Puerto Rico Governor Ricardo Rosselló signed into law on Monday legislation to provide nearly $2 billion in tax relief over five years amid concerns by the U.S. commonwealth’s federally created fiscal oversight board about how the island will fund the tax break.
Rosselló said the new law will improve the island’s investment climate, while providing tax cuts for residents and businesses.
The legislation, which was introduced in April, establishes an earned income tax credit of as much as $2,000 annually per worker and slightly reduces individual and corporate income tax rates, as well as the sales tax on prepared food. It further eliminates a tax on business-to-business transactions for those establishments with annual revenue of less than $200,000, affecting almost three-quarters of island businesses.
Most of the changes will take effect next year, the governor said.
To fund the tax cuts, the bankrupt U.S. commonwealth is counting on $1.7 billion in additional revenue over the next five years from increased efforts to collect taxes. The $200 million annual cost of the earned income tax credit was previously included in the government’s projected expenditures.
