Newest Tax Haven for Wealthy Americans – Puerto Rico

Newest Tax Haven for Wealthy Americans – Puerto Rico

Puerto Rico took a huge hit during the recession. Unfortunately, tourism, which once brought in big dollars to the region has not fully recovered leaving economic and government leaders to seek new alternatives to bring revenue and investments into communities large and small throughout Puerto Rico. One of the primary methods leaders chose for attracting new money revenue and investments into the region is through significant tax breaks.

Act 22

Act 22, known as the Act to Promote the Relocation of Investors to Puerto Rico, provides investors and traders who maintain residences in Puerto Rico for a minimum of 183 days per year to pay no local or federal taxes on capital gains. They also pay no local taxes on income resulting from most dividends or interest income for a period of up to 20 years. Even people who continue employment with a company on the U.S. mainland while living in Puerto Rico are exempt from paying U.S. federal taxes on their salaries.

U.S. citizens must still pay federal income taxes on dividends and interest income from mainland companies, but the tax savings are significant enough that major investors are taking interest – and inviting friends.

The Beauty of Puerto Rico as an American Tax Haven

These changes, combined with the modern infrastructure available in cities like San Juan, make Puerto Rico an attractive choice for investors – never mind the amazing weather and stunning beaches. As far as tax havens go, this is a beautiful choice when it comes to tax benefits easily reaching six figures for many investors and creature comforts alike.

The real beauty of turning to Puerto Rico as a tax haven for Americans is the fact that you don’t have to sacrifice your citizenship in order to do so.

What Does Puerto Rico Get out of this Deal?

Puerto Rico’s unemployment rate still remains high. The New York Times places it in the range of 13 percent which makes it one of the highest in the U.S. The per capita income, also according to the New York Times for Puerto Rico is also around $15,200, which is half of Mississippi’s per capita income. Mississippi is the poorest state in the U.S. to put things into perspective.

The plan is for the new investments and spending on the island to create jobs that will spur even more spending among the local population. The goal is to bring in high dollar investors who are millionaires, if not billionaires, in order to bring some of the fruits of their labors into Puerto Rico. With a growing discontentment among high income earners in the U.S., it may be an achievable goal.

Proceed with Caution

However, some tax experts are urging caution before diving right in. The U.S. is cracking down on what it considers tax dodging and those who have corporate interests on the mainland might want to avoid any appearance of becoming “unpatriotic” in the eyes of investors and consumers. Consider carefully and consult your accountant before taking the plunge to minimize your risks if this is something you’re considering.