Film Incentives: A Legal Framework

Puerto Rico Film industry Economic Incentives
Act No. 27 of March 4,2011

Puerto Rico offers a 40% tax credit of production costs paid to residents of Puerto Rico for services physically performed in the island, that are directly attributable to the preproduction, production and postproduction of audiovisual projects.

The island offers an additional 20% tax credit of production costs paid to non-residents “Above-the-Line”, including producers, directors, writers and talent. The production company will retain and pay to the Treasury Department of Puerto Rico a tax fee of 20% of the compensation, which is 100% transferable against US Federal taxes.

These incentives are available in the form of transferable tax credits and can be cashed-flowed by utilizing certain financial mechanisms. The annual credit cap is $50 million in tax credits.

Qualifying Projects 

The following projects qualify for the benefits under the Act: 

  • Feature films
  • Short films
  • Documentaries
  • TV programs
  • Series in episodes
  • Mini series
  • Music Videos
  • National and international commercials
  • Video games
  • Recorded live performances
  • Original soundtrack and dubbing

There is no content and principal photography requirement. 

Commercial distribution outside of Puerto Rico is required, except for feature films, short films and series. 

The minimum spend requirement is $100,000, except for short films ($50,000 or more). 

Qualifying Expenses 

Expenses include, but not limited to: 

  • The story and script                                                                           
  • Wardrobe, accessories and related services
  • Set construction and operations                                   
  • Post, Editing, and related services
  • Leasing of vehicles, food and lodging                                                         
  • Interest and financing costs           
  • Airfare (if purchased through a Puerto Rico based travel agency)
  • Photography, sound synchronization, lighting and related services

 If 50% or more of principal photography is shot in Puerto Rico, development payments to Puerto Rico residents can qualify. 

Tax Credit Benefits 

Tax credits are confirmed by the Treasury Department after an audit of expenses by a CPA hired by the production company (the Auditor). The production company must pay a fee to the Treasury Department of 1% of the certified qualifying spend.

There is no recapture against buyers and tax credits do not expire.

The Treasury Department may advance 50% of the estimated tax credit. The Auditor must certify that 40% or more of production costs in Puerto Rico were paid, or a bond in which the Secretary of the Treasury is designated as beneficiary will be required. The balance of the tax credit shall be available when the Auditor certifies the rest of qualifying spends.