Tag Archives: Puerto Rico

Puerto Rico a New Tax Haven

A new law exempt immigrants from capital gains taxes in a bid to attract new wealthy residents. The island nation has join other offshore locations, like UK territories Jersey and the Cayman

Puerto Rico

Islands, in helping wealthy individuals pay less tax. Puerto Rico is a US territory, which means it is technically part of the United States but largely administered by an insular local government. It is a four-hour flight from New York City, offers a nice climate, and doesn’t have another obvious strategy for economic growth. But most important is the law passed a year ago, which exempts new residents from the island’s already small 10% capital gains tax.

Picture of the  in Puerto Rico, Courtesy of Wiki Commons

The local government is luring investment managers, who can often treat their salaries as capital gains, along with other wealthy Americans whose income is largely investment returns, on moving to the island, with the hope that their arrival will coincide with investments in real estate, more service consumption, and perhaps new businesses forming here.

The law does offer a significant financial advantage, but before it was enacted, capital gains were taxed at only 10%—still more than fifteen percentage points lower than the American rate, which could have still attracted wealthy residents. People taking advantage of the law must live on the island for 183 days a year, among other residency requirements, and depending on how strictly they are enforced, Puerto Rico may be more of a retirement destination for the super-wealthy than the kind of place where they operate a business.

The issue, though, are Puerto Rico’s economic woes: 14% unemployment, little in the way natural resources, growing pension obligations, and a robust grey market have the country on the budgetary ropes, with raters looking to downgrade its already junk-level bonds. Those high yields are attracting investors, but they are essentially betting on the expectation that the US won’t let its territory go under. They might not be wrong: The UK, after all, rescued the Caymans when that country foundered financially, but it attached a number of strings, including efforts to limit tax avoidance. While the government guarantees the capital gains tax break through 2035, a country looking to raise revenue will find a way to tap the pockets of its wealthiest residents.

Indeed, tax incentives have proven to be both a boon and a bane to Puerto Rico: The country’s recent economic troubles can be traced in part to the end of costly manufacturing tax breaks the US government gave to companies who made goods on the island. But when those breaks ended, in 2006, many companies kept their facilities on the island while transferring ownership to Cayman Islands subsidiaries, avoiding taxes in both Puerto Rico and the United States.

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Why’s Puerto Rico’s Attractive as a Tax Haven

Puerto Rico (Spanish for “rich port”) is turning into the next Singapore. Wealthy Americans have already taken advantage of the year-old Puerto Rican law that lets new residents pay no local or US federal taxes on capital gains.”

Why you should move your US business to Puerto Rico. See the video interview with Barry Breeman on Bloomberg:

Source: Bloomberg

The Commonwealth of Puerto Rico is an unincorporated territory of the United States, located in the northeastern Caribbean, east of the Dominican Republic and west of both the United States Virgin Islands and the British Virgin islands.

Due to the 1952 Commenwealth of Perto Rico creation by the US congress, Puerto Rican’s residents do not pay US federal income taxes. US Citizens who moves to Perto Rico pay 4% tax on earned income, no taxes on distribution and dividends, but only on Perto Rico source based income.

Citizens of Puerto Rico are bilingual and speak both English and Spanish fluently. Official languages of the island are Spanish and English, with Spanish being the primary language.

4 millions US citizens lives in Puerto Rico. Many US hedge funds and US private equity funds have already relocated. The islands also offers well educated work force, easy communication to New York and Miami, pleasant weather as well as great cafes and restaurants.

See the video above to learn more.

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