Tax reform to be a priority in upcoming legislative session

Speaker of the Puerto Rico House of Representatives Carlos “Johnny” Méndez Nuñez

By THE STAR STAFF

Gov. Jenniffer González Colón has announced plans to make foreign investors pay a 4% capital gains tax and to transfer the administration of tourist facilities to municipalities.

Currently, Puerto Rico’s Incentives Code (Act 60-2019) exempts foreign investors from paying capital gains taxes, while local investors face rates between 15% and 22%, the governor said. To level the playing field, González Colón said she plans to impose a 4% fee on foreign investors and reduce the local rate to the same percentage.

“This is a measure that generates revenue and puts locals on equal footing with those coming from abroad,” the governor said.

She noted that the initiative, which stalled last year, is now a top priority for her administration and awaits legislative review.

The Puerto Rico Act 20/22 Society did not answer requests for comment sent via email Sunday.

Citing the poor administration of the Río Camuy Caverns by the central government, the governor also proposed transferring tourism facilities to the municipalities.

“Puerto Rico’s government owns too many facilities, and no one is more attentive to their upkeep than those who benefit directly: the municipalities,” González Colon said. “These revenue-generating assets should be leveraged to promote development.”

On Saturday, the governor met with lawmakers to discuss tax reform. Senate President Thomas Rivera Schatz has said that reducing the cost of living and tax relief for the salaried employees are priorities for the upper chamber. He also has said the Municipal Revenue Collections Center should also be reformed to ensure revenues for municipalities. He said further that energy will be a theme in the session.

The leader of the House of Representatives announced that the approval of a tax reform aimed at reducing the burden on the working class will be the main priority during the third regular session, which begins today. The House has its own version of tax reform, which will cost the government up to $600 million to implement.

House Speaker Carlos “Johnny” Méndez Nuñez announced the agenda, which also includes overhauling the permitting system, strengthening road safety measures, overseeing the transmission and distribution network and energy generation operations, addressing demographic challenges, expanding services and protections for older adults, cutting costs in executive branch agencies, and continuing efforts to secure equal rights through statehood.

“My commitment, along with that of the governor and the New Progressive Party, is to reduce the financial burden on our people,” Méndez said. “The working class has always been the ‘meat in the sandwich’ whenever tax cuts are discussed. This time, that won’t happen. What we approve will positively impact this sector. That is our priority during the first weeks of this new legislative session.”

The House speaker noted that the Treasury Committee in the lower chamber, chaired by San Juan District 1 Rep. Eddie Charbonier Chinea, has already advanced work on the parameters of the tax reform and is prepared to review measures “expeditiously and with full transparency.”

The last major tax reform occurred in 2011, focusing on easing the burden on households and businesses while boosting government revenue. However, its second phase was halted in 2014, depriving residents of an estimated $255 million in benefits. Méndez said lowering income tax rates for the working class would inject new capital into the economy, enabling families to do more with their money and spurring new business creation.

Regarding the 2025-2026 budget, Méndez noted that it will be developed under the current framework and in direct coordination with the Financial Oversight and Management Board, with the process starting in January.

The House will also prioritize reforming the permitting system, which Méndez described as outdated despite amendments since the 2009 Permits Reform Act.

“We need to cut bureaucracy and keep streamlining processes; the House is ready to do that,” he said.