Esta ley enmienda la Ley de Incentivos Contributivos de 1998 para incluir actividades de valor añadido relacionadas con la operación del Puerto de las Américas como actividades elegibles para beneficios contributivos. Define estas actividades, como almacenamiento, consolidación y envío de mercancía, reempaque y acabado de productos semiprocesados, y otras actividades de administración y gestión de bienes asociadas al puerto. Establece que estas actividades se considerarán productos manufacturados a efectos de la ley, siempre que cumplan ciertos requisitos y sean avaladas por las entidades pertinentes.
(Approved December 25, 2002)
To add paragraph (11) to subsection
(d) ; add a third paragraph to subsection
(g) , and amend paragraph (1) of subsection
(h) of Section 2 of Act No. 135 of December 2, 1997, as amended, known as the "Tax Incentives Act of 1998," in order to provide as eligible activities for the purpose of tax benefit provided in this Act, those value added activities that shall be established in the Port of the Americas.
Act No. 135 of December 2, 1997, as amended, known as the "Tax Incentives Act of 1998," supports the manufacturing sector and abroad services industry by granting tax benefits, which allow eligible enterprises to establish in Puerto Rico so that they can enjoy said benefits in the measure that their operations become financially successful. On the other hand, the Port of the Americas, which is being developed by the present government administration, requires the completion of a series of economic activities in its surrounding area related to the use of the Port, which are conceptualized as Value-Added. Therefore, it is figured that a series of the industries that should be established to support the Port of the Americas, would not fall under the definition of "manufactured products," nor under services for markets outside of Puerto Rico, toward which the "Tax Incentives Act of 1998" is currently oriented. However, said industries have a potential of great value for the economy of Puerto Rico. The following could be some
typical industries that may be located in the Transshipment Port of the Americas: $\checkmark$ Warehouses in which goods or products to be consolidated and shipped outside of Puerto Rico through the Port of the Americas shall be provisionally deposited or stored; $\checkmark$ Repacking of goods or products to be consolidated for shipment through the Port of the Americas; $\checkmark$ The finishing of semi-processed products to be shipped to regional markets and other commercial or mercantile service activities related to the administration and management of related finished, semi-processed, or semi-manufactured goods or products that are a part of, or routed through the Port of the Americas.
New manufacturing processes are being implemented through the global economy, which, due to their nature, generate intermediate goods and other types of businesses. Therefore, the new global economy, has developed great importance towards the creation of a critical mass of individually-processed goods, which require precise logistics and availability of inventory, known as "justo a tiempo," or "just in time," and "in time to market."
Therefore, the management of chains of supplies and logistics functions has become a continuously important activity for a medium-size and large entrepreneurial sector, which now shall, not only manage the production processes, but also everything concerning the logistics involved in the management of the flow of supplies or components, inventory, and assembly operations. The above generally requires a significant activity of specialized functions within the chain of supplies. Value-Added is an activity related to
the management of the chain of supplies, which goes farther and involves the processing of the merchandise to be transshipped, such as mixing, labeling, mounting or assembling activities for the subsequent exporting of the resulting product.
The Port of the Americas shall count on Value-Added activities to be established in modern facilities, that will include industries related to this type of activities such as those mentioned above.
To the effects of offering tax incentives similar to those of the manufacturing enterprises already covered by the "Tax Incentives Act of 1998", the following amendments to said Act are proposed, so that the Value-Added activities that are established with regard to the operations of the Port of the Americas, can also enjoy said tax benefits.
Section 1.- To add paragraph (11) to subsection
(d) ; add a third paragraph to subsection
(g) ; and to amend paragraph (1) to subsection
(h) of Section 2 of Act No. 135 of December 2, 1997, as amended, to read as follows: "Section 2.- Definitions.- For the purposes of this Act, the following terms, phrases and words shall have the meaning and the extent stated below:
(a) $\ldots$
(b) Eligible Business: (1) $\ldots$ (11) Value-Added Activities related to the operation of the Port of the Americas, such as storage, merchandise consolidation and shipment thereof; re-packing of consolidated products for shipment from the Port of the
Americas; the finishing of semi-processed products for shipment to regional markets and any other business or service activity related to the administration and management of goods or finished, semi-processed, or manufactured products that are associated with, are part of or pass through the Port of the Americas; Provided, that this eligibility shall be subject to the generated Value-Added activity will represent not less than seventy (70%) percent of the total business of the local commercial entity which receives the benefit. ...
(g) Manufactured Product: Shall include products transformed from raw material into commercial articles, designated articles, and any product with regard to which substantial industrial operations are carried out in Puerto Rico, which, in the judgment of the Secretary of State, deserve to be considered as manufactured products under this Act, due to their nature and extent, the technology required, the substantial employment provided, or any other benefit represented by operations, for the welfare of Puerto Rico.
Subcontracting for production in Puerto Rico of one or several products, or the subcontracting of all or part of the manufacturing process of products covered by an exempted business decree, may be permissible, and the industrial development income from the sale of said products manufactured in Puerto Rico under a subcontract, may be exempt under the terms and conditions of the decree of the exempted business, provided, that the Secretary of State determines beforehand that said subcontracting would be in the best interests of Puerto Rico, upon consideration of the factors indicated in the above paragraph.
Furthermore, Value-Added activities related to the Port of the Americas operation as provided in subsection
(d) (11) of this Section shall be deemed as manufactured products, for the purposes of this Act, provided they are endorsed by the Executive Director of the Industrial Development Company, accepted by the Board of Directors of the Port of the Americas, and the Secretary of the Treasury of Puerto Rico.
(h) Industrial Unit: (1) A plant, factory, machinery or ensemble machinery and equipment with the capacity to perform the main functions used in the production of a manufactured product or article designated in a commercial scale, or Value-Added activities related to the Port of the Americas operations that have been qualified, even when certain facilities are shared with other industrial units of lesser importance such as parts of buildings, power plants, warehouses, material conveyors, or other production facilities, or performs certain industrial operation outside of said industrial unit. An industrial unit may subcontract the production in Puerto Rico of one or several products, or all or part of the manufacturing process of products covered under the exempted business decree and the subcontractor will also qualify as an industrial unit, as long as the Secretary of State determines that said subcontracting shall be in the best interests of Puerto Rico, in consideration of the terms and conditions established in its decree. (2) ... (3) ...
(i) ... ... Section 2.- This Act shall take effect immediately after its approval.
I hereby certify to the Secretary of State that the following Act No. 300 (H.B. 2766) of the $4^{ ext {th }}$ Session of the $14^{ ext {th }}$ Legislature of Puerto Rico:
AN ACT to add paragraph (11) to subsection
(d) ; add a third paragraph to subsection
(g) , and amend paragraph (1) of subsection
(h) of Section 2 of Act No. 135 of December 2, 1997, as amended, known as the "Tax Incentives Act of 1998," in order to provide as eligible activities for the purpose of tax benefit provided in this Act, those value added activities that shall be established in the Port of the Americas, has been translated from Spanish to English and that the English version is correct.
In San Juan, Puerto Rico, today $8^{ ext {th }}$ of October of 2004.
Elba Rosa Rodríguez-Fuentes Director