Saturday, June 28, 2014

Paulson's Puerto Rico Paradise Lures Rich Fleeing Taxes

June 25, 2014

Under Puerto Rico’s new rules, an individual who moves to the island pays no local or federal capital-gains tax -- capital gains are charged based on your tax home rather than where you earn them -- and no local taxes on dividend or interest income for 20 years. Even someone working for a mainland company who is a resident of the island would be exempt from paying U.S. federal taxes on his salary.

Struggling to emerge from an almost decade-long economic slump, the Puerto Rican government signed a law in early 2012 that creates a tax haven for U.S. citizens. If they live on the island for at least 183 days a year, they pay minimal or no taxes, and unlike Singapore or Bermuda, Americans don’t have to turn in their passports. About 200 traders, private-equity moguls and entrepreneurs have already moved or committed to moving, according to Puerto Rico’s Department of Economic Development and Commerce, and billionaire John Paulson is spearheading a drive to entice others to join them.

In October 2011, protesters marched by the homes of Manhattan’s billionaires, including Paulson’s. A little more than a year later, President Barack Obama beat Mitt Romney in an election that highlighted the latter’s wealth and private-equity background.