How To Apply For A Puerto Rico Offshore Banking License
Puerto Rico wants to boost the economy by attracting more investors, residents and non-residents, to the island. In order to do that, they have made it possible for you to be exempt from both the local income tax, and the federal US tax. As a resident you will use Acts 20 and 22, but even without moving to the island you can take advantage of the laws surrounding the International Banking License also known as International Financial Entities (IFEs).
An IFE has to have:
- Office space.
- 4 or more full-time employees at that office.
- Authorized capital stock of $5 million US or more, at least $250,000 US of that as capital paid into the company when the business license is issued.
- $300,000 US of assets that are unencumbered or deemed as acceptable securities.
The IFE Act requires the maintenance of all of these requirements at all times. All of these can be a lesser amount if they are authorized by the Commissioner.
In order to make an application you will need the following paperwork to be in order.
- Your IFE has to be a corporation, LLC, partnership, or some other legal entity.
- The name of your IFE must include the word “Overseas”, “International,” or “Foreign,” or something like that to show it is from somewhere other than Puerto Rico.
- The principal address of your place of business in Puerto Rico.
- The financial details as described previously.
- The reason you started your company. This needs to include what type of business operations you offer, and you need to be sure they are authorized under the IFE Act.
If you want to apply, you will go through a 2 step application process.
Step One of the IFE Application Process
After your organization’s documents are all prepared, you file the application for a permit with the Commissioner. You make the application in writing, and swear it in front of a notary public.
Put together the package of papers for your application:
- drafts of organizational documents proposed to establish your IFE
- your business plan
- the $5,000 US non-refundable application fee
- The personal history and financial information about every persons who will own or control 10 % or more of the capital in this IFE and the same information about the officers and directors of the company
- the number of proposed employees
The Commissioner will then review your application.
Step Two of the IFE Application Process
Step two of the application process starts after the Commissioner approves the initial application and you have received your permit to organize your IFE. Then you must file more papers.
- the organizational documents
- a copy of the original permit to organize with the Puerto Rico State Department
The initial permit is in effect for 6 months. Once you organize your IFE, lease or buy your offices, and contribute the capital required you can finally file for the final issuance of your IFE license.
The Commissioner grants, conditionally grants or denies final license applications based upon his consideration of your documentation.
The IFE Act gives you and the other shareholders in your IFE several tax breaks.
- A 4 % tax rate on net income through IFE Activities
- Municipal and property license tax exemption on those activities
- Exclusion of interest, finance charges and participation in any benefits of partnership.
For shareholders, their tax benefits are:
- a 6 % tax for resident shareholders on distributions of profits or earnings
- Complete exemption from Puerto Rico income taxes on any distributions to non-resident shareholders
International Financial Entities in Puerto Rico offer substantial benefits to anyone from the rest of the US and the world who wishes to do business in Puerto Rico. The steps to setting up the entity do require the knowledge and skills of a professional accountant in order to be certain of their acceptance by the Commissioner.
If you are interested in creating an IFE, or you already have one and require financial advice mail us.
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