By The Star Staff
The Economic Development and Commerce Department (DDEC by its Spanish acronym) recently published a new regulatory framework broadening the scope of “blockchain” technology projects and digital assets that would qualify for tax incentives.
“Puerto Rico is on its way to becoming the technological leader in the region,” DDEC Secretary Manuel Cidre Miranda noted in an agency administrative memo. “Through this effort, we seek to be proactive in addressing an emerging technology that is creating a lot of economic activity around the world, and the island is not and should not be the exception. The U.S. states and the world are moving in this direction to create an environment of certainty and stability for the individuals and companies that work with this technology.”
The memo, published on Feb. 23, establishes definitions and clarifies which blockchain activities are eligible for tax exemption decrees under Act 60 of 2019, better known as the Tax Incentives Code. In addition, the memo defines limits to what is considered acceptable as an eligible activity within the code’s export of services chapter.
“On repeated occasions, we received queries about ‘blockchain,’ seeking information on activities that could be eligible under the Incentives Code,” DDEC Business Incentives Office Director Carlos Fontán Meléndez. “This [memo] provides a precise and accurate legal framework, which positions Puerto Rico at the forefront of this technology worldwide [in order] to continue to establish and expand businesses on the island based on this emerging technology.”
Keiko Yoshino, executive director of the Puerto Rico Blockchain Trade Association, said that “as technology evolves, so do job opportunities.”
“By providing clear guidance on the validation of ‘blockchain’ as an eligible export service, Puerto Rico has demonstrated its interest in competing in the growing digital economy,” she said.
According to the memo, Puerto Rico can step up and take advantage of specific emerging industries in the technological sector by welcoming businesses engaged in blockchain development, blockchain validation, and related activities, including digital assets.
A blockchain is a digital ledger of transactions duplicated and distributed across a network of computer systems. These transactions are grouped into lists called blocks and are securely linked using cryptography. The network participants use software to verify the integrity of the blocks and thus, the transactions and associated data. The technology allows users to confirm that the transaction record is complete and unaltered unequivocally.
A digital asset can be explained as anything in binary data that is self-contained, uniquely identifiable, and has a value or usage. Therefore, with such technology, a person or entity can provide/support ownership, authenticity, transaction history, and location without third parties.
“Therefore, under the provisions of the Incentives Code and the public policy of the Government of Puerto Rico, the Secretary of the DDEC, in consultation with the Secretary of the [Treasury], determines that it is in the best interest and for the social and economic well being of Puerto Rico that ‘blockchain technology,’ ‘digital assets based on blockchain technology,’ ‘blockchain validation’ be considered eligible activities undertaken by the exempt business in Puerto Rico under Section 2031.01 (a)(11) of the Incentives Code, and the digital asset under Section 1020.02(a)(12) of the Incentives Code,” the regulations read.