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License your International Financial Entity in Puerto Rico – Part 3

Posted by: Christian Reeves
Category: Puerto Rico

I’ve covered how to license your financial entity in Puerto Rico in great detail in previous posts. In this article, I will consider capitalization. How much money do you need to have ready for the permit to organize, permit to operate, and operating stages of the process?

Puerto Rico’s capital requirements are relatively low when you compare them to other prime jurisdictions. However, you will see that this can be misleading.

Minimum capital requirements during the permit to organize the stage is $550,000. Meaning that this amount of money needs to be shown in the application packet. This amount of money must be deposited into a bank in Puerto Rico AFTER your permit to organize is approved.

The amount of $550,000 should be separated into two ways. $300,000 should be located in a Certificate of Deposit, while the $250,000 should be paid in share capital. Proof of how the money was obtained should be included in the packet application.

As part of the capital requirements, the individual or corporation applying as an international financial entity to be established in Puerto Rico must also show evidence of their ability to put in up to $5 million dollars over the first 3 years of operation.

Five million dollars is also the amount of money that you should not exceed in shares. You must include in your application how the shares will be divided in your company, this is necessary to incorporate your corporation inside of the country.

Your business plan needs to come with a financial section where you can believably prove to the committee reviewing your application that your offshore bank or international financial entity will reach $2.5 million in two years.

This amount of money, the $2.5 million, is the least amount that you will be required to prove to the authorities. If you plan on earning more than that then you need to provide a deposit that is much larger than the minimum capital requirements.

In my experience, the more money that you bring into the country the better your chances are of getting your application approved. The government of Puerto Rico will take away every obstacle you have in front of you if you promise to make a significant investment in the country.

The same goes for the number of employees that you hire from Puerto Rico. The bigger the economic impact that you make on the island, the greater the chances are of your application to be accepted.

Besides the mandatory capital requirements that you have to comply with, there are other tax and employee requirements that are required by the government of Puerto Rico if you wish to obtain your guaranteed tax rate of 4% for a period of 10 years.

A 4% tax rate is nothing if you compare it to the 25% federal tax rate banks have to pay when they open a branch in Florida. United States Federal Taxes do not apply to international financial entities in Puerto Rico.

As an offshore bank in Puerto Rico, you are not allowed to withhold tax on dividends to foreign holding companies or foreign shareholders. For this reason, banks in Puerto Rico are tax-efficient investments for foreign (non-US) persons.

Tax incentives in Puerto Rico only apply to Puerto Rico sourced income and transfer pricing issues are considered if you have operations that are located within the United States of America.

I mentioned earlier that the minimum number of employees that you must have in Puerto Rico is 4, but I recommend at least 5 in case one of them quits or is fired. This is due because the major reason for the tax incentives to international financial entities is to bring quality jobs into the territory.

Out of the four employees that you must have in the office in Puerto Rico the most important one is the Chief Compliance Officer. He will be the one responsible to talk to the authorities and make sure that everything is in order.

Any citizen from the United States, green card holder, or foreign person with a legal permit to work in the United States can move to Puerto Rico and count as one of your five registered employees.

I hope you’ve found this article on Licensing your International Financial Entity in Puerto Rico to be helpful. For more information, or for assistance in starting a bank in Puerto Rico, contact us at info@banklicense.pro