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Take Advantage of Puerto Rico Tax Incentives

Thanks to some fantastic Puerto Rico tax incentives, you can live in a tropical paradise and keep more of your heard-earned money!

Let’s face it, no one likes to work hard only to see a huge percentage of their income go to taxes each year. It’s for this very reason that many Americans have decided to move to beautiful Puerto Rico.

In 2012, in response to a very slow economy, Puerto Rico passed Act 20 & Act 22 to entice business owners and high net worth individuals to move to the island. Let’s look at how you and your family can benefit from Act 20 & 22.

Puerto Rico Act 20

If you’re a business owner and move to Puerto Rico, you can enjoy paying just 4% corporate tax. You’ll also benefit from 60% exemption on municipal taxes. Plus, property owners get100% exemption on property taxes for the first 5 years, and 90% exemption thereafter.

Puerto Rico Act 22 – Capital Gains

Individual Investors or those moving to Puerto Rico who were not residents for the 6 years leading up to January 2012 (when the acts were passed) will benefit from:

  • 100% tax exemption on Puerto Rico-sourced dividends
  • 100% tax exemption on Puerto Rico-sourced interest
  • 100% tax exception from Puerto Rico income taxes on all short-term and long-term capital gains accrued (once residency has been established)

The requirements to reap these benefits are simple: you must become an actual resident of Puerto Rico, open a bank account here and donate $5,000 a year to a non-profit in Puerto Rico. That’s a pretty fair trade-off for the money you save.

Puerto Rico’s Act 20 & Act 22 tax incentives may sound too good to be true, but many people are eligible to take advantage of them to minimize their tax burden.

Now you may also be asking, “Do residents of Puerto Rico pay federal tax?” The short answer to that is, “It depends.”

The longer answer can be taken right from Section 933 of the U.S. Internal Revenue Code, which states that citizens who have lived all year in Puerto Rico are exempt from filing taxes to the federal government as long as the income was from Puerto Rican sources. However, if income was from any other sources from around the world, yes, you will have to file taxes. Speak with your accountant if you have any other questions.

You may also want to read more about Act 20 and Act 22 to help you make the best financial decision for you.

We’d Love to Help You Make the Move!

If you’d like to take advantage of these incredible tax incentives while living in a tropical paradise, get in touch with us. We help many Americans relocate to Puerto Rico each year and would love to help you, too.

We have been in the business for over 16 years and believe in going above and beyond to help our clients reach their financial goals. We work with your best interests in mind and always make ourselves available to answer any questions you may have.