PUERTO RICO Trends and Developments Contributed by: Juan Ramón Cancio-Ortiz and Cristina M García-Hall, Cancio Covas & Santiago LLP
The mergers and acquisitions (M&A) landscape in the Commonwealth of Puerto Rico (“Puerto Rico” or the “Commonwealth”) in 2026 reflects a market undergoing a structural transition from crisis-driven restructurings in the public sector to more strategic and growth-oriented transactions in the private sector. Unlike larger US jurisdictions, Puerto Rico’s M&A mar - ket is not characterised by high transaction volume or broad sectoral diversification. Instead, local deal activity is concentrated in industries where the island has either structural advantages or where public-sec - tor transformation has ignited private capital participa - tion. Since 2016, Puerto Rico has navigated through a series of crises, beginning with government fiscal dis - tress and defaults causing considerable downgrades to the government’s credit, which ultimately resulted in the restructuring of governmental debt under fed - eral oversight, and large-scale infrastructure rebuild - ing following the catastrophic landfall of two mayor hurricanes in 2017 and a cluster of high-scale earth - quakes in early 2020. The foregoing events reshaped the investment climate on the island, ultimately pro - ducing a more stable, yet still complex, environment Puerto Rico’s legal framework, which blends Spanish- influenced local civil law and US federal law into one system, is one of its most significant advantages in attracting M&A activity. As a US territory, Puerto Rico is subject to federal law, including federal securities laws, antitrust regulations and bankruptcy frame - works. Puerto Rico also retains its historical civil law roots based on the Spanish Civil Code, which has undergone several amendments, with the most recent major changes brought by the adoption of the revised Puerto Rico Civil Code of 2020. This unique context provides a level of legal certainty that is often absent in international jurisdictions. The United States Feder - al District Court for the District of Puerto Rico sitting in San Juan exercises federal jurisdiction in Puerto Rico. Puerto Rico’s own robust court system, composed of first-instance trial courts, the Court of Appeals and the Supreme Court, deals with local law controversies. At the same time, Puerto Rico maintains its own cor - porate laws and tax incentive regimes, which must be carefully navigated in transaction structuring. The for corporate M&A transactions. Legal and Regulatory Framework
interplay between federal and local law creates both opportunities and complexities for dealmakers. Its tax incentive programmes, codified under Act 60-2019 as the Puerto Rico Tax Incentive Code, remain a central focus of many transactions. Among the chief advan - tages in the Tax Incentive Code are 4% fixed income tax rates, 75% tax exemption on property taxes and 100% exemption on dividends for manufacturing, hospitality, and export of goods and services. Other industry or activity-specific incentives are also avail - able. Programmes designed to attract investment in the export services, manufacturing and technology sec - tors can significantly impact valuation and post-trans - action returns. However, recent amendments to these tax incentive programmes underscore the importance of undertaking comprehensive and extensive regula - tory diligence in transaction planning. For example, Puerto Rico Legislature House Bill 505, passed in Feb - ruary 2026, made significant amendments to Act 60, specifically to the Resident Investor Program. While this legislation extended such programme through 2055, it introduced a 4% tax on interest, dividends and certain capital gains for new applicants applying after 31 December 2026. Existing beneficiaries of the Resident Investor Program are grandfathered at 0% rate on interest, dividends and certain capital gains. Macroeconomic and Fiscal Context Puerto Rico’s contemporary economic environment, and consequently its M&A environment, cannot be understood without reference to its debt restructur - ing under the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA). Prior to the enactment of PROMESA, Puerto Rico was unable to benefit from debt restructuring under the United States Bankruptcy Code. At the time, Puerto Rico’s public debt amounted to approximately USD70 billion and its unfunded pension liabilities exceeded USD55 billion. Enacted in 2016, PROMESA established the legal framework that enabled the restructuring of tens of billions of dollars in public debt in federal court while imposing fiscal discipline under the newly created Financial Oversight and Management Board (“Oversight Board”). By 2025–2026, Puerto Rico has made significant progress in restructuring central gov - ernment and public corporation obligations, reduc -
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