What Is Law 182? New Tax Incentives Reshaping Puerto Rico Real Estate and Urban Development

Puerto Rico’s housing landscape is undergoing a major transformation thanks to Law 182-2024, a groundbreaking amendment to the island’s Incentives Code (Act 60-2019). Enacted in August 2024, this legislation aims to combat urban decay and a growing housing shortage by encouraging investment in residential and mixed-use projects within designated urban centers. Offering generous tax breaks appeals to local developers and international investors looking to breathe new life into abandoned or underutilized properties.

This guide outlines the key features, tax incentives, and eligibility criteria under Law 182. It also explores the law’s broader impact on Puerto Rico’s real estate market, from affordable housing expansion to high-end urban redevelopment.

Key Takeaways

• Law 182-2024 provides tax incentives, including a 4% income tax rate and property tax exemptions, for urban redevelopment projects.

• The law targets urban centers, requiring at least $1,000,000 investment and the development of seven residential units.

• Developers can claim a 40% tax credit on eligible investments, transferable or sellable to improve cash flow.

• Law 182-2024 boosts both affordable and luxury housing projects, expanding Puerto Rico's housing stock and attracting investors.

Key Features of Law 182

Law 182-2024 is structured to encourage the redevelopment of Puerto Rico’s urban centers by offering significant financial advantages for qualifying real estate projects. Its key features ensure that both the investment and the intended outcome directly contribute to revitalizing urban neighborhoods, increasing housing stock, and enhancing local economies.

Eligibility Criteria

To access the benefits of Law 182, a project must meet the following fundamental conditions:

• Location Requirement: The project must be situated in a designated urban center of any Puerto Rican municipality. Government agencies pre-identified these zones for targeted revitalization.

• Minimum Capital Investment: Projects must include at least $1,000,000 in eligible costs, excluding land acquisition expenses. This ensures substantial developer commitment to the area.

• Residential Component: Each project must develop at least seven residential units, supporting mid-density urban housing expansion.

• Abandoned Property Redevelopment: Projects involving properties in a State of Abandonment—defined as unoccupied, unsafe, or legally declared a public nuisance—qualify for additional support and streamlined approvals.

Eligibility Summary Matrix

Key Tax Benefits Offered by Law 182 for Real Estate Projects

Law 182-2024 provides a robust suite of tax incentives designed to make real estate development in Puerto Rico’s urban centers financially attractive. These benefits significantly reduce upfront development costs and long-term operational expenses, making the law appealing to many investors, from affordable housing developers to luxury mixed-use project sponsors.

1. Preferential Fixed Income Tax Rate

4% Fixed Rate on Income: Income derived from the sale or lease of eligible urban projects is taxed at a fixed rate of 4%, substantially lower than Puerto Rico’s standard corporate income tax rates (which can exceed 30%).

• Applies to both residential and mixed-use developments.

• Encourages long-term holding and leasing strategies.

2. Dividend and Profit Distribution Exemptions

100% Income Tax Exemption on Dividends: Shareholders, partners, or LLC members of qualifying entities receive a full exemption on income tax for dividends or profit distributions from the project’s exempt income.

• Attracts passive investors and REIT structures.

• Supports reinvestment by reducing tax drag.

3. Substantial Property and Municipal Tax Relief

75% Real and Personal Property Tax Exemption: Developers enjoy a 75% reduction on real and personal property taxes.

• Applies to land, buildings, and equipment used for the project.

• Significantly improves long-term net operating income.
  
  

50% Municipal Tax Exemption: Includes a 50% exemption on municipal license fees, gross receipt taxes, and excise taxes.

• Reduces day-to-day operational costs.

• Particularly beneficial for projects involving leasing or commercial components.

75% Exemption on Construction-Related Municipal Taxes: This includes taxes, fees, licenses, and tariffs levied by municipalities during construction.

• Eases cash flow during project execution.

• Removes a common friction point for developers working in older city districts.

4. Investment-Based Tax Credits

40% Tax Credit on Eligible Investment: Developers can claim a tax credit equal to 40% of the lower of the project’s eligible costs or total development cost.

• Claimed over three annual installments.

• Transferable or salable, allowing developers to manage cash flows or monetize credits.

Summary Matrix of Law 182 Tax Incentives

Together, these incentives lower the financial barriers to entry, increase post-development profitability, and make urban projects more competitive than non-incentivized developments. 

Additional Details

To qualify, projects must meet specific criteria—including location and investment thresholds—and tax credits are transferable. Applications must be submitted by the end of 2025.

• Eligibility: Projects must be in a designated urban center, involve at least $1,000,000 in eligible investment (excluding land acquisition), and include a minimum of seven residential units.

• Carryover and Transferability: Unused tax credits can be carried over until exhausted and may be sold or transferred to other parties.

• Application Deadline: Applications for tax exemption grants must be submitted by December 31, 2025, and construction must commence on or after July 1, 2024.

Strategic Impact

Law 182-2024 reshapes Puerto Rico’s real estate development priorities by directing capital toward underserved urban centers and enabling a more diverse, sustainable, and inclusive housing market. The incentives offered are strategically aligned with broader social and economic goals, extending benefits beyond developers to local communities and the island’s overall economy.

1. Urban Revitalization and Public Safety

• The law promotes the redevelopment of blighted or abandoned properties, turning them into vibrant, functional residential and mixed-use areas.

• This reduces urban decay and helps enhance safety, walkability, and livability in dense neighborhoods.

2. Expansion of Affordable Housing

• With a focus on mid-density, multi-unit housing, Law 182 supports the creation of affordable homes in central, transit-accessible areas.

• This directly addresses Puerto Rico’s long-standing housing shortage and rising rental costs.

3. Upscaling the Urban Core

• The incentives are equally attractive to luxury and boutique mixed-use developments, encouraging a shift in high-end investment from coastal zones to historic and cultural city centers.

• This diversifies the market and spreads economic growth inland.

4. Welcoming International Investors

• Law 182 allows 100% foreign ownership, simplifying the entry process for global investors and enhancing cross-border capital flows.

5. Sustainable Tourism Models

• The policy discourages short-term rental oversaturation by incentivizing boutique hotels and hybrid residential-tourism models that preserve local housing availability while bolstering the tourism economy.

Implementation and Oversight

The effectiveness of Law 182-2024 hinges not only on its incentives but also on the clarity of its implementation and the robustness of its oversight mechanisms. As the program gains traction, several administrative and legislative measures are being taken to ensure both accessibility and long-term fiscal balance.

Application Process

Developers must apply through the Department of Economic Development and Commerce (DDEC) before the deadline to receive tax exemption benefits under Law 182.

Concession Filing through DDEC

• Developers must formally apply to the Department of Economic Development and Commerce (DDEC) to receive a tax exemption decree.

• Applications must be filed before December 31, 2025, and construction must begin on or after July 1, 2024.

• All documentation must include proof of project eligibility, investment plans, and compliance with urban designation criteria.

Fiscal Oversight and Economic Concerns

The Financial Oversight and Management Board (FOMB) has raised concerns about the law’s long-term fiscal impact, prompting discussions on policy adjustments.

FOMB Scrutiny

• The Financial Oversight and Management Board (FOMB) has expressed concerns regarding the potential fiscal impact of the law on Puerto Rico’s public finances.

• These concerns have prompted ongoing assessments and potential modifications to ensure the incentives remain sustainable and justified.

Pending Amendments: Project 359 (PC 359)

Proposed legislative updates aim to extend deadlines, clarify eligibility, and improve the usability of tax credits for developers.

Legislative Updates Under Review

• PC 359 aims to:

1. Extend application deadlines

2. Clarify project eligibility requirements

3. Allow more flexibility in claiming tax credits

• These amendments are intended to improve practical implementation and enhance developer participation while maintaining budgetary control.

Market Effects

Law 182 is driving up urban property values, fueling large-scale redevelopment projects, and promoting environmentally conscious development practices across Puerto Rico.

• Rising Property Values: Increased investor demand for qualifying urban properties drives up values in key locations.

• Urban Core Renaissance: Case studies, such as the North Ponce district, show how Law 182 is catalyzing multi-million-dollar redevelopment and revitalization.

• Sustainable Development: Developers adopt sustainable practices, enhancing the island’s environmental and social appeal.

Its Impact on Puerto Rico Luxury Properties

While Law 182-2024 is often positioned as a vehicle for affordable housing and urban revitalization, its reach extends into the luxury segment. Opening the door for mixed-use and upscale residential developments in historic districts and designated urban cores reshapes where and how luxury real estate is being developed and sold in Puerto Rico.

Here’s how the law is influencing the Puerto Rico luxury real estate landscape:

• Expansion Beyond Coastal Zones: Luxury buyers, both local and international, are beginning to see high-end potential in centrally located urban areas—such as Old San Juan, Miramar, and Ponce—thanks to Law 182’s generous tax incentives.

• Historic Luxury Conversions: Abandoned or underutilized heritage buildings in designated zones are now viable candidates for luxury condos, boutique hotels, and mixed-use projects that cater to affluent buyers seeking exclusivity with cultural richness.

• International Investor Appeal: The 100% exemption on dividend income and 4% fixed tax rate create an ideal climate for international investors looking to diversify their holdings with luxury assets that generate long-term rental income.

• Architectural and Sustainable Prestige: The emphasis on sustainable development aligns with the preferences of today’s high-net-worth individuals (HNWIs), who prioritize eco-conscious building practices and architectural legacy in their investment decisions.

• Diversification of Luxury Locations: Law 182 is prompting a shift in perception, from luxury being defined solely by beachfront property to now including refined urban residences in culturally significant locales.

Puerto Rico Luxury Properties and Houses for Sale

At Christie’s International Real Estate Puerto Rico, we recognize how legislation like Law 182-2024 transforms the skyline and the definition of luxury living on the island. Our experienced team is well-versed in navigating these new incentive programs and ensuring that our clients, whether local buyers or international investors, are positioned to benefit from every opportunity.

Browse our curated selection of Puerto Rico luxury properties for sale, featuring exceptional homes that align with the island’s new wave of urban elegance and investment potential.

2 ALMENDRO, SAN JUAN, PR 00913

A rare oceanfront compound on nearly ¼ acre with over 140 feet of water frontage, this 5,400+ sq ft San Juan property offers unmatched privacy, income potential, and sweeping views—one of the metro’s few beachfront lots ever for sale.

SOLAR 16 QUINTAS DE CULEBRA MELONES BEACH, CULEBRA, PR 00775

Villa Ensueño is a 3-bedroom, 3-bathroom, 3,000-square-foot luxury home on a 1-acre lot in Culebra. It has direct access to Melones Beach, panoramic ocean views from every room, an infinity pool, and seamless indoor-outdoor living just minutes from town and top beaches.

Emerald Lake Plantation UVILLO ST E9, TRUJILLO ALTO, PR 00976

This luxurious 3-bedroom (convertible to 4-), 4.5-bath home in Trujillo Alto’s Emerald Lakes offers lakefront views, a 30kW generator, a water cistern, an EV-ready 4-car garage, and high-end amenities just 25 minutes from the airport.

Conclusion

Law 182-2024 is a transformative policy reshaping Puerto Rico’s real estate and urban landscape. By offering robust financial incentives for urban center developments, the law attracts new investment, revitalizes neglected neighborhoods, and expands affordable and luxury housing options. Ongoing oversight and legislative adjustments will determine its long-term impact on the island’s economy and communities.

At Christie’s International Real Estate Puerto Rico, we understand how to maximize opportunities under Law 182—whether you're developing luxury condos in historic San Juan or converting abandoned properties into high-value investments. Our expert team is ready to guide you through buying, selling, or renting in Puerto Rico's evolving real estate market. Contact us today to make the most of this new era in urban investment.

FAQs

What is the Economic Incentives Act for the Development of Puerto Rico?

The Economic Incentives Act, also known as Act 60, is a comprehensive framework that unifies tax incentives to stimulate economic growth, encourage the exportation of services, attract individual investors, and support industries like manufacturing in Puerto Rico. Law 182-2024 amends Act 60 to include new tax credits and incentives specifically for real estate development in urban centers, offering exemptions from Puerto Rico income tax and property taxes to revitalize blighted areas.

How does Law 182 relate to Puerto Rico’s income tax structure?

Law 182 introduces a 4% fixed corporate tax rate for income derived from eligible urban development projects, significantly lower than the standard Puerto Rico income tax and federal tax obligations. This preferential rate benefits both local and outside of Puerto Rico investors by making urban redevelopment projects more profitable and exempting passive income like dividends from additional taxation under the Internal Revenue Code.

Who qualifies as a beneficiary under Law 182’s incentives?

To qualify, developers must invest at least $1 million (excluding land), construct a minimum of seven residential units, and locate the project in a government-designated urban center. Whether you are an international financial group, a resident of Puerto Rico, or a foreign buyer seeking total exemption from Puerto Rico income, the law is designed to accommodate a wide range of eligible participants, particularly those involved in export services or revitalizing real property.

What tax exemptions and credits does Law 182 provide for real estate developers?

Law 182 offers a robust package:

• 100% dividend exemption from Puerto Rico income

• 75% exemption on real and personal property tax

• 50% exemption on municipal and construction taxes

• 40% investment tax credit (transferable or salable)
  These tax credits and incentives support long-term value creation and make it easier to finance luxury or affordable developments, especially for firms focused on products manufactured in Puerto Rico or services exported from the island.

Can Law 182 incentives be combined with other provisions under Act 20 or Act 22?

Yes. Investors leveraging Act 20 (focused on export services) and Act 22 (now part of Act 60, offering benefits to individual investors who become residents of Puerto Rico) can often layer these incentives with Law 182, depending on the structure of their holdings. When planned correctly, this combination can yield near total exemption from Puerto Rico income tax and optimize returns from both real property development and passive income streams like leasing or REIT dividends.