DEPARTMENT OF BCONOMIC DEVELOPMENT AND COMMERCE PRIDCO Nor NOS. S QOVZRNMEN* 355 FD Roosevelt Ave. Hato t M. 00918 Box 362350 San Juan, 00936-2350 Tel 787.758.4747 New Tax Incentives Legislations in Puerto Rico PUERTO RICO )(Es IEITER I. Overview On January 17, 2012, the Legislative Assembly of Puerto Rico approved new legislation to promote the economic development of Puerto Rico: (1) Act No. 22, also known as the Act to Promote the Relocation of Individual Investors to Puerto Rico (the "Individual Investors Act) and (ii) Act No. 20, also known as the Act to Promote the Exportation of Services (the "Export Services Act"). The Individual Investors Act seeks to attract new residents to Puerto Rico by providing a total exemption from Puerto Rico income taxes on all passive income realized or accrued after such individuals become bona fide residents of Puerto Rico. This relocation should result in new local investments in real estate, services and other consumption products, and in capital injections to the Puerto Rico banking sector, all of which will accelerate the economy of Puerto Rico. The purpose of the Export Services Act is to establish and develop in Puerto Rico an international export services center. This act seeks to encourage local service providers to expand their services to persons outside of Puerto Rico, promote the development of new businesses in Puerto Rico and stimulate the inbound transfer of foreign service providers to Puerto Rico. The act also creates a special fund for the continuous development of new tax incentives that will promote export services and the establishment of new businesses in Puerto Rico. II. Individual Investors Act A. Applicability The Individual Investors Act applies to any individual investor that becomes a Puerto Rico resident on or before the taxable year ending on December 31, 2035 (hereinafter referred to as "Resident Individual Investor"), provided that su