Pharmaceutical and life sciences companies with manufacturing operations in Puerto Rico could be subject to a new six-year excise tax intended to stimulate the commonwealth’s struggling economy. Without much fanfare, nor public hearing, lawmakers met over a rare weekend session to formulate the basis of Act 154, which modifies the Puerto Rico Internal Revenue Code.
Signed into law October 25 by Governor Luis G. Fortuño, the Act establishes a new source-of-income rule and levies a temporary excise tax on certain purchases by offshore companies whose gross receipts exceed $75 million. The excise tax is imposed in lieu of the Puerto Rico income tax that otherwise would arise from application of the new source rule.
The tax, which takes effect January 1, 2011, scales down from 4 percent in 2011 to 1 percent in 2016. It could apply to 40 to 50 multinational firms and add an estimated $5.8 billion to commonwealth coffers during the next six years.