Where can you remain a US citizen but – legally – only pay 4% corporate tax, zero capital gains, and zero dividends tax? Where can you have the best Coquito - a holiday drink made with coconut milk and cream, white rum, evaporated milk, condensed milk, and spices while you dip your toe in a white sand beach? Puerto Rico of course. Never mind that Hurricane Fiona just passed through knocking out the whole power grid and leaving 30 inches of rain and flooding. It’s worth it, when you understand what Act 60 is.
Simply put, Act 60 incentivizes Americans to become legal residents of the island. How you say? I’m glad you asked.
Act 22 - The Individual Investors Tax Act promotes relocation of individual investors to Puerto Rico, providing a total exemption from Puerto Rico income taxes on all passive income realized or accrued after the individual becomes a bona fide resident. A bona fide resident must have physical presence in the Island for at least 183 days of the year and must not have been a resident of Puerto Rico for the 15 years prior to the Act’s effective date. The act provides the following benefits:
0% tax on dividend and interest income
0% tax on short-and-long term capital gains
0% federal taxes on Puerto Rico source income
Act 20 - the Export Service Act, targets certain service businesses by offering corporate tax rates as low as 4% to qualifying corporations that relocate to the jurisdiction. Exempt businesses will enjoy a 75% exemption on the municipal and state property taxes. Companies that qualify as “Small and Medium Businesses” will also enjoy a 100% exemption on municipal and state property taxes during their first five years of operation.
How much are you paying on dividend and interest income now? How much is your capital gains tax? How much is your federal income tax? When you add up the numbers, a hurricane or two doesn’t look so bad. Plus you get to see Bad Bunny live in concert. Aprende espanol ahora pendejo! (Translation: Time to go to Puerto Rico!)
If you need assistance finding your new casa…AskHollingsworth.