DDEC finds hundreds of deficiencies in audit of tax decrees

Economic Development and Commerce Secretary Sebastián Negrón Reichard noted that while the agency aims “to be efficient in the decree-granting process, ensuring compliance with principles of legality, equity, and economic purpose is a priority.”

By THE STAR STAFF

The Department of Economic Development and Commerce (DDEC by its acronym in Spanish) announced Thursday that it found 305 deficiencies and repealed some 23 tax credit decrees following an audit of some 1,700 decrees.

The DDEC announced a series of recent measures implemented through its Business Incentives Office (OIN by its initials in Spanish) aimed at enhancing oversight and compliance processes for tax exemption decrees under the Puerto Rico Incentives Code, Act No. 60-2019, as well as previous incentive laws.

Additionally, the agency’s secretary, Sebastián Negrón Reichard, shared the outcomes of the initiatives.

The OIN audited 1,798 decrees this year, including those from resident individuals, investors and service export businesses. Consequently, 305 deficiency notices were issued, 19 decrees were annulled, and four were revoked due to noncompliance with their terms. Furthermore, more than 887 voluntary surrenders have been processed. These efforts are part of a more rigorous and transparent public policy designed to ensure that incentives are utilized to genuinely promote economic development.

“Incentives are a powerful tool to attract investment, but they come with the responsibility of complying with the conditions established by law,” Negrón Reichard said. “While we aim to be efficient in the decree-granting process, ensuring compliance with principles of legality, equity, and economic purpose is a priority. This oversight is not a punitive exercise but a demonstration of institutional integrity consistent with the governor’s commitment to accountability, ensuring that the benefits reach those who truly contribute to Puerto Rico’s development.”

As part of the new measures implemented this year, Negrón Reichard emphasized that every decree application from individual resident investors must include criminal record certifications from their previous country of residence. These checks must be from the same year in which the decree is processed, and a final public record search will be conducted before the agreement is signed. Individuals convicted of fraud or serious crimes are not eligible for incentives.

New oversight measures also include imposing an annual reporting requirement for all incentive programs. Previously, this requirement applied only to decree holders of five specific programs; now, annual reports will be mandated for 15 programs.

OIN Director Ernesto J. Zayas García noted that a Compliance Audit Committee has been established that will include the undersecretary, the legal director, and members of the secretary’s office, and will be responsible for evaluating referrals, imposing fines of up to $10,000, and recommending revocations when necessary.

Zayas García added that his office has refined and strengthened the use of deficiency notifications. The document can detail instances of noncompliance, impose fines of up to $10,000, provide instructions for correcting or amending the decree when applicable, and issue a warning about reconsideration within 20 calendar days.

He noted that the OIN actively collaborates with the Treasury Department and the Internal Revenue Service to exchange information and process cases. The director emphasized that his division accepts tips and referrals via email at compliance@ddec.pr.gov.

Zayas García said the initiative represents a new phase in DDEC’s compliance policy.

“We have modernized audit processes, expanded Exempt Business Annual Reports to more sectors, and created streamlined mechanisms to detect noncompliance early,” he said. “This will enable more efficient and fair responses, ultimately strengthening confidence in Puerto Rico’s incentive system.”

For upcoming initiatives in 2026, the OIN plans to conduct sample audit campaigns across all industries covered by Act 60. Additionally, notifications of deficiency will be automatically issued, along with the automatic imposition of fines for failure to file the Exempt Business Annual Report after Jan. 15, 2026. The initial penalty will be $1,000 for each instance of noncompliance, which may lead to revocation of the decree.