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ACT 185 - 2014

ACT 185- Private Equity Funds

Eligibility

  • Companies engaged in the business of investing in securities that are non-publicly traded securities at the time of investment
  • Have accredited investors
  • Have an advisory board consisting of at least 1 of its investors or limited partners.
  • Use a registered investment adviser that is ETB-PR with a business office in Puerto Rico.
  • Minimum capital of $10 million within 24 months of issuance, and thereafter.
  • At least 80% invested in Private Securities and up to 20% in allowable short-term investments.

Tax Benefits

  • The Fund will not be subject to any income tax on its interest and dividend income or capital gains.
  • Income derived by investors from interest and dividends will be subject to an income tax of 10%.
  • Fund exemption from municipal license tax
  • Fund exemption from personal and real property taxes
  • Fund exemption from the provisions of the Investment Company Act of Puerto Rico (Act 6-1954) and the Puerto Rico Investment Companies Act of 2013 (Act 93-2013).
  • The Act does not affect any tax treatment that may be obtained by Fund participants under the provisions of any current or future incentives’ law, including, without limitation, Act 20 and Act 22

Requirements

  • Election for treatment as a Fund under the Act must be notified to the PR Treasury no later than the last day of 3rd month after the Fund inception date.
  • Within 4 years from inception and thereafter, restrict investment in any one business and affiliates to 20% of Fund’s capital.
  • For Foreign-PEFs: at all times derive at least 80% of gross income from Puerto Rico sources or income effectively connected or treated as such under the Code (the “80% PR Gross Income Rule”).
  • For Foreign-PEFs: within 4 years from inception and subsequently, maintain at least 15% of Fund’s capital invested in Private Securities that comply with the 80% PR Gross Income Rule during the prior 3 years period.
  • For PR-PEFs: within 4 years from inception and thereafter, maintain at least 60% of Fund’s capital invested in either (i) Private Securities that comply with the 80% PR Gross Income Rule during the prior 3 years period, or (ii) exempt investment trusts under Section 1112.01 of the Code.