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Economy and History

Describe Puerto Rico key economic facts

  • Languages: Spanish, English
  • Population: 3,674,209 (July 2013 est.)
  • Currency – US dollar
  • GDP (purchasing power parity): $64.84 billion (2010 est.) $68.84 billion (2009 est.) $71.51 billion (2008 est.)
  • GDP - per capita (PPP): $16,300 (2010 est.) $17,400 (2009 est.) $18,100 (2008 est.)
  • GDP - composition, by sector of origin: agriculture: 0.7%, industry: 50%, services: 49.3% (2012 est.)
  • Agriculture - products: sugarcane, coffee, pineapples, plantains, bananas; livestock products, chickens
  • Industries: pharmaceuticals, electronics, apparel, food products, tourism
  • Labor force: 1.286 million (March 2012)
  • Unemployment rate: 16% (2011 est.) 12% (2002 est.)
  • Exports: $58.91 billion (2012 est.) $64.88 billion (2011 est.)
  • Exports - commodities: chemicals, electronics, apparel, canned tuna, rum, beverage concentrates, medical equipment
  • Imports: $46.57 billion (2012 est.) $44.67 billion (2011 est.)
  • Imports - commodities: chemicals, machinery and equipment, clothing, food, fish, petroleum products

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Summarize Puerto Rico History

Populated for centuries by aboriginal peoples, the island was claimed by the Spanish Crown in 1493 following Christopher Columbus' second voyage to the Americas. In 1898, after 400 years of colonial rule that saw the indigenous population nearly exterminated and African slave labor introduced, Puerto Rico was ceded to the US as a result of the Spanish-American War. Puerto Ricans were granted US citizenship in 1917. Popularly-elected governors have served since 1948. In 1952, a constitution was enacted providing for internal self government. In plebiscites held in 1967, 1993, and 1998, voters chose not to alter the existing political status with the US, but the results of a 2012 vote left open the possibility of American statehood.

Banking System

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How are Puerto Rican Banks governed?

Commercial banks organized in Puerto Rico are governed by the Banking Law of Puerto Rico, which establishes the organization and legal powers of banks and the requirements for the prudent and financially sound operation of such institutions, including reserve requirements, borrowing limits, and other solvency related mandates.

Depending on their particular circumstances, banks organized in Puerto Rico or doing business in Puerto Rico are also subject to various federal banking laws and the supervision of various federal banking agencies.

The bank holding companies of financial institutions organized in Puerto Rico are subject to the federal law known as the Bank Holding Companies Act of 1956. Additionally, banks organized under the Banking Law of Puerto Rico must insure their deposits with the Federal Deposit Insurance Corporation and are thus subject to the Federal Deposit Insurance Act. They are also subject to the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 and related regulations on interstate branching that apply to banks organized under the laws of the U.S. states.

Other federal laws that apply to banks organized and doing business in Puerto Rico are the Community Reinvestment Act, USA Patriot Act, and anti-money laundering laws. Similarly, banks operating in Puerto Rico are subject to the guidelines of the Treasury Department’s Office of Foreign Assets Control to prevent transactions with certain foreign nations and individuals designated by this agency.

Doing Business in Puerto Rico

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Which kind of Business Entities could be established in the Commonwealth of Puerto Rico?

Puerto Rico recognizes a wide range of business forms, from basic sole proprietorships and general partnerships to special purpose corporate forms and limited liability companies. Investors thus have a variety of options for optimizing liability shield and tax treatment characteristics.

Most common type are: Limited Liability Partnerships(LLP), Corporations (Corp), Limited Liability Company (LLC), Real Estate Investment Trusts (REIT), Public-Private Partnerships (PPP)

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Briefly describe each of above

Limited Liability Partnerships(LLP)

Two or more natural persons, including those rendering professional services, can form a limited liability partnership under the provisions of the Limited Liability Partnership Act.7 They must register the limited liability partnership with the Department of State by filing a certified copy of the constituent deed accompanied by a $100 fee. Registration is valid for one year and must be renewed annually by filing a renewal application and a $110 revenue voucher. The name of the partnership must include the words “limited liability partnership” (sociedad de responsabilidad limitada) or “LLP”, “L.L.P.”, or “S.R.L.”

Corporations (Corp)

Puerto Rico’s General Corporation Law is based on Delaware’s.11 In general terms, a corporation is an entity separate and distinct from its shareholders, directors, and officers. It has the power to enter into contracts, hold property, and sue and be sued on its own name; it also has continuity of life and free transferability of ownership interests.

Limited Liability Company (LLC)

Limited Liability Companies are more flexible operationally than corporations but can still provide legal protection for their managers and members. To form an LLC, one or more persons must file a LLC Certificate of Formation with the Puerto Rico Department of State, along with a fee of $100.00. A foreign LLC may register in Puerto Rico by petition signed by an authorized person following the procedures specified in the General Corporation Act; once registered, it shall have some powers as a domestic LLC, provided that its internal affairs and the liability of its managers and members shall continue to be governed by laws of the jurisdiction where the LLC is organized. LLCs may engage in any lawful activity but must maintain a registered office and resident agent for service of process in Puerto Rico.

The management of an LLC is typically governed by an LLC agreement that sets forth (1) the respective duties of the LLC and its managers and members to each other, (2) the LLC’s management structure, (3) the rights of the managers and members and (4) their respective share of interest in the LLC profits and losses.

Real Estate Investment Trusts (REIT)

A Real Estate Investment Trust (REIT) is a tax designation reserved for corporations investing in real property that reduces or eliminates corporate income taxes. The term “real property” includes, among other things:
hospitals and related facilities; schools and/or universities; public and private housing; transportation facilities and private or public roads; office and residential buildings; buildings occupied by government agencies, departments or corporations of the Commonwealth of Puerto Rico; manufacturing buildings and related facilities; recreational centers; parking facilities; shopping facilities and centers; buildings purchased from the Government of Puerto Rico, its agencies and instrumentalities; and hotels.

Public-Private Partnerships (PPP)

Law 29 of June 8, 2009 codified Puerto Rico’s policy favoring the use of Public-Private Partnerships (PPPs)—contractual agreements between government agencies and a private or non-governmental entity or entities—as a means for achieving greater private sector participation in the development and financing of infrastructure and services, especially for priority projects, which include:
Landfills, water reservoirs, power plants, transportation system, health, security, education, low-income house projects, facilities for sport, ground and wirless communication, high-technology information.

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Briefly describe some Tax Incentives currently established in Puerto Rico?

Act 20-2012 Export Services
Objective: Act No. 20 of 2012: Turn Puerto Rico into an international hub of services, retaining local talent and attracting foreign talent and foreign capital

Benefits provided under a 20 year decree;
4% income tax rate; 100% exempt distributions; 60% exemption from municipal license taxes (90% if located in development zones of Vieques or Culebra); and 90% Exemption of Real and Personal Property Taxes. Tax benefits to “eligible businesses”, defined as entities which provide (i) “eligible services”, which in turn are considered (ii) for foreign markets (with no nexus with Puerto Rico) or promotion services.

Act 22-2012 - Individual Resident Investors
Objective: Act No. 22 of 2012: Mobilize investments that are outside of Puerto Rico to Puerto Rico stimulating the economy through consumption and investment

Benefits provided under a decree:
100% exempt of income taxes (including alternative minimum tax) on interest and dividends received.
100% exempt on capital gain accrued after becoming a resident of PR and realized before January 1st, 2036.
10% tax on capital gain accrued before PR residency and realized within 10 years of becoming a PR resident (5% after 10 years, but before January 1st, 2036 on gain accrued before becoming a PR resident).
Individual Resident Investor (IRI) - Individual who has not been a resident of Puerto Rico for the past 15 years before his first years of residence in Puerto Rico.
Sunset: December 31, 2035.

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Which are the Basic Requirements & Procedures for Starting a Business in Puerto Rico?

a.Requesting and Registering an Employer Identification Number
Except for sole proprietorships that do not employ anyone (other than the sole proprietor), every entity engaged in a trade or business in Puerto Rico must obtain a federal Employer Identification Number (EIN) from the U.S. Internal Revenue Service (IRS) by filing Form SS-4.40

b.Merchant’s Registration Certificate
All merchants seeking to engage in a trade or business in Puerto Rico must register with the Registry of Businesses at the Puerto Rico Treasury Department at least 30 days prior to commencing business operations.

c.Compulsory Business Registry
All businesses operating in Puerto Rico must register with the Compulsory Business Registry by July 15 of each year. Registration requires certain statistical information and can be done on the Internet. Forms and information are available from the Puerto Rico Trade and Export Company.

d.Municipal License Taxes
Within 30 days of commencing operations, a business must provide written notice to the Director of Finance of each municipality in which it has commenced operations and request a provisional license for the quarter in which it commences operations.

e.Bidders Registry
Any person (natural or juridical) who wants to pursue business with any agency of the executive branch of the Commonwealth of Puerto Rico is required to register with the Bidders Registry, which is administered by the General Services Administration. Among the requirements are the payment of an annual fee, and evidence of the payment of municipal and Commonwealth taxes

f.Financial and Accounting Records
As a general rule, a taxpayer must keep and maintain financial and accounting records sufficient to compute both net income under General Accepted Accounting Principles and taxable income under the P.R. Revenue Code.

g.Audited Financial Statements
Every person engaged in a trade or business in Puerto Rico whose volume of business exceeds $3,000,000 must file financial statements, certified by a certified public accountant (CPA) licensed in Puerto Rico, along with their income tax, property tax, and volume of business returns. All foreign corporations must also file a balance sheet of their Puerto Rico operations, certified by a CPA licensed in Puerto Rico, together with the Annual Corporation Report.

h.Internal Revenue Licenses
A license from the Puerto Rico Treasury Department may be required to carry out certain activities, including: selling cigarettes, gasoline, vehicles and parts and accessories of vehicles, jewelry, cement, arms and ammunitions; operating coin-operated machines; operating duty-free port stores; selling firearms and munitions; and operating public carrier businesses. Such licenses may not be transferred without the authorization of the Puerto Rico Secretary of Treasury. A manufacturer of articles whose sale requires a license is not required to have such license, provided the manufacturing operations are completely apart from any location in which an activity subject to such a license is conducted.

i.Municipal Revenue Collection Center (CRIM)
In Puerto Rico, property is classified for property tax purposes as real property (land, buildings and structures, and machinery permanently attached to the land or building) and personal property (practically all other property, including intangibles, machinery, money, cattle, and shares of stock). The Municipal Revenue Collection Center (CRIM) is responsible for making this classification. The CRIM is also responsible for the valuation and appraisal of all taxable property in Puerto Rico.

j.Construction and Use Permits
A business seeking to construct a new structure or modify an existing structure must obtain a construction permit.

k.Sanitary License
A Sanitary License is required for the operation of certain public establishments, including any type of prepared food vendor (fast-food, cafeteria, restaurants, bars, nightclubs, etc.), public pools, vending machines, and beauty salons. This license is issued by the Department of Health and can be requested from ARPE along with a Use Permit or directly from the Department of Health

l.Fire Department Inspection
An inspection by the Fire Department is required for the construction of a new building or to obtain a Use Permit for the establishing of a public operation. The inspection can be requested from ARPE along with the application for the Use Permit. It must be requested annually.

m.Emergency Generator Operation Permit
If a business owns or operates an emergency power plant, it must have a construction and operation permit from the Environmental Quality Board (EQB). An emergency plan for the prevention of diesel spills may also be required.

Santander in Puerto Rico

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How has been the business evolution from Santander in the island of Puerto Rico?

Banco Santander commenced operations in Puerto Rico in 1976, which at the time had $25 million in assets and one branch office.

With the acquisition of Caguas Central Federal Savings Bank in 1990, Banco Santander expanded its network of branch offices and $3,400 million in assets, ranking as the second financial institution of greater importance in the country.

In 1992, the Bank acquires a mortgage entity reorganizing it to create Santander Mortgage, one of the most profitable businesses of the Bank.

Santander acquired the operations of the Banco Central Hispano in Puerto Rico in 1996. During that same year, the Bank delves into the stock market business by creating Santander Securities. At present, Santander Securities is the second brokerage company in Puerto Rico.

In 1998, made an initial public offering of common stock which constituted the largest stock issuance made by a company in Puerto Rico on the New York Stock Exchange. Twelve years later, to further improve efficiency in its management in a complex economic environment it would once again become a private company.

Santander Asset Management was founded in 1999, after its parent company, Santander Securities, acquired an asset management business in Puerto Rico.

In the year 2000, Santander became the first financial institution in the Island to obtain a license to operate its own insurance agency.

In 2006 Santander acquires all the assets and operations of Island Finance. For more than five decades, Island Finance has distinguished itself by making a significant contribution to the economic development of Puerto Rico, managing to position itself as a leader in consumer financing in the Island.

In early 2011, Santander, in collaboration with the Government of Puerto Rico, became host to the First Puerto Rico Business Forum in Spain. A Government delegation, headed by the Governor of Puerto Rico, was in Spain with the purpose of promoting the Caribbean Island as a destination for investment.

In addition, Santander has led and supported funding efforts for important projects of public-private alliances as improvements to the infrastructure of roads and other large-scale projects of the Government of Puerto Rico.

Santander is not only a Bank committed to the future of Puerto Rico, but one that every day works to offer the best service to its customers. Its performance in the Island has been consistently recognized throughout the years by prestigious publications (The Banker and Global Finance) as "the very best of local banking". This validates the stability, reliability and security that are provided to its clients.

Today Santander is the only financial group with a presence in all segments, serving and promoting the country's economy through Banco Santander Puerto Rico, Santander Insurance, Santander Securities, Santander Asset Management and Island Finance; and promoting the development of higher education through Santander Universities and Universia.

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How to open an account with Santander Puerto Rico?

Bank formats required:

  • Commercial Deposit Account and DBA application
  • General Resolution
  • Owners, shareholders, beneficiaries certification
  • Notice of changes in temporary FDIC insurance coverage for transaction accounts
  • Deposit Accounts and Other Banking Services Agreement

Client Legal and Corporate information required

  • Articles of Incorporation
  • State Department Certification
  • IRS Letter confirming Social Security Number
  • Signatories ID
  • Certificate to do Business in Puerto Rico

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Which are Santander Puerto Rico routing instructions?

ABA number: 021502341
Address: 207 Ave. Ponce de León. San Juan, PR 00917

Do you have a branch locator?

Yes we do.

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