P.R. Laws tit. 13, § 10005
(a) Applications. — Any natural or [juridical] person who has established or proposes to establish in Puerto Rico an eligible business, may apply to the Governor of Puerto Rico for the benefits of §§ 10001—10011 of this title. The grants of tax exemption under §§ 10001—10011 of this title shall be considered in the nature of a contract between the grantee and the Commonwealth of Puerto Rico. The Governor may include in grants of tax exemption hereunder such terms and conditions as in his judgment will further the purposes of industrial development of §§ 10001—10011 of this title.
(b) Industrial Tax Exemption Office. —
(1) An Industrial Tax Exemption Office is hereby established which, for administrative purposes, shall be annexed to the Department of State of Puerto Rico. The Governor shall, by and with the advice and consent of the Senate, appoint a Director of the Industrial Tax Exemption Office.
(2) The Director shall appoint the personnel necessary to carry out the provisions of §§ 10001—10011 of this title. The Director shall make arrangements for such public hearings as he may deem necessary and shall require of all applicants for tax exemption the presentation of such evidence as will justify the exemption applied for. The Director or any other person whom the Governor may designate shall hear the evidence presented in relation to any application for tax exemption; shall have power (A) to summon witnesses and take their testimony as to the facts alleged or in any way related to the tax exemption applied for, and (B) to administer an oath to any person or persons testifying before him, and shall make a report to the Governor on the evidence adduced, together with his recommendations in the matter.
(3) The Industrial Tax Exemption Office shall draft such rules and regulations as it may deem necessary to carry out the purposes of §§ 10001—10011 of this title, which rules and regulations shall, upon their approval by the Governor and their promulgation by the Secretary of State of Puerto Rico, have the force of law, and shall be published in one or more newspapers of general circulation in Puerto Rico.
(4) Until such time as the Governor may otherwise provide, the Industrial Tax Exemption Office established by §§ 10001—10011 of this title shall, on and after the date §§ 10001—10011 of this title take effect, be directed and administered, in accordance with the terms of §§ 10001—10011 of this title, by the Director of the Industrial Tax Exemption Office, and the staff of such Office, heretofore created and appointed under section 8 of Act May 13, 1948, No. 184, p. 482, as amended, and said director shall exercise the powers and carry out the duties and obligations imposed on the Industrial Tax Exemption Office and its director by §§ 10001—10011 of this title.
(c) Administrative finality. — All decisions and findings of the Governor of Puerto Rico under §§ 10001—10011 of this title shall be final and no judicial or administrative appeal or other proceeding shall lie against the same unless otherwise specifically provided.
(d) Revocation of tax exemption. — The Governor, after permitting the person to whom the exemption has been granted to appear and be heard before him or before any person appointed for such purpose, who shall report his conclusions and recommendations to the Governor, and upon the recommendations of the Secretary of the Treasury, Secretary of Justice, Secretary of Labor and Human Resources, the Economic Development Administrator and the Industrial Tax Exemption Office, may or shall revoke any tax exemption granted hereunder, as hereinafter provided:
(1) Permissive revocation. — The Governor may decree such revocation in the following cases:
(A) When the person to whom the exemption has been granted fails to comply with any of the obligations imposed on him by §§ 10001—10011 of this title, by the regulations promulgated hereunder, or by the terms of the declaration of exemption.
(B) When the person to whom the exemption has been granted either does not commence or fails to complete the construction of the installations necessary for the production of the manufactured products which he proposes to produce or fails to commence such production, within the periods fixed for such purposes in the grant of exemption, which periods may be extended by the Governor whenever, in his judgment, just cause exists therefor. Provided, that no period shall be originally fixed in excess of three (3) years from the date of the exemption grant for the commencement of operations.
(C) When the person to whom the exemption has been granted discontinues production on a commercial scale or operations in any business eligible under clauses (1), (2), (3), (5) or (6) of § 10002(d) of this title for more than thirty (30) days without the authorization of the Governor. The Governor shall authorize such discontinuances for periods of more than thirty (30) days when they are the result of causes beyond the control of such person.
The permissive revocation shall be effective from the date when the grantee of the tax exemption incurred in the fault on which the order of revocation is predicated.
In the case of a hotel, when the grantee operates same in violation of the provisions of the existing Minimum Requirements Code for Tax-Exempt Hotels, the Governor may suspend the tax exemption for periods of not less than one (1) year. The periods of suspension or suspensions shall be taken into consideration upon computing the duration period of the exemption.
(2) Mandatory revocation. — A tax exemption granted hereunder shall be revoked by the Governor of Puerto Rico if it was obtained by falsely or fraudulently representing the nature of the product or products manufactured or planted and cultivated, or for being manufactured or planted and cultivated, or the nature or extent of the manufacturing or production process performed or to be performed in Puerto Rico or by falsely or fraudulently representing that the property is or shall be devoted to industrial development or by falsely or fraudulently representing any other facts or circumstances upon which the exemption granted was predicated in whole or in part. In the event of such revocation, all the net income previously reported as industrial development income as well as all distributions thereof shall be subject to the normal tax and the surtax and the taxpayer shall be deemed to have filed a false or fraudulent return with intent to evade the payment of taxes, and, therefore, subject to the penal provisions of the income tax laws in force in Puerto Rico. The tax due in such case as well as any other taxes theretofore exempted and unpaid shall become due and payable and shall be assessed and collected in accordance with the provisions of the tax laws in force.
Nothing herein previously provided under this subsection shall affect the tax exemption granted with respect to property devoted to industrial development which has been leased or otherwise used by a business whose exemption has been mandatorily cancelled or revoked, either under the provisions of this subsection or under the provisions of § 10008 of this title, and the exemption of the property devoted to industrial development shall continue its normal course notwithstanding the fact that the business exemption has been revoked, unless it is shown that such lease or utilization was not undertaken in good faith, that is, that at the time when such property was leased or otherwise made available to the exempted business, the owner or owners thereof had knowledge of the facts that subsequently caused the mandatory cancellation or revocation.
(e) Reports. —
(1) Exemption application reports. — Before deciding on any application for exemption, the Governor shall first consider the reports on each application which shall be submitted to him by the Secretary of the Treasury, the Secretary of Justice, the Secretary of Labor and the Economic Development Administrator, and such other Commonwealth agencies as, in the judgment of the Governor, should make their report on such application. Such reports shall be made by the said government executives within the term the Governor may, in his discretion, fix for the filing of such reports. In the event that any report is not submitted by any of said government executives within the time so fixed by the Governor, the Governor may dispense with the report of such executive and act upon the application for exemption.
(2) Other reports. — Any natural or artificial person covered by the benefits of §§ 10001—10011 of this title shall be under obligation to present to the Secretary of the Treasury of Puerto Rico, pursuant to the provisions of the Political Code, 1902, § 295, and within seventy-five (75) days after the close of the grantee’s fiscal year, a complete list and a correct valuation of all real and personal property declared tax-exempt under the provisions hereof, and which said person possesses in his own right or has in his possession on January 1st of each year; to file annually with the Secretary of the Treasury of Puerto Rico pursuant to the Income Tax Law in force, but independently of the amount of his gross or net income, a separate income tax return, in addition to that which he may otherwise be under obligation to file in relation to the operations of the industry the object of the exemption; to keep, separately, the accounting records relative to the exempted business; to keep such records, make such sworn statements, present such declarations, and comply with such rules and regulations as the Governor may prescribe for the enforcement or other fulfillment of the purposes hereof and as the Secretary of the Treasury of Puerto Rico may prescribe in connection with the levy and collection of all kinds of taxes.
History —Dec. 15, 1953, No. 6, p. 12, § 5; June 14, 1957, No. 46, p. 102; June 30, 1959, No. 98, p. 277, § 3.