commerce to receive the following benefits for 15 years:

1) A fixed 4% PR income tax rate in the net income, increased up 10% at renewal.
2) Full property and municipal license tax exemptions.
3) 6% income tax rate on distributions to PR resident shareholders.
4) 0% tax rate on distributions to non-PR resident shareholders.

The IFE Licensing Requirements

The 273 Act determine a series of requirements for the granting of an international banking license:
1) Articles of Incorporation and by-laws.
2) Rent an office space.
3) Hire at least 4 employees.
4) Authorized capital at least $5,000,000.
5) $300,000 financial guarantees acceptable to OCFI.
6) Application to the OCFI for a permit to organize an IFE.
7) $5,000 non-refundable fee and same annual fee if approved.
8) Personal statements for 10% or more shareholders.
9) Comply with US Bank Secrecy Act, US Patriot Act and Office of Foreign Asset Control (OFAC).
10) After these requirements are completed, the Tax Grant will be authorized for 3 consecutive 15-year period for a total of 45 years. The extensions are requested from 6 to 24 months before the end of applicable 15-year term.

Eligible Activities Under IFE License

1. Accept deposits and borrow money from non-residents of PR.
2. Accept deposits and borrow money from certain government institutions
3. Place deposits in any PR bank and foreign banks organized in PR.
4. Make loans to non-residents of PR
5. Issue letters of credit to non-residents or PR
6. Issue letters of credit for export activities to both PR resident and non-residents.
7. Discount money orders and bills of exchange to non-PR residents.
8. Invest in securities and stocks as well as PR government bonds exempt from tax.
9. Carry transactions in any currency and gold or silver and foreign currrency trade.
10. Underwrite and trade notes and debt instruments issued by a non-PR residents
11. Engage in trade financing of import  and export of raw materials and finished goods.
12. Act as a fiduciary, executor, administrator, registrar of stocks and bonds, custodian, trustee, agent and any other fiduciary capacity with non-residents of PR after obtaining a special permit from the government.
13. Acquire and lease personal property on behalf of non-PR residents.
14. Buy and sell security outside of PR on behalf of non-PR residents.
15. Act as a clearinghouse of instruments of foreign persons
16. Organize and manage international financial entities not related to residents of PR.
17. Lend or guarantee loans originated in some governmental institutions.
18. Purchase sub-standards non-performing loans from a PR bank.
19. Establish branches outside PR in the continental USA or in other foreign country.
20. Provide the following services:
  • a) Asset management.
  • b) Management of alternative investments.
  • c) Management of private capital.
  • d) Management of hedge funds.
  • e) Management of pools of capital.
  • f) Administration of trusts.
  • g) Management of escrow  funds for non-residents of PR.

This type of banking license will give, after a separate process of application, scrutiny and due diligence, access to the US federal banking system. But for this, the board of directors and officers should be quialified US bankers with a long proved history in the US banking industry. 

If this is not compelling enough, we are glad to inform you that there are additional benefits to opting for Puerto Rican residency for individual investors. If you want to hear more about it and make sure your application will be successful, give us a call and one of our experts will be happy to take your case and see it through, resulting in opening new horizons for your organization and assets.

Our team is trained to provide you with the necessary information for the formation of your project.

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Fulton Abraham Sanchez, CPA

Fulton Abraham Sánchez, CPA I am Certified Public Accountant, specialized in Tax Planning & Offshore Strategies for Real Estate, Hedge/Equity Funds, Fintech, Crypto, Expats, IRS Debt Resolution. You can email me and follow us on Facebook : FAS CPA & Consultants.

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