Saturday, August 6, 2016

Puerto Rico Expands Tax Haven Deal For Americans To Its Own Emigrants

This article by Deniel Mero, from 2015, mentions how Puerto Rico's territorial status is tied to the special tax evasion benefits. Read the whole article in the link. It is very interesting.

Jan 27, 2015 
by Deniel Mero
"Critics have argued that Puerto Rico’s tax breaks sound too good to be true and if the U.S. Congress becomes concerned enough about the initiative, it could eliminate Puerto Rico’s tax exempt status. But this would require a big change to Puerto Rico’s status as a territory, and so far, there’s no sign of any movement building in Congress to do this."

Puerto Rico’s Acts 20 & 22, tax incentive laws aimed at luring wealthy American investors to move there and at reviving the Island’s economy, are celebrating their third anniversary this month. While Puerto Rico’s economic situation remains bleak (it currently has more than $73 billion of “junk” status debt, unemployment over 13% and income inequality higher than any of the 50 states), its reputation as a tax haven is beginning to catch on.

The original Act 20 & 22 combo

Act 20, the Export Services Act, offers incentives to certain service businesses, including investment and hedge fund managers, to relocate to Puerto Rico and export their services. It does so by taxing their corporate profits at a flat 4%, while making the dividends paid from profits on exported services 100% tax exempt to individual recipients.

Act 22, the Individual Investors Act, was designed to primarily attract high net worth investors to Puerto Rico by providing complete tax exceptions on dividends, interest and capital gains, so long as the individual is present for at least 183 days a year (half the year) in Puerto Rico.