P.R. Laws tit. 23, § 6341
For purposes of this chapter, the following terms and phrases shall have the meaning stated below:
(a) Tourist activity.— Means:
(1) The ownership and/or administration of:
(A) Hotels, condo hotels, Puerto Rican paradores, agri-lodgings, timeshares and vacation clubs; Provided, That timeshare and/or vacation club ownership, or both per se, shall not be deemed to be a tourist activity, unless the owner is the creating developer or a successor developer, as such terms are defined in §§ 1251 et seq. of Title 31, known as the “Puerto Rico Timeshare and Vacation Club Act,” and guest houses, excluding the operation of casinos, gambling rooms, and similar activities, or
(B) theme parks, golf courses operated by or associated with a hotel that is an exempt business under this chapter, the Puerto Rico Tourist Development Act of 1993, §§ 6001 et seq. of this title or any other similar or analogous law, or golf courses located within a tourist destination or resort, tourist marinas, docking facilities for tourists, agritourism, nautical tourism (it being provided, however, that any marinas in the Island Municipalities of Vieques and Culebra shall be deemed to be tourist marinas for purposes of this chapter), medical tourism, and other facilities or activities that, due to the special attractive features deriving from their usefulness as a source of active or passive entertainment or amusement, constitute a stimulus to domestic or foreign tourists, and any other tourism sector, insofar as the Director determines that such operation is necessary and convenient for the development of tourism in Puerto Rico.
(2) The operation of a business engaged in leasing to an exempt business under this chapter or the Puerto Rico Tourist Development Act of 1993, of property devoted to an activity covered under clauses (1) and (3) of this subsection, except that none of the provisions herein shall apply to contracts known as financial lease contracts. When leasing one or more watercraft to an exempt business described in subsection (oo)(3) of this section, the sail or motor watercraft must be leased to such exempt business for a total period of not less than six (6) months during each calendar year.
(3) The development and administration of sustainable tourism and ecotourism businesses, as provided in §§ 6313 et seq. of this title, and the development and administration of useful natural resources as a source of active or passive entertainment or amusement, including, but not limited to caves, forests, and natural reserves, lakes, and canyons, insofar as the Director determines that such development and administration is necessary and convenient for the development of tourism in Puerto Rico.
(b) Agri-lodgings.— Means any lodging facility established in an active agricultural livestock business with the purpose of providing lodging to transient visitors, to enjoy contemplating nature and/or participate in activities related to the farming and animal husbandry operation or to handcrafting.
(c) Agritourism.— Means the group of activities organized specifically by a bona fide farmer to complement his/her main activity, to which tourists are invited; and these constitute other services for pay.
(d) Guest house.— Means any building, a part thereof, or a group of buildings approved by the Puerto Rico Tourism Company, to be operated for tourism purposes; it shall consist of not less than seven (7) rooms for transient guests, and provide administrative staff twenty-four (24) hours a day, a private bathroom per room, and housekeeping service; and it may provide living quarters for its owners or administrators. Such guest houses shall comply with the provisions of the Regulations of the Minimum Requirements for Lodgings and Paradores in Puerto Rico, promulgated, implemented, and administered by the Puerto Rico Tourism Company.
(e) Casino or gambling room.— Means a gambling room exploited through a franchise issued pursuant to the terms of §§ 71 et seq. of Title 15.
(f) Code.— Means Act No. 120 of October 31, 1994, as amended, known as the “Puerto Rico Internal Revenue Code of 1994”, or any successor law.
(g) Puerto Rico Tourism Company.— Means the public corporation established under §§ 671 et seq. of this title.
(h) License grant.— Means the decree issued pursuant to § 6348(c) of this title, whereby the Director notifies his/her approval to an application properly filed and the conditions imposed thereon.
(i) Condo hotel.— Means the group of units of a building or group of buildings converted to the horizontal property regime or to the regime under the Puerto Rico Condo Hotels Act, §§ 1295 et seq. of Title 31, and which meet the requirements of a hotel; in which not less than fifteen (15) rooms or apartments are devoted to lodging transient persons at all times by means of an integrated leasing program. The term “condo hotel” also includes a group of residential units, in fee simple, within a tourist destination or resort, which also meets all the requirements stated in this subsection.
(j) Total project cost.— Means all those expenses and disbursements incurred by eligible businesses, including:
(1) All expenses and disbursements incurred by the eligible business on account of:
(A) Salaries paid to its employees, land acquisition, construction, habilitation, and marketing until the opening;
(B) pre-opening and opening ceremony expenses, and
(C) payroll and marketing expenses during the first twelve (12) months of operation, except that an exempt business that consists of a timeshare or vacation club ownership plan, the promotion, marketing, and sales expenses and disbursements related to the sale of timeshare or vacation club ownership during the first sixty (60) months after opening all the facilities of said exempt business, are included.
(2) the interest and finance charges (e.g., commitment fees) obtained that has been capitalized during the construction period and during the first twelve (12) months of operation;
(3) hard and soft construction costs incurred in the substantial extension or renovation of an exempt business;
(4) expenses related to the purchase of furniture, fixtures, and equipment, as well as operating supplies and equipment during the first twelve (12) months of operation;
(5) expenses related to the issue of debt to obtain capital for the exempt business;
(6) any reserve or contingency account required by the “Puerto Rico Tourism Development Fund” or any creditor or financial institution;
(7) expenses related to the construction and development of infrastructure and utilities necessary for the construction and development of the exempt businesses;
(8) costs of acquisition or the fair market value, as of the date of the contribution, of facilities used to carry out a tourist activity during a period of thirty-six (36) months prior to the date of acquisition or contribution that meets the renovation and/or extension requirement exceeding one hundred percent (100%) of the purchase price established in subsection (ee) of this section; and
(9) any other expense, disbursement, or investment that the Director determines by regulation.
However, the total cost of the tourism project shall exclude, as a general rule and except when at the discretion of the Director, the best interests of Puerto Rico require otherwise: (i) the money that has been invested before the effective date of the act, and (ii) the money that has been invested before holding the pre- application conference, as defined in subsection (ll) of this section.
Under no circumstance shall the estimate cost of the time invested by the developer or any stockholder of the exempt business be considered for the computation of that which constitutes the total cost of the tourism project.
(k) Tourism investment credit.— It means a credit pursuant to § 6344(a)(1) of this title.
(l) Developer.— Means the investor or any other natural or juridical person who is affiliated to or is owned or directly or indirectly controlled by said investor, who is directly or indirectly responsible for or participates in the construction, development or administration of the tourism project or the exempt business.
(m) Director.— Means the Executive Director of the Puerto Rico Tourism Company.
(n) Tourist development income distribution.— Means any distribution of dividends or profits of an exempt business or a distribution in liquidation of an exempt business and which consists of tourist development income.
(o) Eco-techniques.— Means ecologically responsible design and construction techniques in order to significantly minimize direct or indirect environmental impact and reduce costs, such as, but not limited to, the use of clean technology, solar energy, waste treatment and recycling, production of compost from organic waste, management of waste waters, and alternate water supply for domestic and commercial uses.
(p) Nautical tourism watercraft.— Means motor or sail watercraft with a capacity to transport six (6) or more passengers, operated by tour companies or available for rental to be destined to nautical tourism activities, including mega- yachts for tourism purposes, when the Director determines that such operation is convenient for the development of tourism in Puerto Rico.
(q) Primary issue or offering.— Means the first issue of a security, stock, or share for public sale. Investors that acquire stock in a corporation or shares in a partnership or limited liability company of an underwriter or a public or public- private corporation of the Government of Puerto Rico, who acquired such stock or shares at its primary offering to complete the balance of the capital investment required to close the financing of a tourism project, shall be also deemed as if they had acquired the same in their primary issue for purposes of the credits provided in subsections (a) and (e) of § 6344 of this title.
(r) Governor.— Means the Governor of Puerto Rico.
(s) Hotel.— Means any building, part thereof, or group of buildings endorsed by the Puerto Rico Tourism Company, to be appropriately devoted in good faith to providing lodging for pay mainly to transient guests, and shall have not less than fifteen (15) rooms to lodge guests. Its facilities shall be operated under sanitation and efficiency norms and conditions that are acceptable to the Puerto Rico Tourism Company.
(t) Tourist development income.— Means the income of an exempt business from the operation of a tourist activity, and the income from reinvestment in Puerto Rico of the profits of an exempt business obtained from a tourist activity, provided that such reinvestment is a tourist activity. If the exempt business is a hotel, condo hotel, parador, or guest house, the exempt income shall include income from:
(1) The room rental and other service charges related to the tourist activity.
(2) The sale of food and beverages.
(3) The operation of retail stores within the physical facilities, but only if such retail stores are owned and operated by the exempt business.
(4) The operation of golf courses and other sports and recreational facilities that are part of the tourist activity of the eligible business.
(5) The leasing of commercial space within the hotel, condo hotel, parador , or guest house for the operation of businesses which provide useful services to transient guests.
If the exempt business is a tourist marina, tourist development income shall only be deemed to be such income generated by nautical tourism activities; therefore, the income generated by the services provided to persons who keep their watercraft at the marina permanently for their private use shall not be deemed to be tourist development income.
(u) Eligible investment.— Means:
(1) The amount in cash that has been contributed to an exempt business or eligible business that later receives an exemption grant by law, to be used in a tourist activity in exchange for:
(A) Stock in a corporation, if the exempt business is a corporation, or
(B) the shares or increase in shares in a limited liability company, partnership, or joint venture, or
(C) a unit in a condo hotel, provided such unit is devoted to the integrated leasing program of the condo hotel for a period of ten (10) years and for nine (9) months of each calendar year and the investor owns the unit in fee simple.
(2) The value of land and existing structures contributed to an exempt business or eligible business that later receives an exemption grant under this Act, to be used in a tourist activity in exchange for:
(A) Stock in the corporation, if the exempt business is a corporation, or
(B) shares or an increase in shares in a limited liability company, partnership, or joint venture, if the exempt business is a limited liability company, partnership, or joint venture. The value of the land or existing structure contributed shall be the fair market value, minus the balance of the mortgages encumbering the land, or the existing structure, at the time of the contribution. The fair market value shall be determined on the basis of an appraisal of such land or existing structure conducted by one or more professional appraisers duly licensed in Puerto Rico. The Director shall approve the determined net value of the land or existing structure before the same is contributed to the exempt business.
(3) Contributions made in cash by a public corporation of the Government of Puerto Rico or any of its subsidiaries in exchange for:
(A) Stock or shares of an exempt business, or in an eligible business that later receives an exemption grant under this chapter, that holds such corporations or subsidiaries, or
(B) the subordinate debt of an exempt business or an eligible business that later receives an exemption grant under this Act, with such corporations or subsidiaries.
(4) Loans granted, financing commitments issued, and/or legally enforceable commitments to make capital investments, insofar as these have been made by the Hotel Development Corporation (HDC).
(5) Eligible investments shall only be deemed to be such investments in which all funds are used solely and exclusively for the acquisition of land, structures, construction, and habilitation of the facilities of a new business or for the substantial extension or renovation of the facilities of an existing business, as defined in this chapter. Any other investment whose funds are not directly and entirely used for the acquisition, construction, habilitation, or substantial extension or renovation of the facilities of an eligible business, shall be excluded from the definition of eligible investment of this chapter. Provided, That the use of funds for the acquisition or construction of or improvements to a watercraft devoted to nautical tourism or small watercraft, jet skis, kayaks, sail boats or other similar motor or non-motor watercraft, shall not be deemed to be a eligible investment. Furthermore, except when, in the discretion of the Director, the best interests of Puerto Rico require otherwise, eligible investments shall only be deemed to be those investments made after the holding of the pre-application conference with the designated officers of the Tourism Company.
In the event that one of the contributions described in clause (1) or two (2) of this subsection is made, such contribution shall be deemed to be an eligible investment only if such investment is made during the primary issue of the stock or shares. However, as for exempt businesses, such contributions shall not require the issue of additional stock or shares from investors who at the time of the contribution are stockholders, partners, members, or other owners of the exempt business. In the case of condo hotels, an eligible investment shall be deemed to be that cash contribution for the acquisition of a condo hotel unit acquired from the entity that developed or built the same.
In those cases in which the developer of a tourism project deems that the eligible business will need to incur cash expenses before the date of closing of the financing for the tourism project and that the contributions to defray such expenses shall be recorded into the exempt business’s books as a debt of the business until the financing for the tourism project is closed, such contributions shall be deemed to be eligible investments if at the time of closing the financing, the principal of the debt is remitted, except for any interest accrued. Such remission shall be deemed to be a cash contribution in exchange for stock or shares in the exempt business, insofar as the Director agrees to have the aforesaid contributions deemed to be an eligible investment through an exemption grant for the exempt business or an administrative determination to that effect.
(v) Investor.— Means any person who makes an eligible investment, as defined in subsection (u) of this section.
(w) Puerto Rico Condo hotels Act.— Means §§ 1291 et seq. of Title 31.
(x) Puerto Rico Tourist Development Act of 1993.— Means §§ 6001 et seq. of this title.
(y) Municipal License Fees Act.— Means §§ 651 et seq. of Title 21.
(z) Tourist marina.— Means a marina that provides areas, services, and docking facilities for:
(1) Leasing or chartering nautical tourism watercraft;
(2) foreign-flag watercraft, which is owned or held by a Puerto Rico nonresident, or
(3) any other nautical tourist activity, as prescribed by the Tourism Company by regulation.
(aa) Mega yachts for tourist purposes.— Means a watercraft with an overall length of eighty (80) feet that qualifies as a nautical tourism watercraft under this chapter, dedicated to leisure or recreational activities or educational purposes for tourists for pay in waters in or outside of Puerto Rico. In order for a watercraft to be deemed as eligible, it must:
(1) be available in Puerto Rico for such activities during a period of not less than six (6) months every year, and
(2) render a quarterly report to the Director which shall contain a register or log of the use of the watercraft that is proof of its use in the tourist activity. The requirement to render a quarterly report shall become due the twentieth (20th) day of the month following the last month of each quarter.
(bb) Eligible business.— Means any new or existing business engaged in a tourist activity not covered by a resolution or tax exemption grant conferred under the Tourist Incentives Act of 1983, §§ 693 et seq. of this title, or the Puerto Rico Tourist Development Act of 1993, §§ 6001 et seq. of this title, or which being covered, waives such resolution or exemption grant in favor of a grant under this chapter.
(cc) Exempt business.— Means an eligible business that has received a grant under this chapter.
(dd) Existing business.— Means a business engaged in a tourist activity at the time of properly filing an application for a grant under this chapter or which otherwise does not qualify as a new business under this chapter, and which undertakes a substantial extension or renovation of the existing physical facilities to be used in a tourist activity.
(ee) New business.— Means a business not operating at the time of properly filing an application for a grant under this chapter and which shall be engaged in a tourist activity using tourist facilities that have not been used in a tourist activity during the period of thirty-six (36) months prior to the date of filing the application. In the case of eligible businesses that shall use physical facilities not used in a tourist activity during a term of not less than eighteen (18) months prior to filing the application, the Executive Director of the Puerto Rico Tourism Company may release them from meeting the aforesaid thirty-six (36) month requirement when, in his/her discretion, the best interests of Puerto Rico so warrant. Likewise, a new business shall also be deemed to be any existing business or structure that, even if devoted to a tourist activity during the aforesaid thirty-six (36) month period to complete the investment, is acquired or contributed to the exempt business in order for the structures that house said business to be submitted to a renovation and/or extension of such magnitude that its cost will exceed one hundred percent (100%) of the business’s price of purchase, or the fair market value on the date of the contribution, insofar as said amount is entirely invested within the thirty-six (36) month period from the date of acquisition or contribution of the same. The Director may extend such thirty-six (36) month term through an order issued by him/her when, in his/her discretion, the best interests of Puerto Rico so require, but never for an additional period greater than thirty-six (36) months. A condo hotel may only qualify as a new business if the aforementioned units have not been previously used and are acquired from the entity that developed or built the same, except that a unit that has been let by the entity that developed or built the same prior to its initial sale by said entity shall qualify as a new business.
(ff) Puerto Rican Paradores.— Means any lodging covered under the program sponsored by the Puerto Rico Tourism Company for the establishment of a network of lodging units throughout the entire Commonwealth of Puerto Rico that complies with the provisions of the Regulation of Required Minimum of Lodgings and Paradores in Puerto Rico, promulgated, implemented, and administered by said Company.
(gg) Person.— Means a corporation, limited liability company, partnership, or any of these that chooses the benefits of Subchapters K or N of Chapter 3 of Subtitle A of the Puerto Rico Internal Revenue Code of 1994, as amended; an individual or group of individuals; a trust or estate.
(hh) Timeshare and vacation club.— Means any plans with a license issued by the Company pursuant to the provisions of §§ 1291 et seq. of Title 31, better known as the “Timeshare and Vacation Club Act of Puerto Rico”.
(ii) Integrated watercraft leasing program.— Means a business engaged in renting to tourists any sail or motor watercraft of an overall length of thirty-two (32) feet or more for leisure or recreation. The Director shall determine by regulation the terms and conditions applicable to said program, which shall require watercraft eligible therefor to be available in Puerto Rico for rental under the program for a period of not less than six (6) months each year.
(jj) Property devoted to a tourist activity.— Means:
(1) Real property, including land and improvements devoted to the conduct of a tourist activity, and
(2) any group of machinery, furniture, permanent on-site personal property, and equipment necessary or convenient for an exempt business in the conduct of a tourist activity, including infrastructure, equipment, and/or furniture used in eco-techniques.
(kk) Tourism project.— Means the physical facilities that shall be devoted to a tourist activity of an exempt business.
(ll) Pre-application conference.— Means the meeting to be held between an applicant and the officers designated by the Tourism Company to present a proposed project, prior to filing an application for a grant under this chapter, in which the applicant shall explain and present the merits of the proposed project, its contribution to the development of the tourism industry in Puerto Rico, a description of the tourist activity or activities he/she intends to carry out, the estimate of costs expected to be incurred to develop and build the project, financing sources, and any other information that the Director may require.
(mm) Secretary.— Means the Secretary of the Treasury of Puerto Rico.
(nn) Medical tourism.— Means any medical facilities certified and accredited in Puerto Rico that provide lodging services to persons, with the purpose of seeking medical care and treatment.
(oo) Nautical tourism.— Means the group of services to be rendered in contact with water to nautical tourists, which include, but are not limited to:
(1) The lease or charter to tourists of nautical tourism watercraft for leisure or recreation or for educational purposes for tourists, including tours;
(2) the lease of small watercraft, jet skis, kayaks, sail boats or other similar motor or non-motor watercraft, to guests in a hotel, condo hotel, timeshare or vacation club, or which is located in a tourist destination or resort or in a tourist marina or in areas near the aforesaid places, as provided by the Company through regulations, and
(3) the operation of an integrated watercraft leasing program.
Any other term used in this chapter that has not been expressly defined herein shall have the same meaning it has in the Puerto Rico Internal Revenue Code.
History —July 10, 2010, No. 74, § 2; Feb. 29, 2012, No. 47, § 1.