DDEC steps up audits, enforcement of tax incentives
The Department of Economic Development and Commerce, known as DDEC, is expanding oversight of Puerto Rico’s tax incentive programs under Act 60-2019, with the Office of Incentives conducting one of the most extensive compliance efforts in recent years, agency Secretary Sebastián Negrón said during a meeting with members of the media.
The measures include stricter pre-approval screenings, expanded reporting requirements and the creation of a new audit committee to monitor compliance and recommend sanctions when warranted.
During 2025, the Office of Incentives audited 1,798 decrees covering resident investors, individual beneficiaries and service export businesses. As a result, 305 deficiency notices were issued, 19 decrees were annulled and four were revoked for serious noncompliance. Another 887 decrees were voluntarily surrendered.
“Incentives are a powerful tool to attract investment, but they come with the responsibility of complying with the conditions established by law,” Negrón said. “This oversight is not a punitive exercise, but rather a measure of institutional integrity consistent with the governor’s commitment to accountability and economic fairness.”
According to the agency, the most common breaches identified during audits included the failure to file the Annual Report of Business Exempt (IANE, in Spanish), omission of tax payment evidence, lack of proof of real estate purchases in Puerto Rico, noncompliance with required donations and absence of sworn residency declarations or unconditional acceptance statements for the decree.
The DDEC said these issues undermine the program’s integrity and the public trust that incentives are used to support local development.
New screening criteria have also been established to prevent future misuse. All resident investor applicants must now provide criminal record certifications from their country of previous residence and undergo a final background verification before the decree is signed.
The DDEC confirmed that decrees are not being approved for individuals with convictions for fraud, serious crimes or patterns of criminal conduct. So far this year, 34 applications have been denied and 27 withdrawn under these stricter standards.
Ernesto J. Zayas-García, director of the DDEC’s Business Incentives Office, said a Compliance Audit Committee has been formed to review referrals, impose fines of up to $10,000 and recommend decree revocations when necessary.
“We have modernized audit processes, expanded the Annual Reports of Exempt Businesses to more sectors and created streamlined mechanisms to detect noncompliance early,” Zayas-García said. “This allows for more efficient and fair action, strengthening confidence in Puerto Rico’s incentive system.”
The Office of Incentives also coordinates with the Department of the Treasury and the U.S. Internal Revenue Service to exchange information and improve cross-agency oversight. Starting in 2026, the agency plans to roll out automatic notifications and fines for late IANE filings, beginning with a $1,000 penalty that could escalate to revocation for persistent violations.
Negrón said the measures align with the administration’s broader push for transparency and accountability.
“We aim to ensure that every incentive granted contributes to the island’s economic development and that those who fail to meet their obligations are held responsible,” Negrón said.
