P.R. Laws tit. 13, § 10030
(a) Tax exemption concessions to successor businesses. — A successor business may enjoy the exemptions provided by this chapter as long as:
(1) The predecessor exempted business does not cease to operate for more than six (6) consecutive months prior to or after the filing of the tax exemption application of the successor business nor prior to the expiration of the tax exemption period of the successor exempted business, unless such occurrence is due to extraordinary circumstances.
(2) The predecessor exempted business maintains its average annual production and employment for the last three (3) taxable years ending with the close of the taxable year preceding the filing of the tax exemption application of the successor business, or for such part of such period as may be applicable as long as the tax exemption of the successor business is in force, unless such average cannot be maintained due to extraordinary circumstances.
(3) The average annual employment of the successor business is greater than twenty-five percent (25%) of the average annual employment of the predecessor exempted business referred to in clause (2) above. The Governor shall have discretion to determine under what conditions the exemption should be granted and, within the limits established by this chapter, to limit and/or establish the number of jobs of the successor and/or the predecessor business.
(4) The successor business does not use physical facilities including, but without limitation, land, buildings, machinery, equipment, inventory, supplies, trademarks, patents, marketing outlets having a value of twenty-five thousand dollars ($25,000) or more and which have been previously used by a predecessor exempted business. The foregoing provision shall not apply to additions to real property devoted to industrial development, mentioned in § 10025(b)(1) of this title, even when said additions use physical facilities with a value of twenty-five thousand dollars ($25,000) or more and which are being used or have been used by the main property devoted to industrial development or by the predecessor exempted business. Provided, That the Governor may determine, upon the recommendation of the agencies reporting on tax exemption, that the use of such physical facilities, or the acquisition of any industrial unit of a predecessor exempted business or hotel that is or was in operation, will be in the best economic and social interests of the People of Puerto Rico, in view of the nature of the physical facilities, the number of jobs, the amount of the payroll, the investment, the location of the project, or other factors that in his judgment justify such a determination.
The Governor shall exercise his authority to determine the conditions under which the tax exemption should be granted, with power, within the limits established by this chapter, to limit the period, the percentage of the exemption and the taxes to be exempted, to condition the operations and the number of jobs, and to grant the same, as it may be necessary and convenient for the best interest of the People of Puerto Rico, in consideration of the above-mentioned factors.
(b) Exceptions .—Notwithstanding the provisions of clauses (1), (2) and (3) of subsection (a), the conditions of said clauses shall be considered complied with, when:
(1) The successor business:
(A) Assigns to the predecessor exempted business such portion of its annual production and/or employment as may be necessary so that the annual production and/or employment of the predecessor exempted business may be maintained at or be equivalent to the annual production and/or employment that the predecessor exempted business is required to maintain under the provisions of subsection (a)(2) of this section. The assignment herein provided for shall not be covered by the exemption of the successor business, but the successor business shall enjoy the exemption, if any, with respect to the portion so assigned which the predecessor exempted business would enjoy thereon, as if such portion would have been its own annual production in fact. In the event that the exemption period of the predecessor exempted business has expired, then the successor business shall pay taxes on such portion of its annual production as it may assign to the predecessor exempted business, and
(B) declares as not covered by its exemption, for the purposes of the property tax only, that portion of its physical facilities as may be needed so that the investment on physical facilities of the predecessor exempted business be maintained at or be equivalent to its total investment on physical facilities at the close of the taxable year of such predecessor exempted business, prior to the filing of the said tax exemption application of the successor exempted business, less depreciation thereof as of the date the provisions of this subsection are made use of and less any decrease in the investment on physical facilities that might have occurred prior to the date the provisions of this subsection are made use of, as a result of an authorization by the Governor to use the same under the provisions of subsection (a)(4) of this section. In those cases in which the tax exemption period of the predecessor exempted business has not expired, then the successor exempted business shall enjoy the exemption which the predecessor exempted business would have enjoyed if the same had, in fact, been used in producing its industrial development income, with respect to such portion of its investment on physical facilities as, for the purposes of this subsection, it declares as not covered by its exemption.
(2) The Governor determines, upon the previous recommendation of the agencies that file tax exemption reports, that the operation of the successor business is in the best economic and social interests of the People of Puerto Rico, in view of the nature of the physical facilities, the number of jobs, the amount of the payroll, the investment, the location of the project, or any other factors that, in his judgment, would justify such determination, including the financial situation the particular exempted business faces, and exemptions from compliance in whole or in part with the provisions of clauses (1)—(3) of subsection (a) of this section.
In the case of an application for dispensation under clause (2) of this subsection, the Governor shall exercise his discretion to determine the conditions under which the dispensation should be granted, with power, within the limits established by this chapter, to limit the period and/or percentage of the exemption, and the taxes to be exempted, to condition the operations and the number of jobs and to grant the same as may be convenient and necessary for the best interests of the People of Puerto Rico, in consideration of the above-mentioned factors.
(c) Obsolete product. — For the purposes of this section, it shall be deemed that a manufactured product is not substantially similar in the case of any petitioner who applies for coverage under this subsection, and proves to the Governor’s satisfaction that the product that it manufactures or was manufactured by a similar predecessor exempted business of the petitioner, has lost its market due to improved techniques or improved manufacturing processes which have made it obsolete, and that it has been substituted by an improved product that will be manufactured under the subsequent tax exemption application. The Governor shall exercise his discretion to determine the conditions under which he will grant the exemption, with power, within the limits established by this chapter, to limit the period and/or percentage of the exemption and the taxes to be exempted, to condition the operations and the number of jobs, and to grant the same as may be convenient and necessary for the best interests of the People of Puerto Rico, in consideration of the aforementioned factors.
History —June 2, 1978, No. 26, p. 55, § 7; July 20, 1979, No. 176, p. 460, § 5.